Can You Use Student Loans for Rent?

Preparing for college is exciting, but it can also induce anxiety when considering the financial costs. After tuition, housing may be your next largest expenditure.

If you are receiving student loans, it is helpful to know you can use student loans for housing costs. Federal and private student loans can be used to cover costs that are necessary to your education, which is why you can use student loans to cover living expenses such as rent and housing.

If you plan to use student loans for rent, it is important to be wise about where you choose to live. The rising costs of tuition and housing can have a major impact on your future finances. Plus, because borrowed money generally incurs interest, higher housing costs can mean paying more money both now and in the future.

In this blog, we will explain how you can use student loans to pay for rent, the impact of using loans, and a few common mistakes to avoid.

How Student Loans Can Be Used

It is important to understand how student loans can be used. Although most lenders don’t closely monitor how you spend your student loan funds, be sure not to use them frivolously, since you will ultimately have to pay the loans back with interest.

Student loans are meant to be used for the cost of attending college, including any related living expenses. Here are some items student loans can be used to pay:

  • Tuition
  • Fees
  • Books and other necessary school supplies
  • A personal computer to complete schoolwork
  • Housing: you can use student loans for housing, including on-campus and off-campus
  • Utilities
  • Transportation
  • Groceries and a meal plan at school
  • Housing supplies
  • Personal expenses, including grooming and medical

Understanding the Cost of Attendance

The cost of attendance (COA) is different for each school, but many schools calculate COA similarly. The cost of attendance is meant to show you how much you can expect to pay to attend school and cover your living expenses.

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It’s important to remember that your chosen college’s cost of attendance is the maximum you can borrow in federal student loans, minus any scholarships or other financial aid you may receive. Schools will provide different student budgets based on different circumstances for students. For instance, schools may consider the following factors when determining a student’s COA:

  • Does the student live in-state or out of state?
  • Is the student living on campus or off campus?
  • If the student is staying in-state, will they choose to live at home?

Ultimately, keep in mind that the cost of attendance is an estimate that can help determine how much you can borrow in federal student loans.

The Importance of the FAFSA to Use Federal Loans for Rent

The Free Application for Federal Student Aid (FAFSA) is the first step to take in order to receive financial aid of any kind, including scholarships, grants, and federal student loans.

The FAFSA requires your financial information, plus your parents’ information if you are a dependent. Those details determine your expected family contribution and your eligibility for need-based financial aid. If you plan to use student loans to pay for rent, you must file the FAFSA in order to be eligible to receive federal student loans.

Submitting the FAFSA early is important because some funding is available on a first-come, first-served basis. The earlier you submit your application, the more funding you may be eligible to receive.

If financial aid doesn’t cover your living expenses, then you may need to borrow student loans to pay for rent. However, it is imperative to be aware of how much you are borrowing because there is a federal student loan borrowing limit. If you hit the limit, you will likely have to take out private loans to help pay for any remaining expenses.

Understanding Student Loan Disbursement

Once you are approved for a student loan, it is essential to know how long it takes to get student loans if you plan on using student loans for rent. Once your loans are approved, your lender will disburse them to your school.

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Federal loan funds typically go to your school a few days before the semester begins to pay for any tuition, fees, meal plan, or on-campus housing. Funds from private lenders can take longer to be disbursed, so plan accordingly by applying early or budgeting with other funds until disbursement.

The remaining funds are known as your student loan refund and come to you in the form of a check from your school. This generally takes about two weeks after the beginning of the semester. Your student loan refund can be used for textbooks, housing, and other living expenses.

With that in mind, if you are living off-campus and plan to use student loans for rent, be sure to budget for the first couple of weeks in the semester without additional funds so you can make sure to not miss a rent payment.

What to Do If Your Student Loan Disbursement is Delayed

If your federal student loan disbursement is taking longer than the typical two weeks, you should be prepared to pay your rent out of your own funds for at least a month or two.

Although on-campus housing may understand a disbursement delay, it’s important to be prepared. Borrowing funds from family members or saving from a summer job can get you ready to make rent payments in the case of a delayed student loan disbursement.

Considerations & Mistakes to Avoid When Paying Rent With Student Loans

While you can use student loans for housing expenses, it is important to consider the impact of borrowing more loans than necessary. Adding unnecessary debt to your student loan total creates a greater financial burden after you graduate. Not only will you owe the funds you used to pay for rent, but you will also owe interest in many cases.

To avoid making this costly mistake, consider these options before using student loans to pay for rent:

  • Return extra funds. Use only the amount of the student loan refund you need and return the remaining funds. This will allow you to take on less debt and save on student loan interest costs.
  • Weigh your housing options. On-campus housing is usually less expensive than off-campus housing and can help save you from borrowing more funds.
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If you do decide to use student loans for rent, try avoiding these mistakes:

  • Choosing expensive off-campus housing. If you decide to live off campus or have no other option, choose an affordable place with roommates to help reduce your housing expenses and the need for more student loans.
  • Only using student loans. Although you may need student loans to cover your expenses, try reducing the amount you need to borrow by working a summer job or side hustle.
  • Living outside your means. Avoid any unnecessary living expenses, like luxury apartments or a high car payment when you are living on student loan funds. Reduce expenses by buying used textbooks and cooking meals at home.

Ways to Pay Rent to Avoid Using Student Loan Funds

Although using student loans may be necessary to pay for rent, if you can avoid taking on more student loan debt, it will be beneficial and also help save on interest costs. Consider these alternative ways to pay for rent while in college:

  • Get a part-time job. College jobs can help reduce student loan debt. A part-time job can help cover your housing costs and minimize your reliance on student loans.
  • Apply for financial aid. Apply early for scholarships and grants to help pay for rent and other living expenses.
  • Work with a family member. In some cases, you may be able to borrow funds from a family member with low or no interest, rather than taking out student loans.

Apply for Private Student Loans With ELFI

If you need to apply for student loans, ELFI offers private student loans for undergraduate students, graduate students, and parents.* We aim to make the borrowing process simple and affordable with expert assistance from Personal Loan Advisors and no origination fees.

You can pre-qualify with ELFI with no impact on your credit score to see what interest rate you may qualify for.