Q: I'm going to graduate from college in about a year and a half. I'm pretty financially sound. Me and a collegial professor have a good idea. He's going to cosign for me to get a student loan and he has great credit. We're going to take that principal amount and invest it in a CD. Then when I graduate, just pay back the principal and split the interest. G C you're stupid. CD would gain interest while the interest on the Student Loan would be DIFERRED until I graduate! Dumb ass
A: Well, if you pulled out a Stafford (intrest deferred) loan this would make perfect sense, but I would make sure that YOU are the one doing the investing and he has no access to the Certificate of Deposit. It makes sense, but be carefull. Also it might border on lying on a credit application because the stafford loan only covers an amount needed for your schooling as indicated by the schools estimates (plus or minus some) and cost of living ect.. So if you use it and then get a CD with it you are technically lying to the creditors. But I doubt they would ever find out. The only reason this will make you money is if your loan has 0 intrest (at least until school is over) and you pay it back as soon as your finished with school. Once they start charging intrest, it get's really expensive and offsets and benefit you would have otherwise had. Also make sure that your getting a stafford loan and not some subsidised loan that will charge you intrest as well. It may sound good then getting the loan at a lower APR and getting more intrest in return on the CD but the loan could have many hidden costs. I would probably stay away from this deal, it honestly sounds a little shady to me or at the very best impractical.