Help me work through this borrowing question.

[Cherry Brigand]

If I sign up for a 5 year student loan at 4.2% APR interest. Payments are about 370 a month.

However, i can borrow that money and throw it into a CD at 5.15% APR. So I'm technically making money, right?

What am I missing?

 

[Long Dark Blues]

Proof of enrollment is needed, and student loans are dispersed directly to the school.

 

[Kowboy On Sherdog]

Put it all in Bit Coin

@Rob Battisti @TeTe @Travis Alexander

 

[aunshi189]

Put it all on black and get 100% return

 

[Rob Battisti]

Put it all in Bit Coin

@Rob Battisti @TeTe @Travis Alexander

 

[Sweater of AV]

Looks like we’ve got J.P. Morgan over here.

 

[Rob Battisti]

If I sign up for a 5 year student loan at 4.2% APR interest. Payments are about 370 a month.

However, i can borrow that money and throw it into a CD at 5.15% APR. So I'm technically making money, right?

What am I missing?

What you’re talking about here is colloquially referred to as “arbitrage” or taking money from one thing to pay for another thing.

A 4.2% loan right now feels incorrect, as loans always are higher than what CDs are going for, but you’re essentially correct.

 

[mjmj]

Proof of enrollment is needed, and student loans are dispersed directly to the school.

No they aren't. At least mine weren't. They were checks written to me. It's how I paid rent the last 6 months of college if I recall.

 

[davidlemonparty]

Interest rates can change over time and might swing against you.
You will owe tax on the income from the CD which will lower your effective benefit.
It's probably subsidised and you're violating loan terms to do this, which is potentially financial fraud

 

[Long Dark Blues]

No they aren't. At least mine weren't. They were checks written to me. It's how I paid rent the last 6 months of college if I recall.

You're entire loan amount was sent directly to you?

Only the difference above and beyond tuition was sent to me after the fact, typically a month after it was dispersed directly to the school.

Same with my kid's student loans.

 

[mjmj]

You're entire loan amount was sent directly to you?

Only the difference above and beyond tuition was sent to me after the fact, typically a month after it was dispersed directly to the school.

Same with my kid's student loans.

I thought so, but to be honest now you have me questioning my memory. Its been 25 years so maybe I’m off on the details. Maybe the tuition was sent directly to the school and I just recieved the excess like you mentioned.

 

[KBE6EKCTAH_CCP]

If I sign up for a 5 year student loan at 4.2% APR interest. Payments are about 370 a month.

However, i can borrow that money and throw it into a CD at 5.15% APR. So I'm technically making money, right?

What am I missing?

After taxes mihght not be worth the headache and debt is always a risk. But yeah you are making money.

 

[boingyman]

If I sign up for a 5 year student loan at 4.2% APR interest. Payments are about 370 a month.

However, i can borrow that money and throw it into a CD at 5.15% APR. So I'm technically making money, right?

What am I missing?