Can Student Loans Be Used to Pay 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.

However, the housing location that a student chooses can dramatically impact the cost of a college education. Student loan debt is at an all-time high with students owing roughly $1.5 trillion in student loans as of February 2019, according to Forbes. And with the escalating costs of tuition and housing, the number of student loan borrowers—currently pegged at 44 million—is likely to continue to rise nationwide. Today, more than ever, students need to stretch their college loans as far as they can to cover as much of the tuition and housing expenses as possible.

Key Takeaways

  • Student loans can be used to pay for room and board for a qualified student.
  • 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.
  • Students should weigh the costs of living on and off-campus and how much they can afford.

Understanding Student Loans and Housing Costs

Many people take out student loans to help offset the costs associated with post-secondary education, including housing costs. The average amount of student loan debt carried by borrowers from the class of 2017 was almost $29,000. As a result, it's important to compare the costs of living on-campus and off-campus.

Although a student loan can be used to cover on-or off-campus housing, choosing a dorm might help save some money. Most dorms come furnished—at least with a bed, bureau, and desk in the room, eliminating the need to buy furniture. Some schools even include food in their housing costs. As a result, other than the occasional midnight snack and any extra meals, most students should be covered. Also, off-campus housing, such as an apartment, typically requires a security deposit and students are responsible for the utilities, such as heat and electricity. However, dorms do not require a security deposit, and utilities are included in the overall housing bill from the school.

Dorm vs. Off-Campus Housing Costs

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 at 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. The rental amount doesn't include meals, furniture, utilities, and other housing-related expenses.

Also, off-campus housing is usually more expensive in the cities, and there is a lot more competition for it. For example, if you're attending a big-name college in a metropolis, like New York City, Chicago, Boston, or Los Angeles, 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.

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 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 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 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 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.