Student loan money can be used to pay for room and board, whether it is on- or off-campus housing. So the short answer is, yes, students can use money from federal or private student loans to pay their monthly rent or any other living costs. However, the type of housing that a student chooses will dramatically affect the size of the debt that must be repaid later.
Student loan debt is at an all-time high, with roughly $1.75 trillion in debt shared by 43.6 million people by July 2023.
Today, more than ever, students need to stretch their college loans as far as they can to cover as much of their college expenses as possible. Keep in mind that students only have access to the part of the loan that is left over after the college of their choice deducts tuition and fees.
You may need to consider a part-time job or a private loan to cover the period before the loan is paid into your account or after it is exhausted for the year.
Key Takeaways
- Schools pay tuition and school-related fees from a student loan before releasing any funds to be used for housing-related expenses.
- On-campus housing tends to be more affordable, as it eliminates the need for furniture, security deposits, and utility payments. It also may include meals.
- Students should weigh the costs of living on and off-campus and how much they can afford.
Understanding Student Loans and Housing Costs
Although a student loan can be used to cover on-or off-campus housing, choosing student housing might help save some money.
Dormitory rooms come furnished—at least with a bed, bureau, and desk—eliminating the need to buy furniture. Some schools include cafeteria meals in their housing costs, or meals can be included at a reasonable price. Other than the occasional midnight snack, most students should be covered.
Off-campus housing, such as an apartment, typically requires a security deposit and students are responsible for utilities such as heat, electricity, and internet service. Dorms do not require a security deposit, and utilities are included.
Dorm vs. Off-Campus Housing Costs
According to the National Center for Education Statistics, the average cost of room and board in the U.S. in 2020-2021 was $11,963 at a public 4-year college or $13,488 at a private school. That figure can be higher if you decide to live in a fraternity or sorority house.
Given the wide disparity in housing prices in the U.S., nationwide averages are not very useful. But, for the record, the average nationwide cost for a rental unit was $1,995 per month in May 2023. You probably intend to split the rent several ways among roommates, but remember that number doesn't include meals, furniture, utilities, and other housing-related expenses.
In general, off-campus housing is more expensive in the big cities, and there is a lot more competition for it. If you're attending a big-name college in a city like New York, Chicago, or Los Angeles, expect to pay a high price not only for tuition but for living costs.
If you're a U.S. citizen or eligible noncitizen, you can apply for federal funding, provided you have a high school diploma or equivalent certificate and have been accepted at an eligible school.
The sooner you know where you want to live—on or off-campus—the sooner you can assess how much money you need. It's important to fill out the Federal Application for Free Student Aid (FAFSA) as early as possible in the prior academic year.
Student Loan Disbursem*nts
So you've been approved for your student loan. Great! But you're not getting that money directly. Your college or university will deduct your tuition and related fees first, especially if you're not receiving other financial aid such as Pell Grants or scholarships.
Most schools will deduct for your on-campus housing as well if you're living in the dorms.
Schools deduct for tuition and other school-related fees before releasing any remaining loan funds to a student.
Once these expenses are paid, the institution sends you any leftover loan money—usually by direct deposit into a bank account. This amount can, of course, be used for rent, which means you can start writing out your rent checks if you're going to live off-campus.
If you're planning to take a full course load and have no financial aid other than student loans, you should realize there may not be enough loan money left over to pay monthly rent for an entire semester or academic year. Planning ahead and ensuring that enough financial aid is available to cover tuition, fees, and rent is important.
Try not to go crazy on housing costs, though. That debt will follow you down the road for years.
Handling Disbursem*nt Delays
College financial aid departments usually do not disburse leftover student loan money until after the start of the academic year, and landlords always want security deposits and monthly rent on time.
If you're considering off-campus housing, you should make sure you have enough money to cover these costs, whether from family contributions or part-time employment, until the student loan disbursem*nt is paid into your account.
It's wise to find friends to share your living space with. You'll cut down how much you owe on rent every month along with all of the other housing-related expenses like utilities and food.
When Do I Get My Student Loan Money?
The college you enroll in is responsible for paying the part of your student loan that is directly available to you. That is, the government or private lender pays the loan proceeds to the college. The college deducts its tuition and fees and the remainder is paid to the student as a "refund."
Most colleges don't pay that refund until the academic year has begun.
That leaves some students in a quandary, especially if they choose to live off-campus. They may need a part-time job or a private loan to tide them over if they have to make a deposit or pay the first month's rent on an apartment.
What Can I Use My Student Loan to Pay for?
Whether it's a federal or private loan, your loan can be used for books and supplies, room and board (on campus or off), transportation, computers and software, any equipment you need for classes, and sheets and towels.
Your tuition and fees will be deducted before you receive the remainder of your loan, along with student housing costs if you go that route.
What If I Have Student Loan Money Left Over?
If you have student loan money left over at the end of the year, consider paying it back to your loan servicer.
Yes, you can blow the money, but remember that cash is borrowed. You'll have to pay it back, with interest, in the future.
The Bottom Line
Once your college deducts your tuition and fees, the remainder of your student loan is yours to spend. If this is your sole source of funding for the year, you'll need to stretch it as far as possible.
First, assess the difference between the cost of campus housing and the costs of off-campus living. Rental costs vary greatly from city to city, but you may find that campus housing is the most affordable option.
In any case, remember that every dollar you spend will have to be repaid with interest years down the road.
