Students who find themselves with excess money during college may choose to invest their student loan funds rather than use them to pay for education-related expenses. While this type of investment isn't strictly illegal, it's a legal gray area. Generally speaking, government-subsidized loans have restrictions that limit their use to covering educatio♏n-related expenses, whereas private loans have fewer restrictions and can typically be used for investing.

Investing Federal Government Student Loans

The biggest legal consideration when investing student loans is whether the loans are from a 澳洲幸运5官方开奖结果体彩网:private lender or a United States Department of Education-contracted lender. The Department of Education generally has stricter rules on the 澳洲幸运5官方开奖结果体彩网:accepted uses of🎀 student loan funds, while private lenders often trade higher interest rates for fe🦹wer restrictions.

One of the biggest differences between federal student loans and their private counterparts is that the government subsidizes the interest on some student loans as an investment in an educated population. Students who spend their federal loan money on noneducational expenses might not be breaking the law, but they could still face legal repercussions from the Education Department if their actions are discovered. In some cases, this may include repaying subsidওized interest.

Student Loan Amounts

The amount of student loans each student receives is based on a relatively complex formula that takes into account dependent status, parental income, yearly income, residency status, and whether the student will be attending full- or part-time. The final figure is known as the 澳洲幸运5官方开奖结果体彩网:cost of attendance (COA), and it generally includes ꦜa living allowance for students who are living off-campus.

The living allowance is where the gray area of student loan use lies, as some students may choose to invest their student loan funds that are in excess of attendance costs in the same way that others may choose to use them for unrelated living expenses. In cases where institutional scholarships cover the cost of tuition and room and board, students may find themselves with thousands of dollars in unused 澳洲幸运5官方开奖结果体彩网:student loan money to return🎶 or💃 invest.

Is Investing Student Loan Funds Worth the Risk?

Between 1998 and 2000, college student and inexperienced investor Chris Sacca used his student loans to generate an investment portfolio of more than $12 million, according to Morningstar. Sacca is an extreme example of the growing trend of college students who choose to divert money intended for educational expenses and attempt to generate a return in the 澳洲幸运5官方开奖结果体彩网:stock market. Such a move is risky, but it’s not without its be💜nefits, as wise inves🍌tments may be able to generate revenue that exceeds the interest on private loans.

Students who wish to invest student loans while incurring as l𓆏ittle risk of legal action as possible should avoid ꦬinvesting government-subsidized loans. Investing all of your excess student loan funds is also a risky move, so more conservative investors may, for example, choose to invest only the amount that was allotted for general living expenses. While litigation is a possible risk, the real danger most student loan investors face is being unable to make a return on their investment before payments come due after graduation.

The Bottom Line

Investing student loan money may not be explicitly illegal, but it's generally ill-advised. Given how high private loan interest rates can be, many borrowers won't see a real benefit from investing their student loan funds. Worse yet, you may end up in a difficult financial position if your investments tank, as you still have to repay your student loan and have less money to do so. Think carefully about your future before using this risky investment strategy.