Advice needed regarding (college loans) and business funding

Here's my situation;

I am going to be a sophomore in college this fall. Currently, I am paying for my private college tuition from my website earnings. I pay it on a montly payment plan so I always have enough money to cover an emergency. I am not using any loans right now.

What I'm thinking though is why not take out a federal stafford or perkins loan (no payments while in school) and then just keep the money I make and put it in a high interest CD or fund (thats another topic for another time) while in school and then just pay off my college loans as soon as I'm done so I don't get hit with any college loan interest fees? Does that sense?

This would also allow me to also reinvest in my business to help it grow because currently I do not have much flexibility within my budget because tuition, room and board, and self employment taxes take a huge chunk out of my earnings.

Any feedback would be greatly appreciated!
-Chris

 

Hi Chris,

It sounds like you have a good sound plan, but you would really need to sit down and work out the figures before going ahead.

Congrads for been able to afford to pay for your own education out of your own pocket, IMO you will appreciate learning a lot more and take it more seriously, then one would if its been paid for by parents

For starters, if you have not done so already; write down a couple of worst case scenarios;

Things that could happen if anything goes wrong, will you be able to still keep up with your repayments? Terms and conditions of the loan? What if your car dies, and you have to buy a new one? What if your business flunks? What if you get sued and have to pay for representation?

Im not trying to be a pessimist , but in order to work out if a business plan is sound or not, it is best to approach it with a pessimists eye. That way, you will be PREPARED if and when this things happen.

Maybe you can throw some rough figures for us to have a look?

 

You would really need to weight out these options! First, you have to really think are you going to be disciplined enough to put money aside to invest. And what are you going to do, invest monthly and you would have to making a pretty good solid return especially when you start throwing in trade cost or fees. This is really something you would have to look at before doing all this! Also, something to think about with a CD if you take that money out you usually get fined and don't get the return and have you keep your money tied up for a good while. There are lot of things really be looking at.

 

As long as your investment returns more than 6.8% (which I believe is the current rate for Stafford loans) plus any taxes due on your capital gains, that's a great idea. Not sure how capital gains taxes work over there in the US, though, so you should discuss it with a professional.

You're in an enviable situation, CL. I had to go the hard route through university and work a full time job at the same time