Is it a bad idea to invest a student loan?
"This answer is better served as a comment but I don't have enough rep.  It is not guaranteed that they 'do not accrue interest while you are a full time student'. Some student loans can capitalize the interest - before pursuing leveraged investing, be sure that your student loan is not capitalizing. https://www.salliemae.com/student-loans/manage-your-private-student-loan/understand-student-loan-payments/learn-about-interest-and-capitalization/ Capitalized interest Capitalized interest is a second reason your loan may end up costing   more than the amount you originally borrowed. Interest starts to accrue (grow) from the day your loan is disbursed   (sent to you or your school). At certain points in time—when your   separation or grace period ends, or at the end of forbearance or   deferment—your Unpaid Interest may capitalize. That means it is added   to your loan’s Current Principal. From that point, your interest will   now be calculated on this new amount. That’s capitalized interest."" https://www.navient.com/loan-customers/interest-and-taxes/how-student-loan-interest-works/ Capitalized Interest If you accrue interest while you are in school – as with Direct   Unsubsidized, FFELP Unsubsidized, Direct and FFELP PLUS Loans, and   Private Loans – you will have capitalized interest if it is unpaid.   Unpaid accrued interest is added to the principal amount of your loan   after you leave school and finish any applicable grace period. Simply put, there will be interest to be paid on both the principal of   the loan and on the interest that has already accumulated. To minimize the effects of the capitalized interest on the amount you   will pay overall, you can pay the interest during college instead of   waiting until after graduation. That way, you start with the original   principal balance (minus any fees) when you begin repayment." Are there any laws against doing this?  so long as you are truthful in your application for the loan, none that I know of - technically you could use the loan to pay for school and the cash that you would have used instead to invest.   Are there other reasons why this is a very bad idea? I think you've already identified the biggest one, but here are my reasons: Will you go broke or go to jail? Likely not, but there is significant risk in investing with borrowed money. You might come out ahead, but you might also lose a bundle.  If you're willing to take that risk, that's your right, but I would not call it a good idea under any circumstances. "There will be many who will judge your proposal on the idea that subsidized loans should be available to those who need them, and should not be used by others who are simply trying to profit from them. Each school has a pool of money available to offer for subsidized and unsubsidized loans. If they are giving you a subsidized loan, they cannot allocate it to someone else who needs it. Once you weigh the investment risks, I agree that it is analogous to investing rather than repaying your mortgage quickly. If you understand the risks, there's no reason why you shouldn't consider other options about what to do with the money. I am more risk averse, so I happen to prefer paying down the mortgage quickly after all other investment/savings goals have been met. Where you fit on that continuum will answer the question of whether or not it is a ""bad idea""."
"This is the best tl;dr I could make, [original](https://www.forbes.com/sites/zackfriedman/2017/10/19/cfpb-student-loans-complaints/#7a5b4cfc6444) reduced by 88%. (I'm a bot) ***** &gt; Since 2011, the CFPB has received over 50,700 private and federal student loan complaints and 9,800 debt collection complaints, which have led to actions that have returned more than $750 million to student loan borrowers.  &gt; For federal student loans, 71% of complaints related to dealing with a student loan lender or servicer, while 28% related to student loan repayment and 2% to credit score or credit report.  &gt; Whether it&amp;#039;s Student Loan Refinancing, Federal Student Loan Consolidation, Income-Driven Repayment Plans or Student Loan Forgiveness, you must understand all your student loan options.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/784vwz/cfpb_has_helped_return_750_million_to_student/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~233271 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **Loan**^#1 **student**^#2 **service**^#3 **borrower**^#4 **plan**^#5" "Frequently selling and buying properties is generally not advisable in Germany due to the high cost for property purchase tax (""Grunderwerbssteuer"") and land registration fees (""Grundbucheintrag""). You can generally assume that ever time you trade homes, you pay about 10% extra. So it is likely a good idea to keep your property and rent it out while you don't need it so you can use the rent to pay for your new room. That's especially true if you expect the property to increase in value. Also, due to the low interest rate right now, real estate is practically the only good capital investment. A 85k asset which makes you 4.8k each year is a return of investment of 5.6%*. Any financial asset promising you that kind of dividend at the moment is likely equivalent to gambling. * yes, I ignored maintenance costs, but it's still a really good deal. If you want to rent out your flat as stress-free as possible, give it to a property management company (""Hausverwalter""). In exchange for a percentage of the monthly rent they will take care of all the small stuff (like hiring handymen to fix broken toilets). You might still have to pay for really expensive investments, though (like replacing a leaking roof). But when something like that happens, you should have no issue to finance it with a loan because you have a real estate as a security.  