Once you head off to college, your summer breaks might not be the carefree times you remember from childhood. Instead, there’s a good chance you’ll use your “vacation” to make money, complete internships or take classes.
Plus, you might be supporting yourself financially, a reality that’s led many students to use loan money to pay for regular living expenses during the summer. Student Loan Hero took a closer look at how college students are using their loan funds over the summer break. Here’s what we uncovered.
Most use some student loan money for non-tuition expenses
Student loans are designed for education-related expenses, which include tuition, housing and living costs. But many students are also using loan money to pay for non-essentials, such as new clothing (26%), travel (20%) and entertainment (16%).
The biggest spending categories for student loan funds over the summer are food (42%), bills (38%) and housing costs (33%). Overall, only 10% of the college students surveyed are using their loans solely to cover tuition costs, a small figure that might simply be due to the fact that most don’t have to pay tuition during the summer months.
While student loans are meant to cover your cost of attendance — which does include expenses such as food and rent — overspending your loan money could leave you in a tough financial spot in future years. Whatever loan funds you spend now will have to be repaid in the future… with interest.
More than half say earning money is top priority
With 68% of students surveyed worried about making ends meet this summer, it’s not surprising that 53% say making money will be their top priority. Similarly, 66% of college students planning to work this summer.
Getting a job as a college student can help you support yourself financially, as well as reduce the amount you need to borrow in student loans. If you have loans and are worried about your summer finances, choosing to work could help you make the income you need to feel more secure.
Most students use summer earnings for living expenses or savings
Among those students planning to work, more than half (59%) will use their income to cover living expenses, and 57% will funnel their earnings into savings. A slightly smaller group (47%) will put at least some of their money into lifestyle activities, and 41% say they’ll use their income to pay for tuition.
Students with loans are especially likely to use the income they earn this summer for tuition — 49% vs. 31% of those without student loans. Although a summer job probably can’t pay your full tuition bill, even a small dent in it can leave you with less student debt upon graduation.
Students’ summer plans vary by income level
Not all students are planning to work and save for their tuition bill this summer. While students with loans tend to concentrate on making money, those without loans are more likely to focus on having fun.
As you might guess, students from high-income families seem to have more flexibility with their summer plans. For example, they’re more likely to finance their plans with savings, compared to low-income students.
The survey found that more high-income students plan to work an internship, study abroad or travel this summer than those from average-income or low-income backgrounds. In total, 21% of students from high-income families have a paid internship this summer, compared to just 8% of students from low-income families.
But not all students with internships are relying on savings: Among those with an internship, 56% are financing the associated costs with student loans. Although an internship can boost your resume and provide valuable experience, be careful about taking on a lot of debt to complete one.
Making the most of your summer breaks
Summer breaks during college can be a valuable time to make money, gain career experience or even travel the world. But if you’re using student loans to pay for non-education-related expenses, you might come to regret it.
Most student loans accrue interest from the date they’re disbursed, meaning you’ll have to pay back a lot more than you borrowed. Because of this, it’s crucial to keep borrowing to a minimum and avoid taking on too much debt.
By using your summers to earn money and boost your resume, you could set yourself up for greater financial security in the future. Be thoughtful about your summer plans now, so you don’t end up with an unnecessarily heavy debt burden after you graduate.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.28%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.61%5||Undergrad & Graduate|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective Sep 1, 2020 and may increase after consummation.