November 3, 2022
Cash advance for college students
Facing a shortfall in funds? Learn how college students can access a cash advance or other short-term loan.
For most college students, money is tight. And with the costs of higher education rising rapidly, it’s becoming harder and harder to make ends meet as a college student.
What should you do if you’re facing a shortfall in funds? If your expenses simply exceed the cash you have on hand?
You may need to rely on a loan or cash advance. Here’s what you need to know about cash advances for college students.
What is a cash advance?
A cash advance is a short-term loan. It’s usually relatively small and most often comes from a credit card—although there are other types of cash advances. You can use your existing credit limit to borrow cash and pay it back over time.
Cash advances work differently from standard credit card purchases. With a cash advance, you withdraw cash from an ATM or bank, or you can request a funds transfer to your bank account. You can then use this money as needed, which allows you to use the funds for expenses like rent (which can’t typically be put on a credit card).
You’ll usually pay an upfront fee to access a cash advance, as well as interest on the loan. The interest rate will often be higher than the standard interest rate on regular purchases.
To illustrate this, consider this example:
You have a credit card with a credit limit of $4,000 and a current balance of $0
You request a $1,000 cash advance
There is a 5% cash advance fee
You will now have a credit card balance of $1,050 (including the $50 fee)
You will then be required to pay off the balance over time and will be charged interest
Cash advances can be costly, as the interest rate is usually quite high. The main advantage is that they provide quick access to cash without a lengthy application process (assuming you already have a credit card).
Cash advances for college students
If you’re in school, chances are you’re just starting out financially. This can leave you with limited options when it comes to borrowing money, particularly if you haven’t yet established a good credit score.
If you already have a credit card, a credit card cash advance might work. If you don’t have one, check out our guide to the best credit cards for young adults.
You’ll need to consider how much you need to borrow. A credit card cash advance typically allows you to borrow up to 20–30% of your credit limit. So if you have a card with a $1,000 limit, you might only be able to borrow $200–$300.
In general, when considering your different funding options, here’s what to keep in mind:
The loan amounts available compared to what you need
The loan terms and lengths
The interest rates and total costs
The different repayment options
When payments are due
The options available to you, given your income, credit, and other factors
In some cases, students will need to get creative. This could mean asking family for a short-term loan or even looking into emergency student loans. We’ll discuss all your options in detail below.
Types of cash advances and short-term loans
While a “cash advance” often refers to a credit card cash advance, there are actually several different types of short-term loans that can be considered cash advances.
Whether you need a few bucks to make rent or you’re falling behind on bills, here are some of your best options.
Credit card cash advance
A credit card cash advance is the “standard” type of cash advance. This type of loan allows you to borrow cash against your current credit card limit.
If you already have a credit card, this is a simple process. You can access cash at an ATM, a bank, or by using special checks provided by your credit card company.
This type of cash advance typically has an upfront fee of 3–5% of the amount borrowed. You’ll also pay a higher interest rate. If your normal annual percentage rate (APR) is 20%, you might pay 25% on a cash advance, for example.
When you take out a cash advance, the borrowed money is simply added to your credit card balance. You will then be required to make repayments. The amount you pay per month is fairly flexible.
You’ll be required to make at least the minimum payment, which is often $20–$35 or 1–3% of the credit card balance, whichever is greater. Making only the minimum payment won’t help you make much progress on paying off your debt, however.
Credit card cash advances provide fast access to cash, but they are costly.
Spending on credit cards
A cash advance from a credit card gives you actual cash that you can use for anything—but it’s more costly than standard credit card purchases.
One alternative if you’re facing a shortage of funds could be to simply put some purchases on a credit card. For example, on your next grocery run, you could put the charge on your credit card instead of your debit card.
This is a slightly cheaper way to fund your living expenses short term. You won’t have to pay an upfront cash advance fee, and you also won’t face the penalty APR rate of cash advances.
Another bonus? You won’t have to pay interest right away. In fact, if you pay off the full balance by its due date, you won’t pay any interest at all. Cash advances, on the other hand, start accruing interest right away.
For example, let’s consider a scenario where you’re short on cash but know you’ll be paid in 3 weeks. In this case, you could put your expenses on your credit card and wait to pay them off until you get paid. If you pay off the full balance by the due date, you won’t pay anything in interest!
Certain expenses, like rent and tuition, can’t usually be paid for using a credit card. For these expenses, you may need to rely on a cash advance.
Or, you can get creative! Splitting rent with your roommates? Ask them to front you the cash for rent and in exchange offer to pay for an equal amount of groceries or other expenses with your credit card.
Payday loans are short-term loans that are typically issued for no more than 14 days. They are designed to help you cover shortfalls in funding while you wait for your next paycheck.
To qualify for a payday loan, you’ll need to have a steady income from a job. Payday loans are typically available in amounts from $300 to $1,000, depending on state laws.
Payday loans come with finance charges, often in the range of $15 per $100 borrowed. So, if you borrow $300, you might pay $45 in fees. And you’d be required to pay back the full amount, with fees, within 14 days or when you receive your next paycheck.
These fees make payday loans very costly. They’re typically only a good option for very short-term loans or situations in which the student has no other option.
Loans from friends and family
Another alternative may be to ask for a loan from a family member or friend. It can be difficult to swallow your pride and ask, but ultimately, this may be the best route for some students.
If you do decide to go this route, approach the conversation with care. Explain why you need the money, how you plan to repay it, and what you will do if something prevents you from repaying it on time.
What about emergency student loans?
In some cases, you may be able to apply for emergency student loans if you’re struggling financially. This type of loan is available at select colleges via their financial aid department.
To qualify for an emergency student loan, you typically need to be experiencing a financial emergency. Events that may qualify include the loss of a job, a death in the family, or another life event that results in an immediate financial need.
If your school offers this type of financial assistance, it’s well worth looking into. Unlike standard student loans, these loans are disbursed quickly—usually via a transfer to your bank account. They’re also called “instant” student loans because they bypass the usually long wait period to get a standard loan.
Also, unlike standard loans, emergency loans are designed to be used for any emergency purpose—whether that’s rent, food, travel to see family, or another reason. They’re typically not used for tuition or fees.
Another benefit of these loans is that they are typically low-interest—sometimes even 0% interest. They must be repaid relatively quickly, however—often within 90 days.
If you think this might be a good fit for you, talk with your school’s financial aid department to learn more.
Other on-campus resources
Many schools offer a variety of other resources to help out students who are struggling financially. These could include:
Campus vouchers for free meals or discounted housing
Student food pantries
Hardship grants for students who can demonstrate financial hardship
If you’re struggling financially, your first stop should be your campus financial aid department. They will be able to help you navigate the various programs and resources that are available to you.
Private student loans
A final option may be to apply for a private student loan. These are offered by banks and financial institutions, and they are completely separate from the federal loans that you apply for via the FAFSA.
To qualify for a private loan, you typically need good credit and a reliable income. Private loans are harder to qualify for than federal loans but the benefit is that they can be applied for at any time.
Unlike the FAFSA, you can apply for private loans whenever you want. And these loans can be used for any purpose, not just tuition and fees.
With private student loans, you’ll start making monthly payments right away. So keep your new payment amount in mind as you prepare your budget for the coming months.
If you qualify, private student loans might be a good option—particularly if you’re facing a significant cost that can’t be covered by a standard cash advance for college students.
A cash advance for college students can help you cover a shortfall in your budget. With that said, your options may be limited as a college student with little to no income.
The Mos app might be able to help. Mos is a debit card and banking solution specifically made for college students. Mos helps you manage your money, apply for scholarships, find side hustles, and more. Learn more about Mos here.