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.
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.
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
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.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% 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 April 17, 2019, 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 04/17/2019. 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@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 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.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|