The Balance of Loans and Living Expenses
Tuition is only one part of the cost of attending college.
Students also need a place to live, food to eat, and money for utilities, transportation, and other everyday expenses.
For many students, using student loans for rent and living expenses is common and sometimes necessary. However, a student loan refund is not extra money. It is borrowed money that may accrue interest, increasing the total amount that must eventually be repaid.
This guide explains how student loan refunds work, what it can cost to borrow for living expenses, and how students may reduce the amount they borrow.
Can You Actually Use Student Loans for Rent and Living Expenses?
The short answer is yes. Student loans can generally be used to cover education-related living expenses while enrolled in school. The amount available depends on many factors, such as cost of attendance, loan limits, and more.
How Loan Refunds Work After Tuition Is Covered
Federal student loan funds are generally disbursed through a borrower’s school and applied first to tuition, fees, school-provided housing and food, and other authorized charges. These disbursements are typically issued each semester, or at least twice per academic year, depending on a college’s academic calendar (some colleges use trimesters and quarters).
In some cases, if the financial aid disbursement exceeds the amount owed, the remaining funds may be issued to the student as a refund or credit balance. This is often referred to simply as a refund or credit.
Although deposited into a student’s bank account, the refund remains borrowed money. Unless unused loan funds are returned, the amount must eventually be repaid with any applicable interest.
Students do not have to accept every dollar offered. If a refund is larger than the amount needed, part of it may be returned, or a future disbursement may be reduced.
To read more about the disbursement process, please see this page on StudentAid.gov.
What Counts as an Authorized Education Expense?
The 2026-2027 Federal Student Aid Handbook identifies several expenses that may be included in a student’s total cost of attendance:
- Tuition and required fees
- Housing and food
- Books, supplies, and necessary equipment
- Transportation
- Miscellaneous personal expenses
For students who live off campus, authorized housing and food expenses may include rent, basic utilities, and groceries during the applicable enrollment period, subject to the amounts included in the school’s cost of attendance. Vacations, entertainment, luxury purchases, and other expenses unrelated to attending school generally are not authorized uses of federal student loan funds.
Private lenders may have lender-specific restrictions on how student loans can be used. Borrowers should review their loan agreement or contact their lender before using private loan funds.
The Hidden Cost: Interest Doesn’t Care What You Spend It On
Loan interest applies to borrowed money, regardless of whether it is used for tuition, rent, groceries, or other education-related expenses.
How Interest Accrues on Living-Expense Dollars
Interest is the cost charged for borrowing money and is generally calculated as a percentage of the outstanding principal balance. As interest accumulates, the total cost of the loan increases.
When interest begins accruing depends on the loan:
- Direct Subsidized Loans: The federal government generally covers interest while the borrower is enrolled at least half-time and during the six-month grace period.
- Direct Unsubsidized Loans: Interest begins accumulating when the loan is disbursed.
- Private student loans: Interest typically begins accruing after disbursement, although the specific terms depend on the lender and loan agreement.
Many federal student loans use simple daily interest.
This means interest accumulates each day based on the outstanding principal balance and interest rate. When payments are not required during school, unpaid interest may continue accumulating and could later be added to the principal balance under certain circumstances.
How Borrowing More Changes Monthly Payments and Total Repayment Cost
Borrowing additional money for living expenses increases the principal balance that enters repayment. This larger balance generally leads to a higher monthly payment and more interest paid over the life of a loan.
Extending the repayment period may lower the required monthly payment, but it also gives interest more time to accumulate. As a result, a lower monthly payment can sometimes produce a higher total repayment cost.
The final cost will depend on the amount borrowed, interest rate, fees, and terms. Borrowers should review both their estimated monthly payment and total repayment amount when comparing loans or repayment options.
A Simple Example of What $12,000 in Rent Costs You Over 10 Years
To understand the impact of additional living-expense borrowing, consider an example that separates those costs from tuition.
