The Right Way to Use Student Loans for Living Expenses

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

student loans for living expenses

It’s always a bonus when college costs less than you anticipated, especially if you took out student loans to cover your education. If you borrowed a certain amount to cover your tuition, fees, and other expenses but financial aid covered more than you thought, you could receive a refund check for the balance.

Hooray! Free money, right?

Unfortunately, many college students treat a student loan refund like bonus cash and spend it on things they don’t need. And while it might be nice to get a new set of headphones or a computer or go on spring break, it’s important to remember that any money you borrowed needs to be paid back with interest.

So, what should happen with your student loan refund? Here are the do’s and don’ts.

How to spend your student loan refund

There are many smart ways you can use a student loan refund check to enhance your college experience.

Find cheap housing

If you live in a dorm, it’s considered a direct cost and is covered by your student loan before you receive your disbursement. But if you live off campus, it’s your responsibility to find and pay for housing yourself.

Use your student loan refund to cover you housing, but keep it simple. You don’t need to live in an expensive apartment to live in a decent neighborhood. Cut the cost even more by getting yourself a roommate or two.

Keep your food allowance minimal

The best way to eat on the cheap is to cook for yourself. There’s no shortage of cheap and easy recipes for college students online. Meal plan on a budget and use your student loan refund at the grocery store, not at restaurants.

Cover transportation costs

Unless you live on campus or within walking or biking distance, you’re going to need to pay for transportation.

Using your student loan refund to pay for transportation could allow you to get to and from a part-time job, helping you make money in the long run. You should always look at unexpected cash as a way to help get you out of debt rather than deeper in it.

Buy books and supplies

Your student loan refund is supposed to be used to cover education-related expenses. So, it’s a great way to buy the books and supplies you need. Just make sure to shop around for the best deal, which you won’t find at the campus bookstore. Look for used books online to save even more money.

Hire a tutor

There isn’t much of a point to student loan debt if you can’t pass your classes. If you’re struggling, paying for a tutor is absolutely worth the expense.

Pay for additional expenses

If you were approved for additional money to cover special expenses — such as child care, disability-related costs, a computer, or software — use it accordingly.

How not to spend your student loan refund

You might be tempted to use your refund money to spruce up your life a bit, but resist using it to do the following.

Buy furniture

If you’re living off campus in an unfurnished apartment, you’re going to need some household items. Bring what you can from home. Whatever else you need, buy it used. You’ll find plenty of cheap, gently used items on Craigslist, at yard sales, or in thrift stores.

Purchase new clothes

Make your current wardrobe work. If there’s something you just can’t live without, look for it in local thrift stores, check websites such as thredUP or Poshmark, or get together with friends for a clothing swap.

Get a new car

One of the worst mistakes you can make with your student loan refund is to spend it on a new car. Drive the one you have until it won’t drive anymore. If you don’t have a car, learn to make college life work without it. If you live on campus, it’s easy. If not, take public transportation or invest in a used bicycle.

Buy alcohol

Alcohol is a waste of money, and if you’re not careful, it also can be costly to your health, studies, and relationships.

Go on vacation

Whether it’s a weekend getaway or spring break, travel is a luxury that shouldn’t be funded by student loan money. There are plenty of ways to have free fun in a college town.

What to do with leftover student loan money

Save it

If you have more student loan money than you need, this is the perfect time to learn an essential life lesson — how to save for an emergency. You never know what might come up. If you do have leftover funds, sock them away for a rainy day.

Give it back

There is no rule that says you have to keep all the student loan money you receive. In fact, you can return part of your loan interest-free within the first 120 days.

If that 120-day window has closed, you still can pay a portion of your loan back. Take whatever you have left and make a student loan payment while still in school. You’ll put a dent in the debt and free yourself from the interest you’d otherwise pay on that amount when you graduate.

Bottom line: Spend as little as possible

One purchasing decision might seem like a drop in the bucket, but you’ll make hundreds of purchasing decisions while you’re in college. From housing to food to entertainment, that could add up to thousands of dollars in savings over the course of your college career.

While you should focus on keeping your costs down, you also should think about how to reduce your debt. A great way to do this is by taking on a side hustle while you’re in school. That way, you can make money to cover the costs above rather than using your student loan refund check.

If you can use your part-time income to pay for books, transportation, and other expenses, then your entire refund can go toward paying off your student loans.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.