#1
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Taking advantage of low fixed interest rate student loans?
Hey guys,
This fall I will be entering my first year of college and am lucky in that my parents will be paying a majority of my tuition. The total annual cost is $15500, which will be broken down into 10 monthly payments of $1550. My parents will provide $950 per month, and I will make up the $600 difference. I’m wondering if it would be beneficial instead to take out a public state loan at 5.75% (immediate payment) or 6.55% (deferred payment until after graduation) for the full amount of tuition, and invest the $1550 + surplus bankroll into Vanguard index funds. Basically, are there any possible options that would be better than simply paying the $1550 monthly tuition payment? Thanks. |
#2
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Re: Taking advantage of low fixed interest rate student loans?
Well 4 years, or any amount of time for that matter, won't GUARANTEE that you beat the interest rates...but I'd say do it, I'm a risk taker, I figure odds are you will do better than 6.5% and if not, you're young, this is the time to take risks.
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#3
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Re: Taking advantage of low fixed interest rate student loans?
I looked into doing this with my tuition money when I started college two years ago. I decided it wasn't worth doing.
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#4
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Re: Taking advantage of low fixed interest rate student loans?
[ QUOTE ]
Hey guys, This fall I will be entering my first year of college and am lucky in that my parents will be paying a majority of my tuition. The total annual cost is $15500, which will be broken down into 10 monthly payments of $1550. My parents will provide $950 per month, and I will make up the $600 difference. I’m wondering if it would be beneficial instead to take out a public state loan at 5.75% (immediate payment) or 6.55% (deferred payment until after graduation) for the full amount of tuition, and invest the $1550 + surplus bankroll into Vanguard index funds. Basically, are there any possible options that would be better than simply paying the $1550 monthly tuition payment? Thanks. [/ QUOTE ] You are going to let your parents pay $45K so that you can go into debt to make at best a few thousand dollars? |
#5
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Re: Taking advantage of low fixed interest rate student loans?
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You are going to let your parents pay $45K so that you can go into debt to make at best a few thousand dollars? [/ QUOTE ] No, first year tuition also includes room, board, and mandatory meal plan. Tuition from sophomore-senior year I expect to be ~$10K. The repayment term for the loan is 20 years, so with a full-time job out of college I can pay it off without dipping too much into the investment. Obviously, there are a lot of unknown factors so I can't make assumptions, but I would figure that starting my investment portfolio now would yield me more than "a few thousand dollars." |
#6
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Re: Taking advantage of low fixed interest rate student loans?
No, I don't think it's worth it. Remember that the S&P only has an average annual return of close to 7% after taking into account inflation and taxes.
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#7
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Re: Taking advantage of low fixed interest rate student loans?
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You are going to let your parents pay $45K so that you can go into debt to make at best a few thousand dollars? [/ QUOTE ] What? His parents are paying for his college. |
#8
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Re: Taking advantage of low fixed interest rate student loans?
[ QUOTE ]
[ QUOTE ] You are going to let your parents pay $45K so that you can go into debt to make at best a few thousand dollars? [/ QUOTE ] What? His parents are paying for his college. [/ QUOTE ] If his parents were not footing the bill, he would need the loan to pay for college; thus, if he were to get the student loan and use it for 'investment', his parents would in effect be subsidizing his speculation. I may be reading too much into it, but given that his parents are only footing part of the cost, it would seem that what they are paying represents some sacrifice on their part. At a minimum, he should be sure that they are OK with him getting the loan and using it to invest. At a maximum, perhaps he should get the loan, use it for his college expenses and let his parents save their money. |
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