If you're like millions of American college students, you're using multiple loans to finance your education. Each semester, you probably take out several federally-backed loans in order to offset your ever-rising tuition costs. After tapping federal grants worth over $5,000 per semester and additional credit facilities like Stafford and Parent PLUS loans, you could be well on your way to making your education an affordable and rewarding experience. If you're attending a low-cost public university or community college, you might not need any additional streams of funding.
On the other hand, you may be attending an expensive elite university that could cost far more than you're able to borrow. If this is the case, you might be scrambling to find additional sources of funding. To make matters worse, you'll need to worry about additional expenses like school supplies, food and off-campus housing.
You can pay for these expenses in several different ways. The easiest and least confusing method by which to do this is to use the financial aid disbursement that your school is required to provide to you. This disbursement is the financial "surplus" that's left over after your tuition costs have been subtracted from your financial aid package.
Since the student lenders with which you'll be working will almost certainly forward your loans directly to your school's financial aid office, you'll need to keep close tabs on the exact amount of your disbursement. In some cases, your financial aid office may overestimate your tuition costs and keep too much of the money that your lenders send. It's your responsibility to notice this discrepancy and ask your financial aid office for a refund. You can use this refund to pay for miscellaneous expenses like food, rent and school supplies.
If you're not eligible for a student loan refund, you may need to take out an additional loan in order to cover your living costs. Unfortunately, these loans have several important drawbacks. First, they're "unsecured." In other words, they're not backed by the federal government. Since your lender can't rely on the government to offset its potential losses on these loans, unsecured student loans usually come with high interest rates. What's more, they may begin to accrue interest immediately after being issued. This can add hundreds or even thousands of dollars to the final cost of these loans. Finally, these loans may not be eligible for federal refinancing programs. Once you take one out, you'll need to repay it in full.