Dear @Alliswell123,
Welcome to the Wefugees Community and thank you for reaching out to us.
My colleague Éanna gave some important information on a very similar question here before. Please follow the link for further details.
Éanna explained: "As long as your friend still has a valid residence permit and applies for asylum before it expires, then they are not obliged to live in a special refugee reception centre. For people who have residence permits and apply for asylum, the rules around accommodation are different to a person who does not have a residence permit. However, if they apply for asylum and are not able to pay for their own housing, then they will be housed by the social office (Sozialamt). This would likely mean the person would be housed in a refugee centre (Gemeinschaftsunterkunft)."
If someone applies for asylum, the person will receive a so-called "Aufenthaltsgestattung" and I am afraid (I am not a lawyer though) that the applicant will not automatically receive the initial residence permit back (in this case the student residence permit according to section 16b of the German Residence Act) after the asylum application was rejected. Am I right dear @mboen-Éanna or @mbeon-fardeen?
The essential question is, if it's actually necessary or beneficial to apply for asylum and this should be carefully dicussed with a lawyer or at least a very experienced counselling office! If a student finished studies in Germany, there are very good chances to be able to stay in Germany as well on a working visa (and eventually after some more years with a temporary residence permit the person can also apply for a unlimited residence permit "Niederlassungserlaubnis" or obtain the citizenship).
I hope this helps and please don't hesitate to get back to us with any further questions.
All the best,
Meike