First off I don’t see this as a good option unless you are getting your education exclusively paid for through another source like your parents. If not then you are forcing yourself to work harder at a job during your school years which I don’t recommend.

Secondly, the problem is that you have to deal with inflation so not only are you trying to beat the rate on your student loans (depending on if they are subsidized or not) but also beat inflation. Most of my loans (I’m out of school now) sit at about 6%, so using 3% as the inflation rate I would have to be beating 9% to make it even worthwhile.

In “safe” investments such as savings accounts or index funds, you are fortunate if you beat the inflation rate let alone the rate of the loan. So you are left with the stock market, and ignoring hindsight, you would want to “actively” trade these stocks. By actively I mean pay attention to the company including their statements along with the industry, which can be a lot of extra work for a student.

The idea of using student loans to invest sounds like an offshoot of using leverage from your agent to invest more in firms. The difference is most people who use leverage are professional investors and likely know far more about what they are doing than a college student.

Personally I’m extremely glad I didn’t do this because I would have a lost a ton of money as I only recently graduated college. Well that plus I had to pay my own way through school so I would have broken my own recommendation.

1. Pay 3% interest or lower on the student loans.

2. Can pay, and expect to be able to pay forever, the monthly loan repayments out-of-pocket.

3. Are investing with a 20-year-plus horizon.

If at all possible, earn money in side jobs throughout the school year so that you can put as much of the student loan money as possible into tax-advantaged retirement accounts. Start with $5k in a Roth IRA, since you’ll likely avoid any income tax in the year you do this.

This isn’t such a great deal dollar-for-dollar today, but the real value would come from contributing to a tax-advantaged account years before you would normally start doing so.