However, keep in mind that the German tenancy law might make it difficult (but not impossible) to get rid of the tenant in case you want to move back into the apartment. Google ""Mietrecht Eigenbedarf"" for more details. Should you decide after your study that you don't want to move back, you can always sell the flat with the tenant. But rented properties usually get far lower prices on the real estate market than empty ones. Regarding covering your cost of living besides rent during your studies: If you are eligible for BAföG (state-sponsored student loan), you should take it, because it's an offer simply too good to refuse. It's literally free money. But unfortunately you are not, because you own too much real estate wealth you are not living in. But you should ask your bank for a loan backed by said property. That way you will likely pay far less interest than with a regular private student loan which isn't backed by anything except the hope for a relevant degree." What are your goals in life?   If one of them is to appear wealthy then buying a high price import is a great place to start.  You certainly have the salary for it (congratulations BTW). If one of your goals is to build wealth, then why not buy a ~5000 to ~6000 car and have a goal to zero out that student loan by the end of the year?  You can still contribute to your 401k, and have a nice life style living on ~60K (sending 30 to the student loan). Edit: I graduated with a CS degree in '96 and have been working in the industry since '93.  When I started, demand was like it is now, rather insane.  It probably won't always be like that and I would prepare for some ups and downs in the industry. One of the things that encouraged me to lead a debt free lifestyle happened in 2008.  My employer cut salaries by 5%...no big deal they said.  Except they also cut support pay, bonuses, and 401K matching.  When the dust cleared my salary was cut 22%, and I was lucky as others were laid off.  If you are in debt a 22% pay cut hurts bad. "There are a great number of financial obligations that should be considered more urgent than student loan debt.  I'll go ahead and assume that the ones that can land people in jail aren't an issue (unpaid fines, back taxes, etc.). I cannot stress this enough, so I'll say it again: setting money aside for emergencies is so much more important than paying off student loans.  I've seen people refer to saving as ""paying yourself"" if that helps justify it in your mind.  My wife and I chose to aggressively pay down debt we had stupidly accrued during college, and I got completely blindsided by a layoff during the downturn.  Guess what happened to all those credit cards we'd paid off and almost paid off?  Guess what happened to my 401k? If all we had left were student loans, then I still wouldn't prioritize paying those off.  There are income limits to Roth IRAs, so if you're in a field where you'll eventually make too much to contribute, then you'll lose that opportunity forever.  If you're young and you don't feel like learning too much about investing, plop 100% of your contributions into the low-fee S&P 500 index fund and forget it until you get closer to retirement.  Don't get suckered into their high-fee ""Retirement 20XX"" managed funds. Anyway, sure, if you have at least three months of income replacement in savings, have maximized your employer 401k match, have maximized your Roth IRA contributions for the year, and have no other higher interest debt, then go ahead and knock out those student loans." My recommendation would be to pay off your student loan debt as soon as possible. You mention that the difference between your student loan and the historical, long-term return on the stock market is one-half percent.  The problem is, the 7% return that you are counting on from the stock market is not guaranteed.  You might get 7% over the next few years, but you also might do much worse.  The 6.4% interest that you will save by aggressively paying off your debt is guaranteed. You are concerned about the opportunity cost of paying your debt early.  However, this cost is only temporary.  By drawing out your debt payments, you have a long-term opportunity cost.  By this, I mean that 4 years from now, you could still have 6 years of debt payments hanging over your head, or you could be debt free with all of your income available to save, spend, or invest as you see fit. In my opinion, prolonging debt just to try to come out 0.5% ahead is not worth the hassle or risk. "You're ""onto"" something. Investing in real estate was not a bad idea about 10-15 years ago, when stocks were high, and real estate was not. On the other hand, by about 2006, BOTH stocks and real estate were high, and should have been avoided. And around 1980, both were LOW, and should have been bought. I expand this construct to include gold and oil. Around 2005, these were relatively low, and should have been bought over stocks and real estate. On the other hand, ALL FOUR are high right now, and offer comparable dangers." It's tough to borrow fixed and invest risk free. That said, there are still some interesting investment opportunities. A 4% loan will cost you 3% or less after tax, and the DVY (Dow high yielders) is at 3.36% but at a 15% favored rate, you net 2.76% if my math is right. So for .5%, you get the fruits of the potential rise in dividends as well as any cap gains. Is this failsafe? No. But I believe that long term, say 10 years or more, the risk is minimal. "Mathematically, the wisest choice is to invest your extra money somewhere else and not pay off your 0% loan early. An extreme example highlights this. Suppose some colossal company offered to loan you a billion dollars at 0 % interest. Would you take it? Or would you say ""No thanks, I don't want that much debt."" You would be crazy not to accept. You could put that money in the safest investments available and still pocket millions while making the minimum payments back to them. Your choice here is essentially the same, but unfortunately, on much smaller scale. That said, math doesn't always trump other factors. You need to factor in your peace of mind, future purchases, the need for future borrowing, your short term income and job security, and whether you think you can reliably make payments on this loan without messing up and triggering fees that wipe out the mathematical advantage of slow paying the loan. You are fortunate because you really can't make a wrong choice here. Paying off debt is never a bad choice IMO. However, it may not always be the best choice."