Creative with loan money for the Dental Student.

[bu2008]

Ok so I am a first year and I am getting all this loan money to pay for school then to pay for personal expenses. Does anyone have any insight on maybe what to do to take advantage of the loan money I get, for example I get around 10,000 a semester for personal expenses. Should I just go ahead and take it all and maybe invest most of it. I am unaware of the percentage the payback will be exactly but Im sure I can find a way to make a higher return on my money while in school for four plus years. Anyone have any input?????????????
Im thinking invest it, enabling myself and my wife (makes a small salary) to have a 20-30,000 + investment working for us as I begin to start my own practice. Any takers????????? Thanks a bunch!

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[J2AZ]

According to your loan agreement it is illegal to use that money for anything other than school. However, I am sure you wouldnt be the first to do so. If the interest on the money is going to accrue while in school you will need to find out what the interest rate will be. If it is less than 7% you might as well take the money and invest it. Over 20 years you should average about 7% or more and come out ahead. Just MAKE SURE you invest it!!!

 

[toothpicking]

Are you talking about student loan or bank loan? For student loan, if there is a balance in my tuition, my school will know about it from computer and "confiscate" the money toward my tution first before I have a chance to touch the $$$ and formulate a way to generate more points on my credit card. I'm sure the federal government tells schools to do so.

 

[USAF_Dentman]

i had some money left over from an undergrad loan. I put some in a money market fund and some farm futures..I ended up with like 13% returns on the money market for the loan with a rate of 2.1%, so i would say that is pretty good..

 

[ToothMonkey]

You have the right idea, but make sure you do your homework to see whether your investment will return a better rate than the interest rate on your loans.

If you have mostly Stafford loans (which are capped at 8.25%, less any borrower benefits...mine ends up ~6% but YMMV) then the most important factor is how long you plan to hold on to the investment made with your loan money. If this is something for retirement (20-30 years plus down the road) then you can safely count on an annual percentage yield that will exceed any possible interest rate for the Stafford loans. If, OTOH, you want to cash out after 5-10 years, then your risk of losing money with this strategy is greater.

Personally I would take the money and invest it for the long-term. It's hard to lose in that case, unless--as J2AZ mentioned--you have no self-control and spend the extra money rather than saving it. Be honest with yourself about your--and more importantly, your wife's --ability to withstand material temptations.

 

[aphistis]

You have the right idea, but make sure you do your homework to see whether your investment will return a better rate than the interest rate on your loans.

If you have mostly Stafford loans (which are capped at 8.25%, less any borrower benefits...mine ends up ~6% but YMMV) then the most important factor is how long you plan to hold on to the investment made with your loan money. If this is something for retirement (20-30 years plus down the road) then you can safely count on an annual percentage yield that will exceed any possible interest rate for the Stafford loans. If, OTOH, you want to cash out after 5-10 years, then your risk of losing money with this strategy is greater.

Personally I would take the money and invest it for the long-term. It's hard to lose in that case, unless--as J2AZ mentioned--you have no self-control and spend the extra money rather than saving it. Be honest with yourself about your--and more importantly, your wife's --ability to withstand material temptations.

Good advice--I just want to point out that you're getting seriously hosed if you're paying 6% on Stafford right now. I'm paying 3.25%. You might want to double-check your statement just to make sure you're not getting screwed.

 

[SPBest]

Down-payment on a nice car!!!!

 

[SPBest]

Down-payment on a nice car!!!!

Just kidding. Investing it is a smart thing to do. As for the stipulation that the money is for school related expenses, my response is that I am holding the money for anticipated school expenses and rather than accrue interest on money that is doing nothing I am holding it in an interest bearing account. Believe it or not there are people who borrow and reinvest money as a means of income.

I have also figured a way to get points or miles on your credit card for tuition expenses. Your fin-aid office can tell you when they anticipate peying your tuition with loan money. Pay as much as you can with your credit card before the loan is disbursed, then once it has been disbursed you can pay your credit card within the 'no-interest' grace period.

 

[north2southOMFS]

Just kidding. Investing it is a smart thing to do.

Kidding, why? I bought an almost new car with $15,000 worth of student loans my sophmore year. Why wouldn't you? I have my student loans locked in at 3.25%, anyone on this board just try and find me a car loan that is even double that interest amount!

Anyway, they say you can't use it for other things but school and living expenses, but how on earth would they know? And what are they going to do? Take it back? Doubt it. Go ahead.....spend...spend....spend...and marry a rich chick.

