Most college students need student loans to help pay for college. In fact, 43% of students use federal student loans and 12% use private student loans to cover their tuition and other expenses. But what is that money going towards? When you borrow money or earn financial aid like scholarships or grants, it’s typically stretched to cover as many of your outstanding college costs as possible. That includes tuition and fees, room and board, and some supplies like your laptop or books. In some cases, you’ll also need to have money left over to pay for other things like transportation or meal plans.
Using student loans for living expenses shouldn’t be your first option, so make sure you do your research before borrowing. To borrow wisely, you need to understand the process of taking out a loan to cover those non-tuition items.
Here are a few considerations for you to keep in mind before using your student loans to cover your living expenses.
Average Living Expenses
What are living expenses? Generally, living expenses include the cost of all your necessities. In college, this includes rent or room and board, utilities like heat and water, food, clothes, insurance, healthcare, transportation, and recurring bills like phone or internet. When you’re in school, your living expenses will also expand to include books and supplies like your computer. You should use your loans to cover tuition and fees first, and only use them for additional living expenses if necessary.
Average College Costs in 2019
Room & Board: $11,510 (Public, 4-year, in-state)
Books & Supplies: $1,240
Travel & Other Expenses: $3,280
Total: $16,030
Between 2009-10 and 2019-20, the average published tuition and fee prices rose by $5,720 at public four-year colleges and by $8,720 at private nonprofit four-year colleges and universities. That means students have had to borrow more to cover the rising costs of tuition and seek out schools that offer larger financial aid packages.
For the 2019-2020 school year, the average full-time student’s living expenses ranged from $17,550 on a low budget to $26,200 on a moderate budget. The disbursement of living expenses was 52% to housing and food, 17% to transportation, and 31% miscellaneous costs.
According to these statistics, students should be budgeting more than half of their living expenses to rent, utilities, and food. Many people don’t enter college expecting such a high price tag on common expenses. And that’s okay. If you can’t afford those expenses, you may be able to use student loans to cover them.
Budgeting for Living Expenses
The College Ave survey conducted by Barnes & Noble College InsightsSM found that 61% of students said college was more expensive than they expected, even though 76% said that cost was a deciding factor in choosing a college.
You won’t be able to predict exactly how much your living expenses will be before you get to school. The numbers above are averages across the U.S. for full-time students, but they’ll differ among students, schools, and cities. This variance gives you a chance to save money and plan far enough ahead to budget for your estimated costs. That will give you a better idea of how much of a loan you will need to take out.
Calculate Net Price
Net price is the cost of attendance minus your total financial aid package. Many institutions offer their own net price calculators that show their specific costs, including tuition, room and board, books, and miscellaneous expenses. Since costs can vary greatly from one school to another, it’s important to compare the net price of the schools that you’re interested in.
Extra Budgeting Tips
When comparing college prices, you should also consider every opportunity for saving money while at school. Here are a few expenses to watch out for.
- Choosing a Big City. If you attend a college like NYU or the University of Chicago, prepare for higher living expenses across the board. Things like rent, groceries, and transportation tend to be higher the closer you get to a big city.
- Living Off-Campus. Most schools require freshmen to live on campus for their first year. After that, look for housing that fits in your budget. In many cases, you’ll be able to find an apartment or shared house that’s more affordable.
- Saving on Transportation. With the rise of Lyft and Uber, it’s easy to spend $10 here and there to get from A to B. Be extra mindful when using rideshare apps in college. Check out the local public transportation or invest in a bike to get around.
Read More Tips on How to Save Money in College
How to Qualify for Student Loans?
There are two types of student loans: Federal vs. Private Student Loans. After applying through the Free Application for Federal Aid (FAFSA), most students will qualify for federal student loans from the U.S. Department of Education. The FAFSA determines how much you will receive based on your family’s demonstrated financial need. Federal student loans have annual borrowing limits each year.
Private student loans come from non-federal institutions like banks, credit unions, and private student loan lenders. Lenders will evaluate your credit history and income to decide your creditworthiness and if you qualify for a loan. In many cases, students will be required to have a cosigner on their loan before getting approved, since many college students don’t have the sufficient credit and income needed. With a private student loan, you can cover up to 100% of your cost of attendance*.
To use either type of loan to pay for other living expenses, you should understand what is covered. For federal and private student loans, you should use loan money only for qualified expenses. Below are some qualified expenses that student loans generally cover.
What Living Expenses Can I Use Student Loans For?
You Can Use Student Loans For:
- Tuition
- Fees
- Rent, room, and board
- Bills and utilities
- Meal plan or groceries
- Books and supplies
- Equipment (like a computer or printer)
- Transportation
- Dependent care
You Cannot Use Student Loans For:
- Paying off debt (like credit cards)
- Personal expenses
- Entertainment
- Traveling
- Shopping
- Gifts
- Pets
Learn more about what student loans can be used for.
Most of your loan money will go toward tuition, fees, and room and board. But once those are covered, you may have extra money that can be used toward other living expenses. That extra money is called a surplus.
How to Use a Loan Surplus
In most cases, your lender will pay the school directly. The school will take the appropriate amount for tuition, room and board, and other mandatory fees. If there is a surplus, typically your school will issue you a student loan refund following their refund policy. Then you can either return the extra amount to the lender or use those funds for other living expenses.
If you choose to use those funds for any other living expenses. Most students choose to put that money toward their books and supplies or purchasing a meal plan. Of course, it’s important to be smart about how you use your student loan money. Know that taking out a loan costs money, more than the original amount of the loan due to interest
Carefully consider whether using loan money is worth the amount of interest you will end up paying. If you’re not sure how much that will cost, use our student loan calculator for an estimate.
*As certified by your school and less any other financial aid you might receive. Minimum $1,000.
