Investing student loans into an Index Fund
I am a home UK student. My fees will be 9000 + whatever it costs to live (I'm projecting 7000 at a max - I have shared accommodation for 5k (meals included) on a 31 week contract with £500 assigned to extra food and £1500 for fun. Let's assume £16000. I will be given a maintenance + tuition fee loan of £18000, giving me £2000 spare per year. I also have £20k+ in savings from working during a gap-year, and the ability to work alongside my degree earning decent cheddar (plus the possibility of paid internships, summer jobs etc) and if I'm lucky some family support.
I already have £10,000 of my savings invested in a S&P500 tracking index fund, and am planning to add from my savings/earnings incrementally through DCA throughout my time studying. Would it be dumb to invest this extra £2000 (aka any 'spare' money) loan money per year into said fund?
I feel like the fact that student loans are paid pre-tax means it is wise to just let them run for as long as possible. Added to this is the fact that the plan I would be on would increase only by the RPI amount - meaning the fund would just need to outperform inflation. In addition to this (at risk of sounding like a dick), I am going to a target, and therefore may be more likely to get a well-compensated role, offsetting any potential risk.
What are your thoughts?
- Use an ISA wrapped account to make it tax free.
- Don't forget that index trackers can also go down, not just up.
If you had invested the money late 2021, you'd have lost a lot until the recent market rally.
Rule of thumb is to never invest/gamble money you would need for something else, like food, rent, tuition, insurances, ..
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