Can You Invest Your Student Loan Money?
Updated on October 10, 2019
Many people are struggling to pay student loans. The number of loan defaulters, people who cannot afford to meet their daily needs and pay loans, is still high. Which raises the question – if you find yourself with excess money from your student loan, can you make an investment?
It is not illegal to invest your student loan money. However, there are ethical concerns that hinder students from using student loans to invest.
Students Have Invested with Student Loans
Many students realize the challenges that come with student loan repayment. Between 1998 and 2000, a student, Chris Sacca, invested his loan money in the stock market. While such a move is risky, it raises your chances of being able to rely on yourself and to start repaying the student loan.
Is It Legal to Invest Student Loan Money?
College loan money can be acquired from private lenders or a lender contracted by the U.S. Department of Education. While private lenders, such as banks, do not limit how you use your money, the government might. DOE has strict rules on how you spend your student loan money.
The main difference between federal student loans and private lender loans is that the government has subsidized the loans you receive as an investment in education. Private lenders, on the other hand, have fewer restrictions but higher interest rates.
If you invest using your federal student loan, you will not be breaking the law. However, if the DOE discovers your non-educational expenditure, you might face legal action. The DOE might ask that you pay the subsidized interest rates.
Where Does the Excess Money Come from?
The amount of money a student is loaned depends on factors such as dependent status, parental yearly income, residency status, and many more. The amount loaned, after all factors are put into consideration, is referred to as the cost of attendance.
Students choose to invest part of their living allowance. Instead of using a lot of money in elevated living standards, students save money and use that to start investments. If institutional scholarships cover tuition and room costs, a student might find themselves with thousands of dollars in excess funds to invest.
Contact Studentloanify today for more information on how you can put your student loan money to good use.