Assume Borrower A enters repayment with an additional $12,000 in student loan debt from rent and other living expenses.
| Repayment Plan | Monthly Payment | Repayment Term | Total Paid |
|---|---|---|---|
| Standard Repayment | $333 | 10 years | $39,960 |
| Extended Repayment | $211 | 20 years | $50,640 |
| Income-Driven Repayment | $150 | 20–25 years | Varies |
| Refinancing | $193 | 15 years | $34,740 |
Assume the loan has:
- A fixed 7% interest rate
- A standard 10-year repayment period (120 monthly payments)
- No fees or interest accrued before repayment
We can now run some simple calculations and estimate the cost of that additional borrowed money. If no interest were charged, the monthly payment would be:
- $12,000 ÷ 120 monthly payments = $100 per month.
After applying a fixed 7% interest rate, the estimated monthly payment becomes $139.33.
Multiplying that payment by the 120-month repayment period shows the total repayment costs:
- $139.33 × 120 payments = $16,719.60.
- $16,719.60 − $12,000 original principal = $4,719.60 in interest.
In this example, $12,000 borrowed for rent and other living expenses would ultimately cost approximately $16,720, or nearly $4,720 more than the amount originally borrowed. This example covers living expenses only; any amount borrowed for tuition or other education costs would be additional.
Borrowers do not have to calculate these numbers on their own. The Federal Student Aid Loan Simulator can estimate monthly payments and total repayment costs for federal loans.
Why This Adds Up Faster Than It Feels Like It Should
Using student loans for basic living expenses may not feel like taking on additional debt, especially when funds are needed for rent, food, or utilities. Yet, even relatively small amounts borrowed each semester can accumulate into a much larger balance over several years.
Treating a Refund as "Extra Money" vs. Borrowed Money
Once a student loan refund reaches a bank account, it can seem a lot like ordinary income. It is important to remember, however, that the money must eventually be repaid, along with any applicable interest.
This distinction is easy to overlook when a refund covers necessary living expenses, but it’s important to think about the long-term effects of repeated borrowing. For example:
Assume Borrower B receives and spends $3,000 per semester on living expenses:
- $3,000 × 2 semesters = $6,000 per academic year.
- $6,000 × 4 years = $24,000 in additional student loan principal.
That’s $24,000 borrowed beyond tuition before accounting for interest.
Students are not required to keep every dollar offered. If part of a federal loan is no longer needed, the borrower may cancel or return that portion. According to the Federal Student Aid Office, eligible federal loan funds returned within 120 days of disbursement are treated as a reduction of the original loan amount. Applicable interest and loan fees are also removed from the returned portion.
When Living-Expense Borrowing Exceeds the School’s Allowance
A school’s cost of attendance generally includes estimated allowances for housing, food, transportation, and other necessary expenses. When actual living costs exceed those estimates, the difference is not automatically covered.
In these cases, a financial aid administrator may use professional judgment on a case-by-case basis to adjust components of a student’s cost of attendance for documented special circumstances. Each request is reviewed individually, and an adjustment is not guaranteed. Because living costs vary by location and personal circumstances, students facing a shortfall should contact their financial aid office to discuss available options.
Smarter Ways to Cover Living Expenses While in School
Carefully budgeting loan refunds and exploring available assistance programs can help reduce the amount added to a student loan balance.
Budgeting the Refund Like a Paycheck
Student loan refunds are often issued as a lump sum, even though the money may need to cover several months of expenses. This means borrowers may need to budget the refund as if it were a monthly paycheck. How?
Dividing the refund by the number of months in the academic term can help establish a monthly spending limit:
- For example, a $3,000 refund intended to last five months would provide approximately $600 per month for living expenses.
Keeping the funds separate from everyday spending, such as in a savings account, may also make the remaining balance easier to track. The overall idea is to treat the money as a limited monthly budget rather than extra funds available at the beginning of the term.
Reducing How Much You Borrow for Non-Tuition Costs
Reducing living expense borrowing does not always mean eliminating it entirely. Even a small reduction can lower the principal balance and the amount of interest that may accrue. How is this possible?
Students may consider lower-cost housing or meal plans, scholarships, part-time employment, and Federal Work-Study.
The Federal Student Aid Office recommends exploring scholarships, work opportunities, school-based assistance, and other needs-based programs before taking on additional private loans. A school’s financial aid office can also help identify available resources and explain how to reduce an accepted loan amount.
