I recently spoke to one of my professors who had mention that he used student loans to purchase his first real estate property. I asked if he thought that it was a good decision to do that. He replied that he thought it was a great decision on his part and had also used student loans to buy his first shares of stock and bonds. He mentioned that it worked well because you don't have to start paying back any loans until you are finished with school. Im assuming that they were federal and state student loans.
Is there something missing to this?
Are there any other good points that have been missed?
Well, it might be illegal (depending on the type of student loan) and is unethical since student loans are to be used to pay for education.
That sounds a bit tricky. I would be very careful about using student loans to purchase investments.
Now. If I received funds that were to "Cover housing expenses". I might buy a place in a college town, rent out the three other rooms or convert it into 4 apartments and rent out 3 type thing. Using money though that is meant to pay for books/classes could get you into some hot water.
Student loans are the new housing bubble. The only thing unethical is how much these schools are charging for tuition. It's out of control. The only difference is you can't walk away from student loans like you could a mortgage. You're paying it back anyway, good for you for using it to invest in your future.
The real estate property you buy will teach you more valuable lessons in a year than you'll learn in 4 years of higher education anyway.
Thanks for the great replies. Good views on the subject. I would like to include something that I forgot to mention (sorry, I should have). As far as I know, from talking to a financial advisor, the school gives each student a budget which includes estimated living expenses. so lets say school costs you $8,000 in tuition and books (dues directly associated with school) for the year and you take that out as loans. The schools budget given to you exceeds that because it takes in account other expenses. For example, we are given a budget of around $19,000 for the year. So that leaves $11,000 (19,000 - 8,000) in unmet budget that is assumed to being payed for by means other than loans. You are allowed you take out federal loans up to that budget amount. (The long explanation of what @John Wielgolinski mentioned) So, being that you are taking out loans for other living expenses, I feel like it would be ethical. like @Mike Cumbie mentioned, "cover housing expenses." I think that would have been a good way to go at it when I first started. Thats pretty much free money up until you are done being a full time student and could have been used for a couple of down payments.
Much rather see you invest in RE with extra money borrowed than play beer pong, buy a car, buy a vacation, etc. Borrowing always has risks. Ethical argument aside, you cannot BK these loans. But, they are also forgiven with a permanent disability or your death. Couple things to consider.
Be careful not to over-pay for your RE. 'Free' money and a fool soon part. Cheers!
I am a student in St. Cloud, MN @Benjamin Olson . I have never thought of trying to use students loans. I am going to look further into that! Thanks.
I vote for NO, only because you cannot discharge student loans in bankruptcy. Credit cards are my favorite source of financing, provided balance transfer deals are available.
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