Student loans are a great way to pay for school, but they also can become a financial burden. Most students use grants or scholarships that cover tuition and living expenses. There are many ways you can lower your monthly payments by refinancing your current loans with another lender, consolidating multiple debts into one payment per month, or using federal income-based repayment plans.
While some tips and tricks might help reduce your monthly payments or get better interest rates, Peachy Essay a best writing company provides more information on the various options to choose from. This article will help you understand how to use student loans for living expenses and repay them on time.
What Are Student Loans for Living Expenses?
Student loans are primarily used to pay for tuition, although you can also use them to pay for books, room and board. However, it is important to consider whether you can afford to use your loans to cover living expenses. If you are not sure, speak with your student loan provider.
Types of Student Loans with Living Expense Benefits
It is significant to note that not all student loans have living expense benefits. The following types of student loans can be used to cover living expenses:
- Stafford Loans
This is the most common type of student loan and can be used for anything from tuition to living expenses.
- Perkins Loans
A federal program that provides low-interest loans to college students meeting need-based qualifications. Funds are limited, but you can use them for living expenses.
- Parent PLUS loans
It is a Parent Loan for Undergraduate Students, commonly known as PLUS loans. Parents can borrow up to the full cost of their child’s education, minus any financial aid.
- Grad PLUS loans
This loan is designed to assist parents who want to pay off their student’s education after graduation.
Federal Aid Programs for Student Loans
These include
- Pell Grants
- Direct Loans
- Supplemental Education Opportunity Grant (SEOG)
- Work-Study Program (WSP) etc.
Many people rely solely on these government-provided sources of money for school expenses because they don’t qualify for additional financial aid. You must understand the risks and rewards of federal student aid benefits these loans before taking out a loan. If you cannot repay a student loan, you will default.
Student Loan Institutions That Offer Living Expenses
Some banks and lenders offer student loans with living expense benefits. It is statistically proven that 3.73% are undergraduate loans, 5.28% are graduate direct unsubsidized loans, and 6.28% are direct PLUS loans. Financial institutions usually provide special discounts for students who sign up for a student loan with a living expense provision. Among those include;
- Wells Fargo
It offers a living expense benefit that allows you to apply for an interest rate reduction when using your student loans to cover education-related expenses. The repayment period is up to six months, but you must apply for this benefit within two years of your loan disbursement date.
- Navy Federal
You can add a living expense add-on to Navy Federal’s student loans. The benefit reduces your interest rate by 0.25 percent, making your interest rate 2.4% or lower for all loans that start with the living expense add-on.
- Citizens Bank
Citizens Bank offers a student loan repayment benefit that reduces your payments by up to 20% for living expenses like housing or food, in addition to tuition and books.
How to Use Student Loans for Living Expenses?
There are many ways you can use student loans for living expenses. You can even get a college loan with a 0% interest rate if you want to cover the college expenses directly from your pocket.
- Understanding Your Monthly Payment
Your monthly loan payments will be around 10%-15% of your monthly income. You can use your loan payment calculator to see the total amount you have paid off over time, which will help you understand how much money you are spending overall. If you use student loans to pay for living expenses and do not have enough money left over in your budget, you will eventually fall behind on your payments.
- Register With The Department of Education
If your school is not registered, you might not receive your loan disbursement. You can check if your school has been approved on the Department of Education’s website.
- Apply For A Repayment Plan
Several federal repayment plans will reduce your monthly payments. To get the best interest rate reduction, you must either submit your application within fifteen days of receiving your loan disbursement or, if you are a military member, within forty-five days. It is also important to be aware that your most recent application will override any previous applications f you apply for a repayment plan more than once.
- Consider Consolidating
Consolidation is similar to refinancing in that it will get you a better interest rate. However, if you consolidate your loans, you will lose many federal student aid benefits. For example, income-based repayment plans and loan forgiveness programs are not available for federal loans that have been consolidated.
If you have multiple federal student loans from different lenders, you might be able to save money by consolidating them into one loan. Nevertheless, you should watch out for fees and ensure that your new interest rate is lower than your current interest rate. It might not be a good idea if you cannot lower your interest rate by consolidating.
- Evaluate Your School Options
If you cannot afford the tuition at your current school, you should consider it the right choice. If you can afford another school, you might be able to receive more loans and grants at the cheaper school.
- Look Into Private Student Loans
Private student loans can help if you cannot receive more federal aid from your school. Keep in mind that private loans usually offer higher interest rates than federal student aid. If you are considering a private loan, make sure to look at the various repayment plans and interest rates to make a good decision.
Who Qualifies For Student Loans?
You must first fill out the Free Application for Federal Student Aid (FAFSA) to receive federal student aid. Your living expenses are not your only financial responsibility when paying for school. If you have other children dependent on you, you can use their income information to create your expected family contribution (EFC). Your school will then determine how much financial aid you can receive.
Is It Worth It To Use A Student Loan For Living Expenses?
If you cannot get the scholarships or grants you need to pay for college, then yes, it is worth it. If your only option is student loans to pay for college, you should consider using them.
Bottom line
Hopefully, this information has been helpful. Using student loans for living expenses can be a responsible decision if you consider all of your options and make good judgments. Even if your school offers you a repayment plan, you should still check with the Department of Education to make sure that they approve your school’s plan.