Check Your School’s Basic Needs Office First
Some colleges may have a basic needs office, student resource center, or similar program designed to help with food, housing, and other essentials.
Depending on the school, resources may include:
- Campus food pantries
- Emergency short-term loans for books or educational materials
- Basic needs assistance (including meals or housing support)
- Re-evaluation of financial aid packages
Availability and eligibility requirements vary by college. If a school does not have a clearly named basic needs office, the financial aid office, dean of students, or student affairs office may be able to direct students to the appropriate program.
Searching the school’s name + terms such as “student basic needs,” “emergency funds,” “food pantry,” or “student assistance” may also help locate available resources.
SNAP, Who Actually Qualifies as a Student
The Supplemental Nutrition Assistance Program (SNAP) may help eligible low-income households pay for food. For college students, meeting the program’s income requirements may not be enough to qualify.
According to the USDA Food and Nutrition Service, students enrolled at least half-time generally must meet an exemption in addition to SNAP’s income and resource requirements. Common exemptions include:
- Working at least 20 hours per week in paid employment
- Participating in a state- or federally financed work-study program
- Caring for a child under age six
- Being a single parent, enrolled full-time, and caring for a child under age 12
Students enrolled less than half-time are not subject to the special student restrictions, but they must still meet the program’s other eligibility requirements. Because SNAP is administered by each state, students should contact their local SNAP office to determine eligibility requirements and next steps.
National and Local Resources
When campus assistance is limited or otherwise unavailable, national and local organizations may help connect students with other resources.
Swipe Out Hunger works with colleges and universities to support campus food-security programs. Students can check whether their school participates or ask about meal-sharing programs, food pantries, and other hunger-relief services.
211 connects individuals with local food banks, housing assistance, utility support, and other community services. Each state may have its own 211 website; students can call 211 or search for local resources online.
Services offered may vary by school and location, and assistance is not guaranteed. Regardless, these programs may help reduce the amount of essential living expenses that must be covered with student loans.
What If This is Already Part of Your Debt Story
Looking back at how student loan funds were spent can help explain why the balance became larger than expected. Yet, understanding the source of the debt should be useful, not a reason for borrowers to blame themselves.
Why This Doesn't Mean You Did Something Wrong
Using federal student loan funds for authorized expenses such as rent, groceries, or basic utilities does not mean a borrower was careless. These are necessary expenses, and many students have limited income or financial support while attending school.
While enrolled, there is ample stress, excitement, and confusion not only from classes and coursework but also from other pressures of student life. Realizing the impact of spending additional borrowed funds may have been difficult to fully understand at the time.
Regardless of how a balance grew, the life circumstances that made the borrowing necessary should also be remembered.
Options if You’ve Defaulted on a Private Student Loan
Many private student loans can go into default after three missed monthly payments, although the exact timing and consequences depend on a borrower’s loan agreement.
For borrowers dealing with private loan default, the Consumer Financial Protection Bureau recommends first requesting the information needed to verify the debt and the amount owed.
Borrowers can then ask their lender or loan servicer whether a payment plan or other options are available. If applicable, cosigners should also be notified if a loan enters default, as it may appear on their credit report.
Depending on a loan’s status and a borrower’s eligibility, refinancing through a private lender that works with delinquent or defaulted private student loans may be another option.
Before taking any action, borrowers may want to get assistance from a qualified nonprofit credit counselor, financial advisor, or legal counsel. Any agreement should be obtained in writing, and borrowers dealing with debt collections should also understand their rights under federal law.
Using student loans for rent and living expenses is common and sometimes necessary. You can also check out this blog post from Yrefy, financial wellness.
For students, the important thing to remember is that every dollar borrowed adds to a loan balance and may increase the total amount repaid over time.
Dealing with delinquent or defaulted private student loans and considering refinancing?
Yrefy may be able to help. Yrefy works with borrowers who may not qualify for traditional refinancing, including student loan borrowers with bad credit (eligibility requirements and terms apply).
To learn more, contact Yrefy at (866) 816-7649 or fill out our contact form, and a team member will reach out to you.
Disclaimer: This article is for informational purposes only and should not be considered legal, tax, or financial advice. Please consult a qualified financial advisor or attorney regarding your specific student loan situation.
