I realized the other day that the interest on federal subsidized student lans only starts accumulating interest after I graduate.
I can pay for college by working though it, but I realized that I can just take the $19k loan, invest my earnings and savings in an index fund, and then pay off that 19k when I graduate, without ever needing to pay interest.
I then realized that the annual interest rate on federal loans is 4.5%, while the average annual return of an S&P index fund is 9.8%.
What if I just kept that 19k in an index fund and never payed it off, I would accumulate a bunch of debt but I would make even more in stocks.
According to an interest calculator, after 20 years, I would owe 45k in loan debt, but my index fund would be worth 123k.
As long as I don’t spend more of the index fund than my debt is worth, isn’t this a good idea?
Are there any unexpected downsides to this?
Submitted March 02, 2020 at 06:41PM by Teddy_Dies https://ift.tt/38aZhmM
