When you embark on your college career, there is a good chance that you may have to seek additional funds through the procurement of student loans to pay for tuition, expenses, and even living costs. When you request student loans, the loan company is likely to pay the tuition directly to the institution you have chosen and then issue to you any overages. These overages are calculations for books, expenses, transportation, etc. They can also be a result of receiving last-minute scholarships or amounts issued that would normally go to the school for on-campus housing.
When many students end up receiving these leftover funds, they may find themselves wondering what they can spend them on and what is the best way to utilize the money. While there are many options for spending these additional funds, some of the smartest ways to spend them include:
Return the Money Towards Your College Loans
After you have determined that you won't need to use the money for your education for the semester you had received it in, you can simply cancel the loan within 120 days from the time that it was disbursed. This cancellation can be done with federal loans and will prevent you from having to pay interest on that amount.
In the event you have secured a private loan for your college funds, you may be responsible for the interest from the time it was dispersed, but you can use the leftover funds as a lump sum payment to make a big dent in the amount of the loan and interest that it will accrue. By making this large payment, you will not only cut a large portion of the interest that you will pay, but you will also shorten the length of time it will take to pay it back.
Using the Money for Other Education Costs
One of the first things to consider when you receive your overages is making sure that all of your education for the current semester will be covered. Tuition is just the start. You will have to buy books, supplies, and sometimes software for your classes. You should also assess your need for equipment, such as computers special calculators, possible lab fees, and the cost of transportation to and from school. After these have been accounted for, you will want to make sure that your room and board are taken care of for the semester and possible deposits you will need to make the next semester.
Can You Spend Money on Other Expenses?
You may hear stories of people using their extra disbursement money for other expenses such as buying a car or going on a vacation. While many people often get away with spending government education funds on other expenses, it would technically violate your loan agreement. In fact, the Office of Inspector General has an open hotline for people to report the abuse of Department of Education funds. When it comes to private loans, it is best to ask what expenses the loans can be used for. While most recommend use for academic funds, not all of them require it.
Always Use Leftover Funds Wisely
No matter what, it is crucial to remember that all education loans are meant to be used for the purpose of securing your education. Spending your loan on things like dining out and Spring Break vacations can not only get you in trouble but can often cost you a significant amount of interest and debt for insignificant purposes. Remember that after college, you will have a long road ahead of you and the more you can reduce your debt, the better prepared you will be for the future.
This content is developed from sources believed to be providing accurate information, and provided by Wrought Advisors. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.