That Student Loan Disbursement Is Not a Stimmy Check

It’s in the headline: that student loan disbursement is about to drop, and you’re probably thinking about what you’re gonna blow it on. Pro speakers? The drip? A gel pen set in every shade of… blue? But hold up, hold up. This isn’t consequence-free money and eventually, the bill will come due. We’re here to be reasonable and rationale about managing newfound funds and credit lines. Because if you don’t check yourself—well, you know the rest.

You're On Your Own and That Rules

We get it: living on your own is a huge step, and while many talk about the importance of budgets and earning enough money, there isn't usually as much said about all the sources of credit coming your way. Managing available loans and credit cards can easily skew your idea of your income—making it much harder to set real boundaries with budgets. Suddenly—you're kinda... wealthy? Sitting on a few grand that will "last you through the semester"? What could go wrong? 

Unfortunately, many students before you have accidentally incorporated available credit into their income (“income,” cough), winding up in wild, chaotic debt later! So here are a few top tips for leveraging new credit lines to work for you, and for healthfully framing the money you're using while in college.

The "Monopoly Money" Phenomenon

Money is an uncomfortable and complicated topic for most people. Many have grown up without feeling like they had enough; others had plenty and don't know how to adjust to funding their typical lifestyle. And when you're just starting, credit lines and loan disbursements can feel unreal—like play money. 

The danger of the "monopoly money" mindset is that you can take important tools and turn them into decades of debt. Of course, we're not saying you can't use credit cards and student loan money for anything fun! But it is critical to remember that loan money always comes at a cost.  

Credit Card Limits and Authorized Users

Many parents will add their college students as authorized users on one of their credit cards when they move out. It's an excellent way to jump-start your credit score and have an emergency backup! However, if you're unaware of a few key factors, you may sabotage your credit (and relationship with your parents) over a nice Bluetooth speaker or computer. 

Credit card companies or financial institutions offer credit lines with a specific limit. That limit is based on the borrower's credit history and reported income. So you're an authorized user on your parents' card because A) you don't have a credit history, and B) you don't have an established income. 

So make sure you aren't basing your purchases off the $50,000 limit on your parents' card—it’s not additional income!

Student Loan Disbursements

Another "monopoly money" situation is when student loan disbursements hit your bank account. It's hard to feel the weight of money when a few thousand dollars suddenly drop into your account! Sure, some of it is earmarked for tuition or books. But what's the harm of blowing off some steam with a new TV or a trip to the beach?

While there are no hard and fast rules about what you spend student loan money on, it's crucial to create a healthy relationship with it. It's a good idea to determine what the money is for before it hits your account. You may even find that you've received more than you “need"—so you might not necessarily want to spend your whole disbursement anyways!

Are you in college and trying to get a handle on your finances? You're not alone! At Kora, we take the time to keep you updated on tips, tricks, and trends in finance. So subscribe to our blog to stay in the loop!

REFERENCES

HOW CREDIT CARD LIMITS ARE DETERMINED | NERD WALLET

WHAT HAPPENS IF YOU HAVE LEFTOVER STUDENT LOAN MONEY? | SAVING FOR COLLEGE