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Can Student Loans be Used to Pay Rent?

Student loans can be used to pay for rent. Additionally, you can use funds from student loans to pay for other living expenses, like food and transportation. 

However, there are some limitations you should know. So in this article, we’ll take a deep dive into what you can do with your student loan and how to use student loan funds for rent and other essential costs.

How Do You Pay for Rent Using Student Loans?

Your involvement in paying your rent with student loans depends on what kind of housing you live in. For example, if you live on campus, the school will automatically deduct room and board from your loan balance each month or semester. 

Alternatively, if you’re living off campus in a house or apartment, you’ll usually be responsible for transferring the funds to your landlord directly. 

It’s important to note that the ability to pay for rent or other housing expenses extends to both federal and private student loans. This means you can use federal student loans or private student loans to pay for room and board, including the cost of an off-campus apartment or house. 

However, you still have to stay within the housing allowance specified by your college or university. This is why you should understand exactly how your student loan is disbursed, so you can budget accordingly.

How student loans are disbursed

First-time student loan borrowers may not be aware that they don’t receive the full loan amount in their bank accounts. In fact, when you get a student loan, the funds are sent directly to the college you’re attending, not to you. This way, your school can use the loan to pay for tuition and other expenses, including room and board – if you’re living in on-campus housing. 

Once all the essential school costs have been paid off, you’ll be “refunded” the remaining funds left from the loan. You can then use this money to pay for rent, textbooks or other college-related costs. If you choose to live off campus, there are no restrictions on the location of the house or apartment. 

Keep in mind the money will arrive in a lump sum. So you’ll need to budget carefully to pay rent each month.

What to do if your student loan disbursement is delayed

It can be stressful if you need funds and your school is taking longer than expected to disburse them to you. This is especially true if you need to pay for off-campus housing, as most landlords require security deposits and the first and last month of rent upfront. 

Financial aid departments tend to disburse student loan money after the academic year has already begun. You should always make a contingency plan to account for delayed disbursements. This plan could include saving money from a part-time job to pay for upfront rental costs or getting a roommate to lower your housing expenses.

Understanding Cost of Attendance

The cost of attendance (COA) plays an important role in your student loan, including how much money you’ll receive and how you can use the funds. Here’s what’s included in a college’s COA:

  • Tuition & fees: Tuition is the largest expense you’ll need to pay with a student loan, followed closely by housing costs. 
  • Books: College textbooks can be surprisingly expensive, which is why many students choose to buy their books second-hand.
  • School supplies & equipment: Most students need a wide range of supplies for school, from relatively inexpensive things like notebooks and pencils to more expensive equipment like laptops and printers.
  • Transportation: Whether you need a car or have the option to take public transportation, these costs will be factored into the COA for your student loan.

Naturally, these costs won’t cover all of your expenses as a student. You’ll also need to pay for food, toiletries and other items you need on a regular basis. However, these categories help lenders estimate how much you need to pay for essential college costs.

What else can student loans be used for?

You may feel confused about what you can actually use your student loan for. To help you out, here’s a list of common uses for student loans:

  • Transportation
  • Utilities
  • House supplies
  • Groceries 
  • Child care/dependent care
  • Meal plan at school
  • Medical expenses
  • Miscellaneous expenses (grooming, pet care, etc.)

What shouldn’t you do with your student loans?

While you may not get in trouble with your lender for using student loans for costs unrelated to college or living expenses, it could make it harder for you to stick to a budget. In the short-term, this can jeopardize your ability to pay rent. And in the long-term, you’ll need to pay this money back – plus interest. 

Here are a few costs you should definitely not use your student loans to pay for:

  • Vacations and travel
  • Eating out at expensive restaurants
  • Paying off other debt (like credit cards)
  • Other people’s expenses

Alternatives to Using Student Loans for Rent

If you’re worried you won’t have enough funds left from your loan to pay rent, don’t stress. There are alternatives to using student loans for rent. In fact, opting for one or more of these options could help you borrow as little as possible, easing the burden of debt after you graduate. 

  • Apply for financial aid and scholarships: Every year, millions of dollars are “lost” in unused student aid and scholarship funds. Eligibility varies with each program or scholarship. While you may not qualify for every financial aid program or scholarship grant, you can probably find some organizations (private or public) that can help you pay for educational expenses.
  • Get a job: Many college students get part-time, on-campus jobs that are willing to be flexible based on their class schedule. You can attend classes in the morning and work in the evening, greatly reducing the need for student loans.
  • Lower overall expenses: If you’re like most students, college is your first experience living on your own. You’ll quickly find that lowering your expenses can make budgeting much easier, with or without student loans.

What To Do with Leftover Funds

After your tuition, fees and rent are paid, you may still have funds left over from your student loan. Though you may be tempted to celebrate with these funds, you should avoid using student loan funds for any non-essential expenses. Instead, try to make financially-sound decisions that will benefit your future, like making early student loan payments early or creating an emergency fund

Paying off your student loan early is especially pragmatic if your loan comes with high interest rates. If you’re currently shopping for a student loan, consider working to improve your credit score or using a cosigner to get the best possible loan terms.

No Such Thing As “Free Money”

While student loans help millions of students access higher education, they also come at a high cost. Many students struggle with student loan debt after they graduate, which is why it’s so important to budget well now. 

Spending your student loan funds on frivolous purchases could end up hurting you down the road. So you should try to make every dollar count and work on loan repayment as soon as possible.

The Short Version

  • If you live on campus, the school will automatically deduct room and board from your loan balance each month or semester
  • The ability to pay for rent or other housing expenses extends to both federal and private student loans
  • When you get a student loan, the funds are sent directly to the college you’re attending, not to you
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