Should I get a Student Loan?

[homer]

I'm currently in grad school. I have enough cash in reserve to pay for all my schooling. My question is, should I take out a deferred student loan and try to invest my cash so when I'm done with school I come out ahead? Anyone try this?

[jjkoestler]

I'm in grad school too, and I think the best option is to pay for school out of pocket (if possible). Investments certainly aren't sure things these days, and the amount of money you'd make probably isn't worth the headaches of dealing with student loans. If you do decide to take out loans I suggest avoiding Sallie Mae like the plague. They are a horrible company.

[adamb100]

I think it's best to use your cash reserves so you come out of college as debt free as possible. http://forum.brewerfan.net/images/smilies/smile.gif

[owbc]

You should avoid private loans but it might be a good idea to look into the federal student loans. The interest rate can be really low on those loans. That being said, I do not anticipate the stock market going much higher in the next few years, so it's probably best to use the cash for now, unless you are planning on making a big purchase like a car.

[blatzlight]

Depends on the loan. If it is a deferred loan with tax deductible interest you should take it. I mean putting the money in a CD is better as you actually get a return.

 

Also, right now is still a prime time to invest. I am actually well above my November 2007 peak point now just by making trades while everyone hoarded cash and sold. Thank you to all them.

[mothershipconnection]

Yes, unless you don't need a free loan. You pay no interest on subsidized loans until you graduate. Just pay it off 6 months after graduation and you got a free loan.

[homer]

Yes, unless you don't need a free loan. You pay no interest on subsidized loans until you graduate. Just pay it off 6 months after graduation and you got a free loan.

That's what I was thinking.

[GAME05]

i'm in grad school, too. you could always just get the Stafford Loans, which don't charge interest until you graduate school. you could just put the money into an interest-earnings savings account and then pay it all back upon graduation. then you can make the profit on the interest if you don't happen to use the money you're loaned.

[craigharmann]

Pay for it. Don't get yourself in debt for any period of time. You never know what may or may not come up after you graduate.

[homer]

I can appreciate the idea of not taking on any debt but if I do pay for it out of cash then I don't have any money on hand in case there's some kind of emergency between now and when I graduate.

[nate82]

Easy solution if you are uncomfortable on taking on the new debt don't take out the full amount. I believe you have an option to take a partial amount of the funds available to you. This would leave you with enough for an emergency fund that you are now paying for your education. Why use the cash you have now if you can pay for the loan almost immediately after graduating?

 

The interest rates on the student loans are actually rather small and you don't have to take out the full amount if you don't need it. I took out a student loan in college even though I didn't need it because I wanted to buy a new computer which I could have afforded with the cash I had. I am glad I didn't pay for the computer with the cash I had because about a month or two later my car had broken down and I had to pay for that and luckily I had the cash to pay for that.

 

To me it is an easy decision take out the student loan and then repay it back when you graduate. You have 6-months I believe before interest payments start. Plus you also get a tax write off with any interest you pay on the loan. Not to make that sound like a good thing but the loan is probably the best way to go because as you said if there is an emergency how are you going to pay for it? Keep your cash that you have and take out the stafford loan and be at ease you will be able to pay for any emergency that comes your way like your car breaking down or getting into an accident. You can't plan for these things but you can prepare for them. I know I am going to sound like a broken record but do the student loan and keep your excess cash for yourself inc ase you really need it for an emergency.

[homer]

thanks for the advice everyone. Just one more tidbit - I don't carry any debt whatsoever (credit card, mortgage, car, etc.) so this would be the only thing on my "record".

[PeaveyFury]

If the alternative is paying for school with your only emergency money, then taking the loan is probably the way to go. If something happens when you graduate, you have normal repayment terms. If you don't take it and something happens in the next year, you're in a much worse situation.

[nodakfan17]

Pay for it. Don't get yourself in debt for any period of time. You never know what may or may not come up after you graduate.
+1

I think you need to ask yourself - is the return on my investment significantly greater than the interest rate on my loan? If I were in your situation, I'd just count my blessings. Soon you'll have a graduate degree and no debt. Then you'll have more time to pay proper attention to your investments.

[PeaveyFury]

I think you need to ask yourself - is the return on my investment significantly greater than the interest rate on my loan?

 

It's not only about the return on his investment- as he said, if he doesn't take the loan, he uses his emergency fund, which is a bad and dangerous idea.

[nodakfan17]

It's not only about the return on his investment- as he said, if he doesn't take the loan, he uses his emergency fund, which is a bad and dangerous idea.

 

True ... it can be a bad idea if you have no way of accessing money in an emergency. However, I'd like to think that most parents would loan their children money in a pinch. If the emergency fund is so important, set aside $1000 right and adjust your budget accordingly. Saving $1000 over the course of 8 months shouldn't be a problem unless you are really running on empty now. There are plenty of creative ways to cut corners.