Take out student loans to fund retirement?

[Roland of Gilead]

I do not know right now if there is age discrimination in student loan availability but if not, what would stop someone who is in their 30s or 40s from taking out student loans and investing that money instead of using it for books and housing, then getting the debt cancelled if the current proposals happen?

Can you qualify for funds for room and board if you are older?  It would be an interesting way to reduce expenses and some of the college towns are in pretty interesting locations.

[nereo]

I do not know right now if there is age discrimination in student loan availability but if not, what would stop someone who is in their 30s or 40s from taking out student loans and investing that money instead of using it for books and housing, then getting the debt cancelled if the current proposals happen?

Can you qualify for funds for room and board if you are older?  It would be an interesting way to reduce expenses and some of the college towns are in pretty interesting locations.

To get federal student loans (FAFSA), you must fill out an application, which will determine your Cost of Attendence (COA) as well as determine how much you should contribute towards your education based on your financial circumstances (your Expected Family Contribution, or EFC).  It does not matter if you are 18 or 38, though the COA and EFC is calculated slightly differently for grad students and if you cannot be declarred as a dependent on anyone's taxes.

That said, given the fungibility of money once you have student aid there's no accounting to make sure that your SL check goes towards, say, tuition - that would be impossible.  I took the maximum amount out each semester and put a large chunk into savings while working to earn money and living like a broke student to keep costs down.  I was also fortunate enough to get several scholarships which further deferred costs.  Once I graduated I was able to take a big chunk of money from savings to eliminate most of my loans (most of which had been subsidized, so I paid no interest).

[secondcor521]

I do not know right now if there is age discrimination in student loan availability but if not, what would stop someone who is in their 30s or 40s from taking out student loans and investing that money instead of using it for books and housing, then getting the debt cancelled if the current proposals happen?

Can you qualify for funds for room and board if you are older?  It would be an interesting way to reduce expenses and some of the college towns are in pretty interesting locations.

Well, there are several problems with your plan.

First, you'd have to actually be going to college to take out student loans.  Some (most?) loans and grants require you to attend full time or at least half time.  Maybe that's what you want to do with your time, maybe not.

Second, if you invest that money instead of using it for books and housing, then you'd either (a) have to use other money of your own to pay for books and housing, thus creating no real net benefit to your scheme, or (b) not buy the books and housing, therefore committing loan fraud and face prison, or (c) take out loans in excess of books and housing, the excess of which is likely to be considered taxable income (google "taxable scholarships and grants" and read a few articles).

Third, student loans have interest and origination fees, which would set you back if the forgiveness doesn't happen.

Fourth, there's a possibility that forgiven student loan principal would be considered taxable income in the year in which forgiveness happens.

Finally, you can legally only borrow for room and board for "COA" - cost of attendance.  Cost of attendance is either your actual cost if you're living on campus in a dorm, or a budget number calculated for you by the school.  This number may be higher or lower than the published cost of room and board depending on your living situation.  My son's COA is quite low because there is a category at his school called "living with parents".  Borrowing more would either create loan fraud or taxable income, depending on the circumstances.

Props for thinking outside the box, though!

[wageslave23]

If you are going to school anyways, then yes I would try to take out the max amount of loan you are able to even if you don't need it.  Then invest the money that you would have spent.  The interest rates on SL aren't very good so you probably would break even with the investing.  But you might as well roll the dice and see if loans are forgiven in the next 3 years.  Even if forgiven loans end up being taxable income, you still come out ahead.  The only way you lose is if loans aren't forgiven and the market only returns 4% and your loan interest rate is 7%. 

[Roland of Gilead]

I would definitely wait and see how things play out.  I would most definitely be interested in attending classes again if there were very little cost.  Consider a person in retirement who can pull $30k per year out of their portfolio at 3% WR and then consider that if they were to get some sort of full ride loan that they didn't have to repay, that $30k per year would stay in their portfolio and grow.

The problem is they can always say this is limited to people below age 25 or similar and there would not be a great protest.   It will be interesting to see if there are any age limits.

I took a few advanced courses a couple years back in engineering at a local university but stopped because I really could not justify the tuition and book cost during retirement if I were not going to make use of the knowledge.   It was a lot of fun though.   Now?  Maybe?

[Bucksandreds]

Aint no way student loan debt is getting cancelled. In 2009 you had Democrats campaign on getting healthcare to all Americans. They had the President, the House and a supermajority in the Senate and got a watered down ACA out of that. If Dems win the margins will be trimmed and more loans may be forgiven for those who attended fraudulent online colleges and things like interest may be forgiven or lowered but for 99% of people they will have to pay them back or go on income based repayment.