Housing Options That Cut Student Loan Borrowing

March 3, 2024March 4, 2024 admin

Having a place to call home during college can be costly. At public four-year institutions, on-campus housing costs an average of $11,451 annually for room and board, with off-campus renters averaging $10,781, according to a report at EducationData.org updated in August.

For most who borrow to pay for college, student loans can be used for on- or off-campus housing.

The process typically goes like this: Once the student enrolls, the educational institution receives funds from the student’s loan to apply to tuition and other school-related fees. Once tuition and fees are paid at the start of the semester, the educational institution transfers any remaining funds to the borrower, usually through a direct deposit to the student’s banking account.

While students can use student loans to purchase supplies and textbooks or to pay other school-related expenses, the funds can also be used to pay for housing.

Knowing when the money will be available is key because the remaining loan funds are usually disbursed after the start of the academic year. This timing could affect the overall budgets of off-campus renters in particular since most rental agreements require a security deposit at the beginning of the lease.

Whether borrowers choose on- or off-campus housing for their “home sweet home,” the decision will affect the total amount of student debt he or she will take on over the course of a college career, so it pays to understand the most affordable options.

Here are some housing options to get a true picture of what makes sense for each student’s specific situation.

On-Campus Housing

Student housing on campus can include dorms, university apartments, university co-operative living, married housing, learning communities and other school-sanctioned choices.

On-campus housing offers students both community and convenience. Being on campus puts students at the center of the school’s social and academic life and activities, and in many cases contributes to overall feelings of connection. Dorms are typically located close to classrooms, dining halls, activity buildings and other campus hot spots, so for many students there is no need for the expense of a car.

Since the institution publishes the total housing costs before each semester, on-campus housing rarely involves unexpected surprises to a student’s budget. The upfront costs of on-campus housing include meal plans, which often can be modified for the most affordable and flexible situation, as well as basic furnishings and all utilities including Wi-Fi.

Upperclassmen might want to explore making dorm life affordable by working as a resident adviser or assistant, commonly called an RA. RAs provide support to dorm residents and fulfill other duties. Frequently in exchange, their room and board are fully or partially paid for by the school.

Some upperclassmen look into cooperative living as an alternative in which monthly housing costs are reduced depending on tasks performed at the living facility. Co-op housing, typically available off campus, is also an option on campus at some colleges.

Off-Campus Housing

For those considering off-campus housing, it is important to budget for the required funds through savings or other sources since the student loan disbursement is not immediately available. Once the disbursement is available, those funds can then be applied to housing expenses.

When looking at rental homes, apartments or other off-campus housing options, carefully review the specific terms of the rental agreement because they will affect your overall budget.

It may be more affordable to look at off-campus properties offering a 12-month lease, but that means renters might have to sublet over the summer months, which could be more inconvenient than a shorter lease – and perhaps more expensive in the long run.

Security deposit amounts vary. On average, renters can expect to put down the equivalent of one or two months of rent when signing the lease.

Renters typically are responsible for utilities such as internet, water and electricity. Rates vary by state and city, and an apartment’s size also affects the cost of utilities.

Location plays a part in affordability. Off-campus housing is usually more expensive closer to the central campus than farther away, since there is more competition in the marketplace for greater convenience. While apartments or rental homes are less costly when located outside the immediate campus area, students should factor in the time and expense of commuting such as gas, parking, insurance or other transportation costs.

Rooming with a few friends can help trim down housing expenses. When signing a lease with roommates, understand the terms. Is each person signing off on an individual lease agreement? Is a cosigner needed?

Also worth exploring is subsidized housing based on financial need. As an example, some community colleges participate in a program by the nonprofit Single Stop USA that helps low-income students overcome barriers to success and includes housing support. Check with your college’s admissions office for information.

Finally, when it comes to off-campus housing leases, watch for surprise expenses such as a background check fee. The fees might add up if a student applies for multiple rentals. To set up a house, off-campus students will also need to budget for items like kitchen supplies, linens, furniture, and other housing-related expenses.

A True Financial Picture

In all, it pays to do the required homework and estimate living expenses to determine college affordability. If you’re relying on student loans and find that one option saves you even just $200 a month over another – or $6,000 in three years plus interest – that’s well worth considering.

While there is no way to be “home-free” when it comes to student housing, selecting the most affordable housing option helps minimize student loan debt upon graduation.