Why You Should Max Out Your Student Loans

I’m about to let you in on the secret of how I used my student loans to build wealth. Now, coming from a frugal individual like myself, this secret may shock you.

Are you ready? Do you have your notepad and pen? OK.

I maxed them out.

Yes, that is correct. I completely maxed out every penny that I could in student loan funds. I took advantage of every student loan program that I could find and you should too!

Why You Should Max Out Your Student Loans

No Collateral Needed

The premise behind student loan programs is that the financing institution is banking that your education will allow you to repay the loan at some point in the not too distant future. These programs are put into practice to assist those of us who came from poorer backgrounds as a way to enhance our futures by financing an education. The education is then supposed to lead to a successful career that will allow us to be a contributor to society instead of a drain on society.

This means that your future is all you need for collateral. This is great for students, if it used correctly. When you view student loans in this light, they hold more wealth building power as financial tool of leverage than a mortgage does!

How To Leverage Student Loans To Build Wealth

First off, don’t take my heading the wrong way. I lived rough in college – but I had a purpose!

Most student loan programs, or the ones that you should take advantage of, have deferred payments until after graduation. Essentially, this means that you have access to FREE MONEY for at least 4 years!
*Note: Some programs require minimum – interest only payments.

Student loan money is meant to be used for tuition, books, and living expenses. The first trick to leveraging this student loan money is to ask scholarship or grant money after you receive your loan. I accomplished this by simply approaching the financial aid department at my University for additional funding. I would make an appointment and plead my case days before the semester would begin. It wasn’t often that I received less than an additional $500.00/semester.

So there I was with an extra $500 in free money along with my student loan that would pay for my tuition, books and allow me to live comfortably. This was the beginning of my strategy. Read on to the end of the article to find out how to leverage this money!

Get A Job

Put time and experience on your side.

It is essential that you have a job in college. I know that sounds obvious, but I’m heading in a different direction with it. I don’t suggest working full time or finding the job that pays the most money; I’m suggesting that you get a part-time job in your field of study.

Working at even a menial job within your field of study will at least give you some experience when you head out into the workforce with your hard earned degree. This will often allow you to skip the entry-level positions and actually earn a mid-level salary right after graduation.

The Strategy

Live like a peasant and invest like crazy.

Because repayment of student loans is deferred until after graduation, sometimes up to one year after, it provides the perfect opportunity to leverage free money to your advantage and harvest the growth of investments over a short time period.

As long as you invest the money and don’t use it to live “high on the hog” in your college years, this strategy works. Depending on the investments you choose and their performance, you could graduate with a positive net worth! So, don’t go and blow the money – be smart.

We have all heard the stories of the poor college student living on Ramen noodles and kool-aid. Well, that’s how I did it. Actually, mine was more of a macaroni and cheese and canned tuna – I need my protein!

Anyway, I took all of the money that was left over from my scholarships, student loans and part-time job and rolled it into certificates of deposit that matured in the year I was to graduate. I would have invested in the stock market, had I had the knowledge that I do now.

Hindsight is always 20/20!

This has been the basic strategy of leveraging student loans, if I have skipped over something or if you have any suggestions, please share them in the comments below.

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