Student loans can be incredibly stressful for a lot of different reasons. However, disbursement day for your student loans can be one of the less stressful days. Often, you may have situations where your student loans cover more than what the school’s financial office asks you to pay. In this case, you will get a refund. But what do you do with that refund? This article will discuss some of the smartest things to do with extra student loan money.
Why Would I Have Extra Student Loan Money?
There are many different reasons why you might have extra money from your student loans. For one, maybe you enrolled in fewer credit hours than you initially thought, which would significantly reduce your tuition. Additionally, you could have received more scholarship or grant money from the school or from an outside source, which would also lower what you owe for tuition. Overall, if you don’t owe as much tuition money as you thought, it will result in a refund of some of your student loan funding, which will typically go back into your bank account.
Is It Smart to Use Student Loan Money for Other Things?
Whether it’s wise for you to use a leftover student loan balance for other things depends on your financial situation and what you’re using the money for. For example, if you want to take your excess student loan balance and go on an unnecessary shopping spree, that is obviously not the best use of your money. However, if you were already planning on using your own money for other school-related expenses, why not use the loan money you’ve already taken out for that? Below are some of your options regarding how to use your excess student loan money, although this is not an exhaustive list.
Create a “Rainy Day Fund”
As a full-time student, you will undoubtedly have some unexpected expenses come up. For example, you might want to take a road trip. In this case, you would need extra money for gas and transportation. A professor may ask that you buy a particular book, attend an event, or do a class project that requires extra materials. A friend may ask you to get lunch with them on campus. Whatever the case, putting extra student loan money aside for emergencies or a “rainy day fund” prevents you from having to dip into savings or use a credit card.
Buy/Lease A Car
If you don’t already have a car on your college campus, you may want to invest in one for your upcoming school year. Whether you need a car to get to campus from your housing or to get to a job, not every college campus is entirely walkable. Depending on the kind of refund you get from your student loans, it could be enough to put up the down payment on a new car or buy a used one from a local dealer. However, this is a big decision. You should probably consult your family about this, regardless of your refund size.
Use It For Books
Almost every college course you enroll in will ask that you purchase textbooks. Some might only be $10 or $15 each, and many of these you can even buy used from other students. However, some professors will assign a book that needs to be purchased new because it contains an online access code or other digital materials that can only be used once. In cases like these, you should consider putting a few hundred dollars away each semester for your textbooks, which is a great thing to use student loan funds for.
Buy a Meal Plan/Dining Money
Depending on the school you attend, a meal plan may or may not be included in the tuition you are already paying. However, some schools offer entirely separate meal plans, allowing you to pay an additional fee to eat on campus. This could be a specific number of meals or unlimited meals. Additionally, many schools offer some form of dining dollars that you can use toward paying for food in locations around campus. If you have a student loan refund from your school and aren’t sure what to use it for, a meal plan could be one great option. After all, you’ll always need to eat.
Pay Off/Down Credit Cards
If you already have credit cards open and carry a balance on any of them, another good option for using your student loan refund is to pay off or pay down those credit card balances. That way, at least any debt that you leave school with will be consolidated into your student loans rather than your credit cards. Generally, interest on student loans is far less than the interest on a credit card. So you would actually be doing yourself a tremendous financial favor. Paying off your credit card balance can also give you a lot of relief regarding finances, as you won’t be carrying a balance and can have an open line of credit.
Store Some Money on Your Student Account
Many schools allow students to save money on their personal student accounts for things like printing, parking fees, vending machines, etc. So one option for using your student loan refund balance is to store it on your student account for those situations where you need to print assignments or otherwise give money to the school directly. This is a great way to start setting and keeping your savings goals.
Start the Loan Repayment Process
Another thing to do with your loan refund money is to start repaying your student loans before your grace period ends. You’ll often have the option to pay the interest on your student loans while still in school, which can save you a lot of money as you repay the loan after you’ve graduated. In addition, putting your loan refund back into your loan payments can help you pay down your loans faster and have smaller monthly payments after graduation.
Give It Back To Your Parents
If your parents are currently paying for or helping you pay for your secondary education, one of the best things you can do with your student loan refund is to give that money back to your parents. Your parents will likely appreciate this thoughtful gesture. You could even link their bank account directly to your school account, so any refunds go directly to them.
Return Money To The Department of Education
If you took out federal student loans, you can return any student loan refunds back to the Department of Education to avoid paying interest fees on that part of the loan. In fact, if you give the money back directly, it will be as though you never borrowed it in the first place!
Extra student loan money can be a relief or a major hassle, but you must consider your options for what to do with it. Ultimately, try to put any refund money toward something that will advance your education rather than wasting it on things you don’t really need.
