Investing Fin Aid $

[bmwrob]

Advertisement - Members don't see this ad

Hey,
Anyone else out there considering short-term investments for you financial aid $? A few of the docs that I shadowed said that when they were in med school they would pay for tuition, books, etc... with 0% APR credit cards and then invest the 30,40,50K from fin aid into a short-term (1-3 months) CD at 2-4% and then just pay off the credit cards before the APR went to normal rates. Sure, it is only a few hundred dollars, but that might come in handy as an emergency fund. Plus, with the credit cards that you use you can earn sky miles and then get discounts on airfair. So, am I crazy?

 

[A.D.O.R.]

Question: Did they apply for mutiple cards each year? I know if you apply for, get approved, use and then cancel cards your credit score gets dinged for each one you cancel. Short-term gains may not outweigh long-term consequences.

 

[A.D.O.R.]

Additionally, some schools charge a "financial aid tax" for non-retirement/pension plan investments. My school requests 35% of any non-retirement/pension plan investment gains. Just one more thing to keep in mind.

 

[bmwrob]

Question: Did they apply for mutiple cards each year? I know if you apply for, get approved, use and then cancel cards your credit score gets dinged for each one you cancel. Short-term gains may not outweigh long-term consequences.

Good question. I will ask them that one.

 

[bmwrob]

Additionally, some schools charge a "financial aid tax" for non-retirement/pension plan investments. My school requests 35% of any non-retirement/pension plan investment gains. Just one more thing to keep in mind.

I don't recall ever reading anything about this on TUCOMs website, but I will look into it. Thanks.

 

[DrB]

Don't get crazy with the credit cards... if you use them instead of your financial aid, you will be collecting interest upon interest. I don't know of many cards that offer 0% interest rate, only ones that offer 0% on balance transfers. You could put it into a money market account once you get it and pull it back over when you need to use it. Just as long as the interest is guaranteed and you are not charged a fee for the account.

As for me... I am going to school in Las Vegas, going to put my financial aid check on red! 😎

 

[bmwrob]

Don't get crazy with the credit cards... if you use them instead of your financial aid, you will be collecting interest upon interest. I don't know of many cards that offer 0% interest rate, only ones that offer 0% on balance transfers. You could put it into a money market account once you get it and pull it back over when you need to use it. Just as long as the interest is guaranteed and you are not charged a fee for the account.

As for me... I am going to school in Las Vegas, going to put my financial aid check on red! 😎

Nice. That was a fear that I had when applying to TUCOM-NV. Blowing it all at the card tables probably wouldn't have been a good idea. As for using the credit cards to pay tuition.... it would only be for a month or so and then I would use the fin aid $ (which would have been sitting in a money market/high interest savings) to pay off the credit cards. I have been researching and have found quite a few cards that offer an intro 0% APR on all purchases and balance transfers for 6 months to a year. Those are the ones that I am thinking about using. Plus getting the sky miles.

 

[bl2seq]

How can they invest 30 to 50K? It is true that you get 30-50K in financial aid, but more than half of it goes to tuition, so you never see that money. The most you can invest is your living expenses.

Also, the money you have in CD counts as your assests, which can lower your EFC. The EFC formula counts 35% of your assests towards your EFC (this is probably the 'tax' that someone mentioned).

So is it really worth the hassle?

Hey,
Anyone else out there considering short-term investments for you financial aid $? A few of the docs that I shadowed said that when they were in med school they would pay for tuition, books, etc... with 0% APR credit cards and then invest the 30,40,50K from fin aid into a short-term (1-3 months) CD at 2-4% and then just pay off the credit cards before the APR went to normal rates. Sure, it is only a few hundred dollars, but that might come in handy as an emergency fund. Plus, with the credit cards that you use you can earn sky miles and then get discounts on airfair. So, am I crazy?

 

[A.D.O.R.]

How can they invest 30 to 50K? It is true that you get 30-50K in financial aid, but more than half of it goes to tuition, so you never see that money. The most you can invest is your living expenses.

Also, the money you have in CD counts as your assests, which can lower your EFC. The EFC formula counts 35% of your assests towards your EFC (this is probably the 'tax' that someone mentioned).

So is it really worth the hassle?

yup. I didn't know where it came from or what it counted toward but there it is and now I know.

 

[xanthines]

Credit Scores are now required to treat inquiries within a given 6-week period as one inquiry. I heard it on Clark Howard one day.

-X

Question: Did they apply for mutiple cards each year? I know if you apply for, get approved, use and then cancel cards your credit score gets dinged for each one you cancel. Short-term gains may not outweigh long-term consequences.

 

[ackbar]

Hey,
Anyone else out there considering short-term investments for you financial aid $? A few of the docs that I shadowed said that when they were in med school they would pay for tuition, books, etc... with 0% APR credit cards and then invest the 30,40,50K from fin aid into a short-term (1-3 months) CD at 2-4% and then just pay off the credit cards before the APR went to normal rates. Sure, it is only a few hundred dollars, but that might come in handy as an emergency fund. Plus, with the credit cards that you use you can earn sky miles and then get discounts on airfair. So, am I crazy?

as long as you can invest the money into something that yields a higher percent, it makes sense to.

I am personally doing something like it. I was going to pay for everything cash when school starts, but then I realized how low the interest rates are on student loans, so I just took out loans and put the amount I would have paid in cash in CDs, there are some bank CDs with well over 4% yield.

 

[A.D.O.R.]

Credit Scores are now required to treat inquiries within a given 6-week period as one inquiry. I heard it on Clark Howard one day.

-X

Thanks for the information but inquiries are only part of the problem. Cancelling your credit cards is also a problem. The six-month period, if it applies to mortgage lenders and I'll assume it does, is going to be very helpful for folks who are shopping for the best rate to finance a house.