Student loan debt is the highest it's ever been. According to Forbes, students owe roughly $1.5 trillion in student loans as of February 2019. And with the rising cost of tuition, the number of student loan borrowers—currently pegged at 44 million—will continue to rise nationwide. This makes it the second most common type of debt consumers owe. The average amount of student loan debt carried by borrowers from the class of 2017, the report said, was almost $29,000.
While this may be alarming, many people take out student loans to help offset the costs associated with post-secondary education. If you're attending a big-name college in a big metropolis, like New York City, Chicago, Boston, or Los Angeles, you should expect to get hit with a big bill—not only for your tuition, but also for additional costs like housing. 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 you must be enrolled in an eligible school.
But just how far will your student loan stretch? And can you use it for housing? If you don't know the answers to these questions, read on to find out more.
- Student loans can be used to pay for room and board for a qualified student.
- Schools will pay for tuition and school-related fees before paying out any left over funds from a student loan, which can 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.
- Students should weigh out the cost of living on and off campus, and how much they can afford.
Student Loans and Rent
Student loans can be used to pay for room and board, which includes both on- and off-campus housing. So the short answer is yes, students can use money from their loans to pay monthly rent for apartments and other forms of residence away from campus. But you'll have to decide if you're going to live on or off campus. Both have their advantages, but the cost will probably be a big factor in your decision.
If you choose to live in a dorm, you may be able to save some money. Most dorms come furnished—at least with a bed and a desk in your room—so you don't have to buy furniture. Some schools even include food in their housing costs, so other than the occasional midnight snack and any extra meals, you may very well be covered. Dorms also don't require a security deposit—something you have to pay if you rent an apartment—and you won't have to pay utilities.
According to My College Guide, the average cost of living in a college dorm at a public school in the U.S. is $8,887 or $10,089 if you choose a private school. That figure can be higher if you decide to live in a fraternity or sorority house. Compare that to the average rent for a one-bedroom apartment nationally, which sits at $959 per month. This figure, of course, doesn't include meals, furniture, utilities, and other housing-related expenses. But remember, if you choose to go to school in a bigger city, off-campus housing will not only be more expensive, but there also will be a lot more competition for it.
The sooner you know you where you want to live—on or off campus—the sooner you can assess how much money you need, so it is important to fill out the Federal Application for Free Student Aid (FAFSA) as early as possible in the prior academic year.
Student Loan Disbursements
So you've been approved for your student loan. Great! But, don't rely on using all of that money for your housing just yet. Remember, higher education institutions pay your tuition and other school-related fees first, especially if you're not receiving any other financial aid such as Pell Grants or scholarships. The school will likely take out the money from your loan proceeds to pay for your on-campus housing as well if you're living in the dorms.
Schools pay for tuition and other school-related fees before releasing any remaining funds to a student.
Once these expenses are paid, the institution sends you any leftover loan money—usually by direct deposit to 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 enough financial aid is available to cover tuition, fees, and rent is important.
Handling Disbursement 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 seeking off-campus housing, you should make sure you have enough money to cover these costs, whether from family contributions or part-time employment, until they receive their student loan disbursement. Alternatively, you may want to swallow your pride and look for a roommate for your off-campus housing. By sharing your living space, you can cut down how much you owe on rent every month, along with any other housing-related expenses like utilities and food.