How to Borrow Money to Live on While in School

by Jeannine Mancini
When borrowing money for college, remember you'll have to pay it back someday.

Students don't always have the financial resources to focus solely on school or the time to juggle school and work. If you need money for living expenses while you're in school, borrowing money may seem like the only solution. However, borrowing funds is sometimes challenging without proof of income. Fortunately, there are options specifically for college students. In addition to borrowing money, there are free options that you can explore.

Federal Student Loans

The federal government offers student loans to help cover the costs associated with college. The loans don't have to be repaid until after you graduate or stop attending school, so you don't need to meet any income requirements to qualify. There are no credit checks, so you won't need a co-signer even if you don't have a high credit score. Interest rates on federal student loans are typically lower than private student loans, according to the U.S. Department of Education. A downside is that student loan debt can add up fast, especially if you're deferring the payments until you graduate. There are some serious consequences if you default on a federal loan, which can include a wage garnishment, tax refund offset and damage to your credit score. Not even filing bankruptcy will get you out of federal loan debt except in rare circumstances.

Private Loans

Students and parents can take out private student loans provided they meet the bank's requirements. Eligibility for private student loans is usually based on credit, income, and debt-to-income ratio. If you don't have established credit or a source of income, you'll likely need a co-signer or a parent to take out the loan. The loan will be in your name, but the co-signer is liable if you stop making the payments. You may need to apply for several loans to compare interest rates, since lenders generally don't publish student loan rates. You can start with your current bank or ask your college if it works with any preferred lenders. If you skip payments or default on a private student loan, your credit score will suffer. Like federal loans, private student loans are not dischargable in bankruptcy. Unlike a federal student loan, the government doesn't enforce collection efforts, but the creditor can sue you and obtain a judgment that allows it to levy assets and garnish your wages.

Credit Cards

While taking out a credit card may seem like an attractive way to finance your living expenses, it can lead to a future financial burden. Student credit cards often carry interest rates that start at 20 percent or more. For students already struggling to make ends meet, it's easy to fall behind on the payments. If you miss a payment, you'll incur a late fee and even more interest charges. The Credit CARD Act of 2009 requires applicants under 21 to have a co-signer or prove the ability to make the credit card payments. Don't max out your credit card; doing so will bring down your credit score, which can hurt your chances of qualifying for low interest rates in the future.

Grants

Unlike loans, grants are free money that never has to be repaid. As of publication federal Pell Grants award up to $5,645 per year to students who fall below a certain income limit. The Pell Grant can be used for college tuition and any related expenses, including room and board and living expenses. Along with federal grants, there may also be grants available through your college. Students may qualify for grants directly from the school. Grants aren't necessarily income-based, but based on personal or family qualifications. For example, a school may award a grant to a student who is the first person in her immediate family to attend college.

About the Author

Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.

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