How to Launch a Business with a Student Loan

Student loans can become a huge burden

Primarily, student loans are granted for the main reason of attending to the financial costs of a tertiary education. They can come from either the Government or private lending organization. In some instances, some students who get excesses over the funds given in these loan schemes often choose to invest rather than returning these funds to the grantor. The legality of this act in itself is not clear cut; as while it may not be totally ethically acceptable in some spheres, it does not in any way break any law.

A number of college students have achieved great profit from investments made with surpluses from student loans. In fact, according to Pando Daily, between the years 1998 and 2000, college student, Chris Sacco, who had very minimal experience in business used student loans to generate a portfolio that was as high as over $12 million. Chris is a very suitable example of the rising tide of students who use funds originally intended for educational expenditure to try to gain profit in the stock market. It is however worthy to note, that like any other business, investing with Student loans come with its own risks, but then again, like other businesses, if carefully handled and adequately managed, it can lead to great gain.

The greatest basis for the examination of the legality of using student loans in investment is whether the loans are from a Private organization or the Government (directly or indirectly). The Government, through the department of Education, generally has stricter policies and regulations guiding the use of student loans obtained from it. On the other hand, private organizations have less strict regulations in the use of granted loans, however, the often come with higher interest rates the loans obtained from Governmental bodies. This is primarily due to the fact that the Government often subsidizes the interest set on student loans to improve the literacy of its population. Thus, students who spend loans obtained from the government on expenditure unrelated to education may be made to face certain penalties. 

You can run a business and still top your class

However, for students who have the privilege to make certain investments with student loans. It is highly imperative that they take into consideration some factors before diving into such investments: 

• Consider the risk-benefit ratio of the investment you are about to make. Considering the fact that the starting funds of such investment come from a borrowed source, it is very important that you assess the risks of your targeted investment plan and make sure they are as minimal as can be. If not, the investment might not be a risk worth taking.
• Estimate the time required for profit yield in the investment and compare with time required to refund loan. Although some investments are highly profitable, they may take a long time before they start to yield profits. Investments like this are not usually advisable considering the fact that student loans, like other loans, often have a time limit for its settlement (especially for students who have to pay certain minimums at regular intervals) and an inability to make necessary refunds in this period may cause undesirable penalties.
• Always have a contingency plan. As investments don’t always yield desired results, it is advisable that students interested in using student loans for investments have a plan B.

Using student loans in Investments can be a very wise step to take, especially when done correctly.