Student loans and investing

[AnesthesiaLogs]

Hi all,

I'm wondering: can anyone tell me what is the total amount of dollars in student loans the government/medschool/salliemae/etc. give you per semester (or per year) and at what interest rate?

I'm just asking because I wonder what students do with the cash they have on hand. Do they blow it on HDTVs or does anyone invest?


Thanks,

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[Law2Doc]

Hi all,

I'm wondering: can anyone tell me what is the total amount of dollars in student loans the government/medschool/salliemae/etc. give you per semester (or per year) and at what interest rate?

I'm just asking because I wonder what students do with the cash they have on hand. Do they blow it on HDTVs or does anyone invest?


Thanks,

With interest rates as high as they are, you'd need to have a pretty sure thing going to borrow student loans to invest. You have no time to actually manage an investment, and the income on a lot of the more passive things is frequently less advantageous than just borrowing less.

 

[Dookter]

I blew $1500 on a bike. It's an investment of sorts....in my health and sanity.

 

[dutchman]

Hi all,

I'm wondering: can anyone tell me what is the total amount of dollars in student loans the government/medschool/salliemae/etc. give you per semester (or per year) and at what interest rate?

I'm just asking because I wonder what students do with the cash they have on hand. Do they blow it on HDTVs or does anyone invest?


Thanks,

Please don't do either one of those things. Give back excess money.

 

[Droopy Snoopy]

I've also heard it you could be in serious trouble with the IRS if you're caught investing your government loans. My undergrad loans are locked in at 2.8%, but my postgrad stuff is all 6%+. To make up the differencee between yield and interest I'd have to be investing in some super blue chip anyway, like Berkshire Hathaway, and there's really not that much left after bills. For us the total financial aid allowable is $30,000/yr, but I think it varies from school to school depending on estimated total cost of attendance.

 

[AnesthesiaLogs]

With interest rates as high as they are, you'd need to have a pretty sure thing going to borrow student loans to invest. You have no time to actually manage an investment, and the income on a lot of the more passive things is frequently less advantageous than just borrowing less.

Well, actually, I had much more time to invest in med school than in residency. I work about 60+ hours as an anesthesia resident. Plus, purchasing a foreclosed house $30,000 below market price requires anywhere from $7-15k which you could then rent out for cash flow.

I blew $1500 on a bike. It's an investment of sorts....in my health and sanity.

I did the same thing too, and actually I still ride my motorcycle to work. I wear a helmet, and I really only use the motorcycle to go back and forth to work. Nothing else.

I've also heard it you could be in serious trouble with the IRS if you're caught investing your government loans. My undergrad loans are locked in at 2.8%, but my postgrad stuff is all 6%+. To make up the differencee between yield and interest I'd have to be investing in some super blue chip anyway, like Berkshire Hathaway, and there's really not that much left after bills. For us the total financial aid allowable is $30,000/yr, but I think it varies from school to school depending on estimated total cost of attendance.

6%+ holy schmoly. But when do you have to pay back all the loans - after residency?

I'm an anesthesia resident and real estate investor. I'm just trying to see if it's possible to use student loans to purchase a foreclosed home $30,000 below market price, rent it out for cash flow, then sell it 1 year later to collect the excess $30,000 equity.

 

[deleted77919]

6%+ holy schmoly. But when do you have to pay back all the loans - after residency?

You can defer until after residency but interest is accumulating on all of them. Many start accumulating interest during med school. Current Stafford Rates (bulk of most student aid packages) are fixed at 6.8%.

Edit: Interest is accumulating on all of them during residency deferral after a short grace window. Many (aka, the unsubs) start accumulating interest on day 1.

 

[Keg]

You can defer until after residency but interest is accumulating on all of them. Many start accumulating interest during med school. Current Stafford Rates (bulk of most student aid packages) are fixed at 6.8%.

Subsidized Stafford Loans do not accumulate interest until six months after the student has finished the course of his/her studies (the government pays the interest); hence, it is "free money." If one were trying to invest, this would be the only certainly profitable way to do so - place it in a high yield savings account (I have an account with 5.05% APY) and let it grow. The caveat is that students are limited to $8500 per year of Subsidized Staffords.

It would take a bit of work to invest unsubsidized loans (Federal or private) and beat the interest rate of 6.8% (currently). Even with those, however, there is a grace period of three months, at least with the Unsubsidized Stafford. Therefore, if that money were placed in a 3-month CD or in the high yield savings, that interest could be collected, as well, before those were paid back. I think the federal limit on these is $30,000, and the private limit is whatever your credit will support, though it may be more of a hassle than it's worth (just FYI, a $30,000 principle in an HSBC online savings account would yield $380.35 in interest over three months).

This all being said, I know nothing of the legality of investing loan money, although I can't understand why the government would have a problem with it being held in an interest-bearing account rather than it devaluing in a checking account.

 

[akpete]

Hi all,

I'm wondering: can anyone tell me what is the total amount of dollars in student loans the government/medschool/salliemae/etc. give you per semester (or per year) and at what interest rate?

I'm just asking because I wonder what students do with the cash they have on hand. Do they blow it on HDTVs or does anyone invest?


Thanks,

I spend the cash on things like food and rent. Nothing left over...actually, our school's budget is so tight it's not enough.