When I took out a private student loan for my first year of graduate school, me and a friend had plans to rent an apartment together and I would commute to school. Because of that, I included estimated costs of living in the loans (as is permitted by the loaner). Soon before the semester started, those plans fell through and I’ve ended up with more money than I need. Most of that money has come back to me as a refund after it was applied to my bill. I don’t really want to keep all of it because I might spend too much of it on non-essentials, and I don’t want to misuse the funds. Should I just use the refunded money to pay back the student loan and make sure that I do not take out more than I need next time? Should I save it for next year? I would appreciate any advice.
Pay back the loan.
If the loan terms do not include a pre-payment penalty, then, yes, you should repay all the money you ended up not needing for housing. The alternative is investing the money, but you are not going to get interest anywhere close to the amount of interest that you would be paying on the loan. You may want to keep a small, “rainy day” reserve fund.