Can you use your student loan to pay for your accommodation?

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There are several facts in life: death, taxes, and the fact that the cost of college continues to rise.

Data from National Center for Education Statistics states that in 2019-2020, the average total tuition fee for first-time undergraduate full-time students living on a four-year private campus was $ 53,200; in private non-profit organizations it was $ 35,100, and in government agencies – $ 25,500.

As a result, the country’s student loan debt is staggering: 43.2 million student borrowers have an average of $ 39,351 in debt. Statistics show that across the country, 43% of students say they have education debt and 65% of graduates have student debt. Eduation.org reports… The same report says that 52% of students who take out a student loan don’t think it’s worth it.

With so many Americans taking on large debts and regretting it, it’s worth considering if there is a more affordable way to pay for their education. And what exactly do student loans cover? Understandably, students use them to pay for tuition, textbooks, and other school materials. But can you use student loans to cover living expenses and other non-education expenses? Should you?

To choose spoke with financial experts to get the full details.

How student loans are distributed

What you can use your student loan funds for

Here are the typical expenses that college students need to cover that you can pay with student loans:

one. Tuition fees and fees

According to Collegedata.com, in the academic year 2020-21, the average tuition fees and fees is an:

  • $ 37,650 in private colleges
  • $ 10,560 Public Colleges (State Residents)
  • $ 27,020 at public colleges (out of state residents)

2. Accommodation and meals

Prices vary by school and city, but Collegedata.com reports that for the 2020-2021 school year, the average cost of living and dining is

  • $ 13,120 in private colleges
  • $ 11,620 in public colleges

3. Books, laptop and supplies

College council says annual cost books and supplies for a four-year public college cost about $ 1,300. In private colleges, the costs are probably slightly higher.

4. Personal expenses

This may include cell phone bills, tutoring, laundry, club fees, internet, transportation, streaming, and all other entertainment.

Is it worth using these funds for living?

Students can certainly use student loan funds to cover living expenses, says John Lee, co-founder of Fig Loansas they are part of the school attendance equation. “You need to be able to get to school while living nearby, pay basic bills and have access to transportation,” he says.

To make the most of tuition funds, textbooks, and other school needs, Lee encourages students to find the least expensive housing options they can while at school to minimize the need to make the most of their loans. “Having multiple roommates can save you thousands a year. And while the budget may seem foreign to young people in the real world for the first time, it becomes all too real when you work full time and try to earn monthly loan payments,” he adds.

“Just because you can use student loan funds to cover your living expenses doesn’t mean you have to,” says Tyne. “The cost of attending classes is high on its own, so if you add funding to your living expenses, debt can quickly increase,” she says.

However, using student loan money to pay for your day-to-day expenses may be better than using a credit card, she argues, since the interest rate is often lower. “If you can cover even a fraction of those costs in cash, you’ll be in a better financial position after graduation,” Thane continues.

Consider taking a part-time job or freelancing here and there to reduce the amount you need to borrow, she says. “Remember, every dollar you do now has to be paid back in the future,” Tyne says.

What is not worth spending money on?

“You shouldn’t use your student loans to pay for travel, parties, or concert tickets,” says Lee. “However, most lenders will not have control over your expenses. However, I would advise students to think very carefully about whether the money spent on entertainment is worth paying back in full, plus interest, over the next few years after graduation. “

Consider a credit card with 0% annual interest rate for laptop, textbooks, and more.

Some college students may find it helpful to use credit card with an initial 0% per annum to pay for expensive purchases like a laptop or textbooks.

“Using advance bids such as a 0% interest rate is one way to use credit as a financial instrument,” says Rod Griffin, senior director of consumer education and advocacy at Experian.

But, as with any loan decision, it is important to understand the terms and conditions that you agree to. These so-called teaser rates usually expire after a certain period of time, says Griffin.

“When using an initial rate offer, it is important that you have a card redemption plan before interest is required from you,” he explains.

With the right plan, using a credit card to cover expenses you know you can pay back can be a beneficial way. build credit and cut down on the student loan bill you might have after graduation, ”says Griffin.

Another benefit to using credit cards responsibly is that it can help college students establish their credit history for future purchases, such as a car or mortgage.

There are a number of credit cards available for college students that offer a starting 0% annual rate, including Discover it® Student Cashback and Bank of America® Travel Rewards for Students… If you need a longer introductory period, consider USA Bank Platinum Visa Card

Discover it® Student Cashback

On the secure Discover site

  • Awards

    Receive 5% cashback on everyday purchases at different locations every quarter, such as Amazon.com, grocery stores, restaurants, gas stations, and when paying with PayPal, up to a quarterly maximum when activated. Plus, automatically get 1% unlimited cashback on all other purchases.

  • Welcome Bonus

    Discover will match all cashbacks you earned at the end of the first year.

  • Annual fee

  • APR introduction

    0% for 6 months on purchases

  • Regular annual interest rate

  • Balance transfer fee

    Commission for the transfer of the initial balance 3%, commission up to 5% for balance transfers in the future (see Terms and Conditions) *

  • Foreign transaction fee

  • Credit required

Bank of America® Travel Rewards for Students

  • Awards

    Unlimited 1.5 points for every dollar spent on all purchases

  • Welcome Bonus

    25,000 bonus points after spending at least $ 1,000 on purchases within the first 90 days of account opening that can be used to earn a $ 250 credit for eligible travel purchases.

  • Annual fee

  • April introduction

    0% per annum for the first 12 payment cycles for purchases

  • Regular annual interest rate

    13.99% to 23.99% variable

  • Balance transfer fee

    Either $ 10 or 3%, whichever is greater

  • Foreign transaction fee

  • Credit required

US bank Visa® Platinum Card

On a secure site US Bank

  • Awards

  • Welcome Bonus

  • Annual fee

  • April introduction

    0% for the first 20 payment cycles for balance transfers and purchases

  • Regular annual interest rate

  • Balance transfer fee

    Either 3% of the amount of each transfer, or a minimum of $ 5, whichever is greater

  • Foreign transaction fee

  • Credit required

Many students like a pros and cons checklist to aid in decision making.

If you’re struggling to decide whether to take out more loans to cover your living expenses, Thain recommends making a list of pros and cons.

Pros of using student loans to cover living expenses include::

  • Probably cheaper than using a credit card due to lower interest rates
  • Funding is easy to get even with bad credit
  • Universal funding for educational and personal expenses

Cons of using student loans to cover living expenses include::

  • Increase in student loan balance, which will grow by compounding interest
  • The temptation to blow up the budget and spend money on irrelevant

Bottom line

When you take out student loans, you can set them aside for your educational needs. Once your tuition, room and board are covered, it’s up to you how to spend it. However, since you must return these funds with interest, experts recommend that you choose your spending carefully.

They suggest you live with a roommate, take a part-time job, and look for alternative ways to pay for expenses, such as a credit card with a 0% annual interest rate. Experts agree that spending decisions should be smart so as not to be overwhelmed by paying off a lot of debt after college.

For Discover it® student cashback rates and fees, click here

Bank of America® Travel Rewards Student Information has been self-collected by Select and has not been verified or provided by the card issuer prior to publication.

Editorial note: The opinions, analyzes, reviews or recommendations expressed in this article are solely owned by the Select editors and have not been reviewed, endorsed or otherwise endorsed by any third party.

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