Investing student loans?

[Bill 1337]

I'm going off to college and my tuition is free with financial aid and my grandparents are paying for my dorm/meal plan. My poker winnings can easily cover the other expenses.

I was wondering if it would be wortwhile to take out a student loan (5% interest) and invest it? I was thinking putting the money in a high yield savings account which would be like 6% interest. Also paying back the loan would help build credit. Any thoughts?

[emon87]

taxes

[XxGodJrxX]

Which student loan are you taking out that is 5% interest? The lowest I found were government loans at 6.8%.

Even if there was such a loan, it would not be worth it, since there are fees that are around 2%. Also, as another poster pointed out, taxes would also bring down your total return.

On the other hand, it may be +EV with a subsidized loan, since interest does not accumulate until you graduate from school.

[Bill 1337]

Fed Perkins Loan UG System Offered
$2,000.00

Fed Sub Stafford Loan System Offered
$3,500.00


The Federal Perkins loan is 5%. I guess it would be +EV to take the Federal Subsidized Stafford Loan? Even with ~7% interest?

[XxGodJrxX]

Subsidized loan does not accrue interest while you are in school. You'll be hit with the 2% fee. It may be worth it, though I am not sure if I am taking all the factors into account.

[choccypie]

When I get my student loan in September I'm going to stick it into a high interest savings account. When you pay back student loans (in the UK) you have to take into account inflation, which is around 2% so it's technically interest free. Highest interest savings accounts pay about 6% so it's free money that can be put towards poker bankroll [img]/images/graemlins/laugh.gif[/img]

[remi983]

http://www.mechcad.net/products/acemoney/

Download the free version, open program, click on tools, then go to the 'savings calculator.' Type in the amount and expected yield and you can see eactly how much you'll earn.

HSBC has an online savings account w/ 5.05 apy. I just started law school and got a bunch of subsidized student loans. I'm going to make a few hundred this year off of interest. I need access to the funds, so I couldn't get a CD, but that might be something to look into.

On a side note, I know a recent med school grad who used this strategy throughout school and made a bunch of $$$ of off the interest. He graduated at the top of his class and the hospital where he's working is paying off all of his loans. So, now he has like 6 figures of free $$$.

[freddy827]

if you want to do this why not do it with 0% APR balance transfer credit cards? http://www.mymoneyblog.com/best-pre-...ansfer-offers/

[lippy]

Well, it is illegal, but you could easily get around that because you personally will be paying cash. But, student loans are supposed to go directly towards education (broad term AFAIK) costs.