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4 Student Loan Mistakes To Avoid When Living Off Campus

Susannah Snider

The time has come for you to toss your shower sandals in the trash and buy that contraband lava lamp.

You're moving off campus. And nothing can stop you -- except figuring out how to pay for it.

The good news is that you can tap your student loans to foot your off-campus bills. But borrow carefully and avoid these four mistakes.

1. Skipping the Free Application for Federal Student Aid: Filling out the FAFSA is the all-important first step in your financial aid process. You'll specify whether you plan to live off-campus, on-campus or with relatives, says Brad Barnett, senior associate director of financial aid and scholarships at James Madison University.

[Find out how to avoid becoming a scary student loan statistic.]

If your school calculates that the average cost of living off campus is more than living in the dorms, you may be able to borrow more to cover the higher cost of attendance. "We generally give a little more -- and most schools do -- for off-campus housing," says Dorothy Body, financial aid director at Bowie State University.

Or your loans could stay the same if it costs the same or less to live in town.

If your aid package amounts to more than tuition, fees and any other billable expenses, you'll receive a refund for the remaining amount. That money, typically disbursed at the beginning of the semester, can go toward your rent, bills, food and other off-campus necessities.

2. Living lavishly: Resist the temptation to use your refund check on a vacation abroad or that fancy new watch you've been eyeing.

"We've seen increases in debt balances of 30 percent in the last five years," says John Collins, managing director of GL Advisor, a financial advisory firm for advanced degree professionals with student loan debt. "Tuition costs haven't increased that much but more folks have used loans to fund discretionary spending."

Collins estimates that misusing your loan refund can add between $10,000 and $50,000 to your student loan bill. If you're tempted to start buying bottle service at your favorite nightclub, remember that "you'll pay for it tenfold after you graduate," he says.

[Find out how to make a large college feel like home.]

Another massive loan sinkhole is living in a luxury apartment building, says Julie Selander, director of One Stop Student Services at the University of Minnesota--Twin Cities. The office provides a financial literacy and money management initiative for students called "Live Like A Student."

Upscale accommodations are particularly tempting since they're often constructed around campuses and aimed at students. But resist the urge to move in. "You don't have to keep up with the campus Joneses," says Selander.

3. Maxing out your loans: Examine where you can cut back on spending and how you can make your loans stretch the furthest. "Far too often, students don't look at what they can do within their current environment to make it more affordable," says Barnett of James Madison University. "They just think they need more money."

Remember that all the costs that were neatly packaged into your dormitory fees, such as cable and Internet, energy bills and furniture, will come out of your loans or your pocket now. And you'll have new financial responsibilities, such as a security deposit, renter's insurance and home maintenance supplies.

One of the biggest ways to cut expenses is to ditch your car, says Barnett, especially since many campuses are walkable or equipped with affordable bus systems and shuttle services. "The car issue is big," he says. "You really don't need a car on a college campus."

[Get tips on getting ready for your freshman year.]

4. Relying solely on loans: You may be able to fully fund your living costs with student loans, says Selander. But that doesn't mean that you should.

You'll repay each dollar, with interest, after graduation. That interest can range from 4.66 percent for federal Stafford loans to 7.21 percent for PLUS loans in 2014-2015. Any money that you can put toward your living expenses up front will be cheaper in the long run and could keep you from having to manage runaway student loan debt after graduation.

Tap your savings and look into an on-campus part-time job that you can balance with your studies. Ask parents and grandparents for cash during birthdays and holidays while you're in school, says Body of Bowie State University.

"Off-campus housing can be much more affordable for students who 'get it,'" says Barnett. "That means finding an inexpensive place to live, understanding how to food shop and keeping utilities down."

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