Private Student Loans for June 2023
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The Right Way to Use Student Loans for Living Expenses

Editorial Note: The content of this article is based on the author's opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners.

Using student loans for living expenses like housing is expected by loan providers. Typically, when you take out loans for college, the money is sent directly to the school to cover things like tuition and room and board, fees, textbooks and other educational expenses.

If you borrowed a certain amount for all of these things but financial aid covered more than you thought, you could receive a refund check for the balance. What should you do now?

You could simply send the check back to your loan provider. You could also keep the money and put it towards additional school expenses. You might even be tempted to upgrade your car or spring break plans.

How to spend your student loan refund

There are many ways you can use a student loan refund check to enhance your college experience, but remember, “free” money does not exist. Your check is not extra spending money; it’s a refund of your leftover loan amount that you will be expected to repay, with interest. If you are going to spend the funds, it is wise to carefully think about how to best utilize your cash. Simply living off your student loans without a plan may not be a wise decision.

According to the U.S. Department of Education’s Federal Student Aid office, you can use student loan funds only for education expenses like tuition, room and board, textbooks and other school supplies.

And, you can also use it for transportation to and from college and childcare. Student loan providers don’t check your bank account, but you are not supposed to spend your loan dollars on things like a new school wardrobe or a big trip. The same rules apply to your refund.

Here are some things you could use your student loan refund to help with your college experience:

Find Affordable Housing

If you live in a dorm, the expense is considered a direct educational cost and is covered by your student loan before you receive the balance of your disbursement. But if you live off campus, it’s your responsibility to find and pay for housing yourself.

If you use your student loan refund to cover your off-campus housing, try to keep it simple. Find out if your school offers co-ops or keeps a list of affordable and student-friendly local buildings. Try to find an affordable apartment in a decent neighborhood close to campus. If you want to save further, consider cutting the cost down by getting a roommate or two.

Keep your food allowance minimal

The refund money may tempt you to order more take-out and hit more happy hours, but doing so could be an easy way to burn through your do-it-yourself meal plan to save money.

It’s usually cheaper to cook healthy meals for yourself than to eat out or even join a school’s meal plan. And there’s no shortage of cheap and easy recipes online. Plan out and budget for your meals by shopping at grocery stores and local or campus-based farmers markets.

Cover transportation costs

Unless you live on campus or within walking or biking distance, you’ll need to spend on transportation.Using your student loan refund to pay for transportation could allow you to get to and from a part-time job, helping you make money in the long run.

Buy books and supplies

Your student loans are supposed to be used to cover education-related expenses. So, a refund check can be a great way to buy the books and supplies you need. Just make sure to shop around for your best deals, which you probably won’t find at the campus bookstore. Look for used books online or rent textbooks to save even more money.

Hire a tutor

If you’re struggling with your studies, paying for a tutor may be worth the expense. Ask your professors for recommendations or check online to hire a graduate student to help you with your studies.

Pay for necessary additional expenses

If you were approved for additional money to cover special expenses — such as child care, disability-related costs, an updated computer or software — use it accordingly. Try not to skimp on goods and services you need to make the most of your education.

How not to spend your student loan refund

You might be tempted to use your refund money to spruce up your life a bit, but try not to do any of the following:

Buy furniture

If you’re living off campus in an unfurnished apartment, you’re going to need some household items. But before you (and your refund check) run off to Ikea, consider your options. You could bring what you can from home, and for your remaining needs, buy it used. You’ll find plenty of cheap, gently used items online at Facebook Marketplace or Craigslist, or at yard sales or thrift stores.

Purchase new clothes

A new wardrobe isn’t usually needed for college, unless maybe you are from sunny Florida and heading to school in snowy Maine, for example. If weather is a big game changer, then it may be advisable to invest in a warm coat and other necessary cold-weather gear.

But you don’t need to purchase a brand new wardrobe. Keep as much of your current clothes as possible and shop local at thrift stores, check websites such as thredUP or Poshmark, or get together with friends for a clothing swap.

Get a new car

It can be a big mistake to use your student loans on a new car. Drive the one you have until it stops working. If you don’t have a car, try to learn to make college life work without it. If you live on campus, it’s easy. If not, check out public transportation or invest in a bicycle. Many colleges also offer shuttles to help students get around.

Buy alcohol

In our opinion, alcohol is a waste of money, and if you’re not careful, it also can be costly to your health, studies and relationships. And if you are under 21 years of age, it’s also illegal to purchase it.

Go on vacation

Whether it’s a ski weekend or spring break, travel is a luxury that shouldn’t be funded by student loan money. There are plenty of ways to have free fun in a college town and its surrounding areas.

What to do with leftover student loan money

Save it

If you have more student loan money than you need, this is the perfect time to learn an essential life lesson — how to save for an emergency. You never know what might come up. If you do have leftover funds, sock them away for a rainy day.

Give it back

There is no rule that says you have to keep all the student loan money you receive. In fact, you can return part of your loan interest-free within the first 120 days.

If that 120-day window has closed, you still can pay a portion of your loan back. Take whatever you have left and make a student loan payment while still in school. You’ll reduce your debt and free yourself from the interest you’d otherwise pay on that amount when you graduate.

If you want to give back the refund, but still could use some extra cash, there are ways to earn money in college to help fund your life. Try making money via apps on your smartphone or find a part-time remote job and work from the comfort of your apartment or dorm.

Spend as little as possible

One purchasing decision might seem like a drop in the bucket, but you’ll make hundreds of purchasing decisions while you’re in college. From housing to food to entertainment, that could add up to thousands of dollars in savings over the course of your college career.

While you should focus on keeping your costs down, you should also consider how to reduce your debt. As mentioned earlier, maybe try taking on a side hustle while you’re in school. That way, you can make money to cover your costs rather than using your student loan refund check.

If you can use your part-time income to pay for books, transportation and other educational expenses, then your entire refund can go toward paying back your student loans.


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