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Higher education can be expensive—and while people typically focus on the costs of tuition, students' living expenses can add up as well. At public four-year universities, the price of housing and food topped $12,770 in the 2023-24 school year. These costs may even increase for students who live off campus. You can use student loans to cover these living expenses, but you'll need to understand the limitations and best practices. Here's what to know.
What Can Student Loans Be Used For?
You can use student loans for a wide variety of college costs, as long as those costs meet the lender's eligibility criteria. The Department of Education funds most federal student loans, while banks and credit unions fund private student loans. Lenders usually allow you to use your loan funds toward these categories of expenses:
- Housing and food
- Tuition and school-required fees
- Required textbooks, course materials, supplies and equipment
- Transportation costs you incur between school, home and work
- Dependent care costs, if applicable
Can Student Loans Cover Living Expenses?
Yes, private and federal student loans can be used to pay for housing and food.
Every year, colleges create student budgets that include the full cost of attendance for the upcoming academic year. These budgets include expenses for different living situations—such as living on campus, living off campus and living with relatives.
When you apply for a student loan, your lender first disburses the funds directly to your school. Those funds go toward tuition and fees, and you receive any leftover balance to use for eligible school-related costs. If you decide to live off campus, you can use the leftover loan funds for rent payments, utilities and groceries.
Learn more >> What's the Average Cost of College Tuition, Fees and Housing?
Pros and Cons of Using Your Student Loan to Pay Rent
Using student loans to pay for rent can be convenient and may help you to focus on your studies, but it does come with some drawbacks. Consider these pros and cons before you go this route.
Pros
- Offers simplicity and convenience: Using student loan funds to pay for housing can be a straightforward way to ensure your rent is covered. You can pay your bills each month without worrying about how you'll earn the money.
- Allows you to focus on school: Some research shows that having a job while in school may negatively impact your grades and could delay graduation. Using student loans to pay for rent allows you to focus solely on your studies and excel in your classes.
Cons
- Increases your loan size: Using loan money toward rent costs increases the amount you borrow and, ultimately, the amount of debt you take on. This will impact your future monthly payments, repayment plan choices and can even affect your credit score.
- Accrues more interest and fees: The more money you borrow, the more interest you pay over time. Your origination fee, if applicable, will also increase since you are borrowing more.
- Limits your available rent funds: Your school's cost of attendance determines the maximum amount you can take out in student loans. If you plan to use some of the loan for living expenses, the cost of attendance cap will limit how much you can spend on rent.
Learn more >> How Much Should You Borrow in Student Loans?
How to Use Your Student Loans for Rent
Student loans are usually disbursed as a lump sum for each school term, so you may receive several months' worth of rent upfront. Here are a few best practices for using your student loan money for rent:
- Research housing costs. Check the cost of off-campus apartments, single room rentals and other living options where your school is located.
- Make a budget. Once you find an apartment, make a budget that includes rent, groceries, utilities, transportation, textbooks and supplies.
- Determine your loan amount. Based on your budget and your school's other costs of attendance, figure out how much you want to borrow in student loans.
- Make a plan for delayed funds. In some cases your loan funds won't be disbursed in time to cover upfront costs, such as a security deposit or first month's rent. You may need to use money from other sources to cover these expenses.
- Receive your loan funds. Once your school applies your loan funds toward tuition, fees and other school charges, it should send you any remaining balance. This process may take a couple of weeks.
- Choose a bank account. Keeping the money in a high-yield savings account can help your funds grow until you need them. This strategy also keeps your rent funds separate from your spending money.
- Track your spending. This can help you avoid overspending and ensure you have enough money for rent and other living expenses. Depending on your preference, you can track your spending using an app, pen and paper or other tool.
Learn more >> How to Pay for College When Financial Aid Isn't Enough
The Bottom Line
If you're worried about covering all your college costs, including rent, consider additional ways to save money in college and earn extra money if necessary. Apply for scholarships and grants, look into part-time work and work-study jobs, take advantage of student discounts and consider applying for a student credit card that could earn you rewards and help you begin building credit (as long as you use it responsibly).
Managing your student loan usage and repayments responsibly is another way you can build a positive credit history. Being careful with how much you take out and ensuring you pay your loans back on time is key to maintaining a positive payment history, a factor which makes up 35% of your FICO® Score☉ , the score used by 90% of top lenders.