 

[SPBest]

Kidding, why? I bought an almost new car with $15,000 worth of student loans my sophmore year. Why wouldn't you? I have my student loans locked in at 3.25%, anyone on this board just try and find me a car loan that is even double that interest amount!

Anyway, they say you can't use it for other things but school and living expenses, but how on earth would they know? And what are they going to do? Take it back? Doubt it. Go ahead.....spend...spend....spend...and marry a rich chick.

I said it was the SMART thing to do. Not the fun thing to do, if you need a car that's a school related expense, right. I mean you've got to get there.

I'm no financial guru, but if you take ten years to pay that student loan, even at a low interest rate won't you be paying for that car long after it's gone? If you invest you can return the principle amount borrowed plus any accrued interest to the lender when payments begin you can take the interest earned for yourself.

 

[ToothMonkey]

you're getting seriously hosed if you're paying 6% on Stafford right now.

No kidding.

6% is not my current interest rate...it's the maximum future interest rate I could experience after 2.25% in borrower benefits from my lender. Sorry if that wasn't clear.

Granted, there's no way Stafford interest rates will be maxed out over the entire lifetime of the loan. But setting that maximum rate (instead of today's flukish super-low interest rates) as your target APY when investing loan money may be a good idea since achieving such a ROI would guarantee a profit no matter what happens with the 91-day T-bill rate. That's just my (conservative) way of thinking...

 

[eddiescott]

No kidding.

6% is not my current interest rate...it's the maximum future interest rate I could experience after 2.25% in borrower benefits from my lender. Sorry if that wasn't clear.

Granted, there's no way Stafford interest rates will be maxed out over the entire lifetime of the loan. But setting that maximum rate (instead of today's flukish super-low interest rates) as your target APY when investing loan money may be a good idea since achieving such a ROI would guarantee a profit no matter what happens with the 91-day T-bill rate. That's just my (conservative) way of thinking...

Hey could you guys please tell me what you are investing in that pays so much interest ????

I just bought a CD last week and the highest interest you could get was 4.75 and that was with a minimum deposit of $25,000 and it was a 4-year CD.

So who has that much money sitting around that they arent going to need for 4 years?

Also the CD rate for 1 year is only 2.25%

I would really like to know where you all are investing your money b/c I dont see where you could get better returns even with 4-yr compunding......

Thanks !

 

[Hoffa24]

I guess it depends on how much risk you would like to take. You might want to continue to shop around if you are looking for CDs because you can do better.

If you want to keep your money liquid with no risk, then you might be interested in either ingdirect.com who has a no fee 2.35% APY savings account (they also have bonuses for setting up a new account) or emigrant direct with the no fee 3.0% APY checking account (http://www.emigrant-direct.com/).

Unless you are willing to invest in the market, there are no other investments that are earning the traditional 6-10% interest that I am aware of. Because interest rates are low, the interest that you can earn lending money (CDs savings accounts, MM accounts) are all not giving a good return. It’s kinda a catch 22, because if interest rates were higher then student loan rates would also be higher.

IMHO, you don’t want to be gambling with this money, dental school is already expensive, if you loose on your investments, then it just ends up being that much more expensive.

 

[eddiescott]

I guess it depends on how much risk you would like to take. You might want to continue to shop around if you are looking for CDs because you can do better.

If you want to keep your money liquid with no risk, then you might be interested in either ingdirect.com who has a no fee 2.35% APY savings account (they also have bonuses for setting up a new account) or emigrant direct with the no fee 3.0% APY checking account (http://www.emigrant-direct.com/).

Unless you are willing to invest in the market, there are no other investments that are earning the traditional 6-10% interest that I am aware of. Because interest rates are low, the interest that you can earn lending money (CDs savings accounts, MM accounts) are all not giving a good return. It’s kinda a catch 22, because if interest rates were higher then student loan rates would also be higher.

IMHO, you don’t want to be gambling with this money, dental school is already expensive, if you loose on your investments, then it just ends up being that much more expensive.

Just like I said, there isnt anywhere.
Thanks for taking the time to simply restate what I said right above you.

That helps alot when there are double postings.

We really like that !

 

[ToothMonkey]

Hey could you guys please tell me what you are investing in that pays so much interest ????

I'm not getting that kind of annual return right now, but I expect to average at least that over the next 20-30 years. That was really the main point of my original post--that you can invest your extra loan money with confidence if you put it in the market and leave it there over the long-term, but if you're looking for short-term results you will have to accept much greater risk or a lower guaranteed ROI.

