Do Student Loans Cover Room and Board?
Discover if student loans extend beyond tuition to cover your full college living expenses and how different loan types compare.
Student loans serve as a financial tool to help individuals pursue higher education. They provide necessary funds to cover various educational expenses, bridging the gap between personal savings and the overall cost of attending college or university. Loans enable access to academic programs and require future repayment, typically with interest.
Cost of Attendance
The “Cost of Attendance” (COA) estimates a student’s total educational expenses for an academic year, as determined by each institution. This figure includes direct costs, such as tuition and fees, and indirect costs. Schools calculate different COA figures based on a student’s living situation, such as on-campus, off-campus, or commuting from home.
The COA encompasses tuition, mandatory fees, and allowances for books, course materials, supplies, equipment, transportation, and personal expenses. It may also include allowances for childcare or disability-related costs. Specific amounts vary by institution.
The COA explicitly includes an allowance for housing and food, commonly referred to as room and board. This covers living expenses whether a student lives on-campus in dormitories with a meal plan or off-campus in an apartment, including utilities and groceries. Student loans can therefore be used to pay for these essential living costs.
The COA establishes the maximum amount of financial aid, including student loans, a student can receive. A student’s total aid package, combining grants, scholarships, and loans, cannot exceed this determined COA.
Loan Disbursement for Living Expenses
Student loan funds are generally not deposited directly into a student’s personal bank account initially. Instead, the funds are sent directly to the educational institution, usually at the beginning of each academic term.
Upon receiving the loan funds, the school first applies them to cover direct institutional charges. These charges primarily include tuition and any mandatory fees. If a student lives on campus, the school also applies the funds to on-campus room and board costs.
Any remaining loan funds, after these direct educational charges have been satisfied, constitute a surplus. This remaining balance is then disbursed directly to the student. Students typically receive these excess funds via direct deposit to a bank account or sometimes as a check.
Students can use these disbursed funds to cover other eligible components of their Cost of Attendance, which includes off-campus housing, utilities, groceries, transportation, books, and personal supplies. These funds are part of the loan that must be repaid with interest.
Federal and Private Loan Differences
Federal student loans and private student loans offer distinct characteristics when used to cover educational expenses, including room and board. Federal loans, provided by the U.S. Department of Education, are directly linked to a school’s Cost of Attendance. These loans often feature fixed interest rates, which are set annually, and generally do not require a credit check for most borrowers.
Federal loans are considered the primary option for covering living expenses due to their borrower protections and flexible repayment plans, such as income-driven repayment. They also offer options for deferment and forbearance, which can provide relief during financial hardship. Eligibility for some federal loans, like Direct Subsidized Loans, is based on demonstrated financial need.
Conversely, private student loans are offered by banks, credit unions, and other financial institutions. While they consider the Cost of Attendance as a limit, their terms, interest rates, and eligibility criteria are determined by the individual lender and often depend on the borrower’s creditworthiness. Borrowers with limited or no credit history may require a creditworthy co-signer to qualify.
Private loans can have either fixed or variable interest rates, and they offer fewer borrower protections and less flexible repayment options compared to federal loans. They serve as a supplementary funding source once federal loan options and other financial aid have been exhausted.