Why I Maxed Out My Student Loan

This will probably be the only time I wholly endorse sinking yourself into more debt. But this is the best debt you could possibly ask for. Interest-free money!

I wish I would have thought of this earlier on. In my second year at university it hit me, why wasn’t I taking everything I could from my student loan.  I had a part-time job which covered the majority of my expenses and in an effort to remain as debt free as possible was drawing only a small amount of my living costs per week. Oh, the missed gains.


I figured why not start drawing the max amount of $174 per week and put it into investments and savings earning interest, I wasn’t paying any after all.

Overall if I would have done this over the full 4 years of my degree and simply put that $174 into a locked reward savings account earning 2.5% a year I would have had $29,479.60 based on 40 week study year. Of that $1,48.60 is interest. If you want you could do this and then pay back the $28,014 in principal and just take the interest. Or you could keep on racking up interest on your free money and slowly pay back the principal as part of your loan out of your weekly wages. Either way, it’s a win-win.

If you’re a bit more of a risk taker, like me, you could invest a portion of this into stocks, I started with stable large companies on the NZX – Summerset, Chorus, Genesis Energy, Etc. These gave me a much higher return than that bank account ever would have but could have easily seen me make a loss on my investment. In which case that free money would have cost something.

One of my stock picks turned out to be a winner, A2 Milk which I purchased for .72 cents a share and sold this year for just under $8. A return of close to 800% and all because I took the government up on its offer of interest-free money.

My advice – if you’re in the position where you don’t need that money to cover your living expenses you’d be stupid not to take it anyway and put it to good use.

Remember at the end of the day, a student loan is a debt and if you don’t have the discipline to save all the extra that you don’t need and instead spend it then I would highly recommend not taking more than you absolutely need. Don’t be dumb it’s still debt.

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