College as a Safe Haven for Adventuring

As most of you know, I’m a graduate student in here in Florida since 2000.  My financial background is about as average as you can get.  My parents are considered middle class, and as a result, financial aid isn’t as readily available.  In my opinion, students from financial backgrounds similar to mine are the ones that are hit the hardest.  We’re forced to find creative ways to fund our schooling while absorbing large amounts of debt.  Folks higher in the financial food chain normally can afford the skyrocketing prices of college (although it’s becoming much harder for them as well).  Those lower on the financial chain have a variety of programs available to them, some being addition federal help, grants, scholarships based on financial need, etc.

Before you say anything, this isn’t a rant against the education system and the government.  I believe the government should do more for the middle class, but historically that’s not been the case.  In any event, and even more so for students in my position, you should be looking forward to taking risks, financially, while in school.  But how can some of us take risks when we’re barely able to survive?

That’s the key.  I’m sure some of you are tired of living off the typical college staples (ramen, pizza, cheap beer).  So what can you do about it?   I’m currently taking loans from the federal government, some of which are subsidized interest wise, while others aren’t.  What does this mean?  It means that while I’m at school, about half of all loans I take out from the federal government are effectively interest free.  Subsidized loans are just that – the government pays the interest while you’re in school.  So take advantage.  Am I advocating going into debt while in school?  Yes!  What reason do you have, while in school, to not take advantage of interest free money and explore any ideas you may have?  I know, most students like to go out and party and all that jazz.  But for those that are focused on the future right now, why not take $2,000 or $5,000 or even $10,000 and learn the markets?  Or take ownership in a business?  Or even start your own?

I know what you’re thinking.  It’s a loan.  You will have to pay it back once you’re out of the system.  But honestly, when you’re pushing $50k, $75k, or in my case close to $100k, what’s another $5-10k?  Who’s to say you can’t turn that $5-10k into $10-20k while you’re finishing up your degree?  Sure, you could lose it all, but what’s another $5-10k when most adults are taking anywhere from 10 to 30 years paying off their student loans. 

Or if you prefer, you could always take that $5-10k and stick it in a CD or Bond.  Your ROI might be enough to help cover rising costs due to current inflation rates.  Or perhaps you could take your friends out for a round of drinks.

Jorge 7 March 2008 Adventure Series
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Viewing 7 Comments

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    You should go more into detail about the potential behind investing your debt money. Other than the stock market, there are great places to invest with confidence like Treasury Bonds (as you have mentioned). With college prices skyrocketing, it is important to have a grip on your finances and not be in a hole as soon as you graduate.
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    The obvious question is...why the hell have you been in graduate school for 8 years???
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    umm, he says hes gunna be pushing 100k+ a year, im sure that takes alot of schooling. Anyways, nice post. I know exactly what you mean with the middle class getting screwed. Iv dealt with it myself for a couple years. The government/school gives me about 1/4-1/2 of the money I need for the whole year. Its ridiculous.
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    Yes, education is getting ridiculously expensive. Anyway, I think using some of that money to invest is definitely better than spending it all drinking and partying. Although it's an integral part of college (don't miss out you'll regret it). And with interest free terms, you could get a nice income meanwhile.
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    My mistake! It should have said a student since 2000, but a graduate student since 2004, although I wouldn't put it past some folks to be in graduate school for about 8 years. Bobby, that's about the same amount I get from the government. Funny thing is, I can't ask for food stamps or whatnot since I'm a full time student (not that I'd ask for them anyways since others really do need it more than we do).

    Jon, if the students here on campus would save even 5% of the money they spend on booze and partying, they'd be so better off. But I guess that's where the disconnect occurs. Only a handful of students in my opinion really worry about the future. The rest live in the present. Problem is, their present doesn't seem that interesting (beer ping pong anyone?).
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    Did I just read that you advocate borrowing to 'invest'? This is the worst idea ever. First, you are borrowing on a recourse line that cannot be discharged in bankruptcy. Second, you are telling unexperienced poor people to invest money. The reason they don't have any money is because they can't manage it. This is the path to ruin.
    Yes, student loan lines and 0% APR credit cards provide a low cost of capital. Unless you a proven track record and a risk management plan, don't play with leverage. Borrowing is leverage.
    How many people have the discipline to put it in a CD and make a couple hundred a year from arbitrage?
    Danger!
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    Options:

    Am I advocating borrowing to invest? Yes and no. I can only guess what your age or background is but have you been on a college campus lately? The amount of stupidity on site financially astounds me. Instead of blowing your cash on booze and other non-essentials, invest it. Or like you said, arbitrage works very well. Sure, 4% of $10,000 on a simple basis is $400 per year but it pays if you do have the discipline. I'm not saying to go out and take a loan out if you can avoid it. But some of us have such large student loans outstanding it wouldn't concern me taking out a little extra even if it's just to learn how to invest. The markets need some sort of tuition payment, right?

    I guess my problem is I figure anyone who has any good handle on their finances and their future would have some sort of knowledge and/or concept of risk management. I really need to stop assuming that most folks even really care about their financial well being. I mean heck, both my parents and my wife's parents don't!

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