 

[Hoffa24]

Wow, that was kinda rude, just trying to help…

 

[eddiescott]

Wow, that was kinda rude, just trying to help…

Oh sorry. Its just aggravating reading all these posts where people (not you) think they know what they are talking about.

I just should turn off the computer.

 

[eddiescott]

I'm not getting that kind of annual return right now, but I expect to average at least that over the next 20-30 years. That was really the main point of my original post--that you can invest your extra loan money with confidence if you put it in the market and leave it there over the long-term, but if you're looking for short-term results you will have to accept much greater risk or a lower guaranteed ROI.

Listen, who in the heck invests money over 20-30 years??? Thats crazy.

IF thats your plan then get a 401k or buy real estate.

 

[eran76]

Burrowing money you don't have, then turning around and investing it to pay back the loan you took out.... that sounds like buying on the margin! Isn't that what brought the stock market down in 29???

I'm thoroughly confused by this thread, how is it that any of you are taking out loans and then actually have the money left over to invest, rather than pay tuition/supplies/living etc.? Where is this wonderful fountain of money and how do I get to it?

 

[aphistis]

Burrowing money you don't have, then turning around and investing it to pay back the loan you took out.... that sounds like buying on the margin! Isn't that what brought the stock market down in 29???

I'm thoroughly confused by this thread, how is it that any of you are taking out loans and then actually have the money left over to invest, rather than pay tuition/supplies/living etc.? Where is this wonderful fountain of money and how do I get to it?

1) If you don't have the cajones, then nobody's forcing you.

2) It's in the Department of Education budget. Enroll in dental school and they'll mail you your very own golden goose, just like we all got.

 

[DrTacoElf]

Kidding, why? I bought an almost new car with $15,000 worth of student loans my sophmore year. Why wouldn't you? I have my student loans locked in at 3.25%, anyone on this board just try and find me a car loan that is even double that interest amount!

Anyway, they say you can't use it for other things but school and living expenses, but how on earth would they know? And what are they going to do? Take it back? Doubt it. Go ahead.....spend...spend....spend...and marry a rich chick.

I got a used car loan for 4.25% from my credit union.

 

[jdcinza13]

Kidding, why? I bought an almost new car with $15,000 worth of student loans my sophmore year. Why wouldn't you? I have my student loans locked in at 3.25%, anyone on this board just try and find me a car loan that is even double that interest amount!

QUOTE]

That seems smart at first, but the only problem is your car is going to DEPRECIATE at a very rapid rate...make sure you pay it off quickly otherwise you will be paying back your car loan when you don't even have that car.

 

[Dr.Bear]

I just have a student loan/financial aid question. I was told that FAFSA is my first step. I haven't filled it out yet because I am not 100% on which school I will be attending.... Do you know if you can fill it out BEFORE you know how much your tuition will cost? Also, I hear different things from different schools, is it best to go through your school's financial aid resources, or should you look for loans on your own. If someone could e mail me at [email protected] I would definitely appreciate it.
Thanks.

 

[eric275]

To fill out your FAFSA you don't have to be 100% sure about which school you will be attending. When you fill out your FAFSA form online it gives 5 or 6 schools that you can have your FAFSA information sent to. So I guess you do at least have to have it narrowed down. The financial aid you recieve is based off of the projected expenses your school submits. So the amount you recieve in government subsidized financial aid is not a set amount for all dental schools.

The financial aid offices at schools I have been to stressed the importance of getting your FAFSA information to them as soon as possible to help expediate the process. One financial aid coordinator shared that some students this alst year that waited or procrastinated in filling out thier FAFSA information and getting it to the schools had not recieved their financial aid by the time school starts. Granted it all gets straightened out but if your depending on those loans for living expenses it could definately complicate matters.

As for the question about going through your schools financial aid dept. or looking on your own, I believe you have to go through your schools financial aid dept. to get government subsidized loans, at least in my expereinces. Private lenders to my knowledge can not pursue these funds for you as the amount you recieve is based on the tuition and living expenses generated and communicated to the government by individual schools. I would call a financial aid office at one of your perspective schools or a private lender to get a definate answer on this rather than assume something that may get you in a bind later. I do know that if you are expecting to need more than the schools projected expenses that you will have to pursue private loans which financial aid offices can sometimes help with, that is as far as giving you types of loans that are reputable.