

Ask HN: Student loans to fund my startup ventures? - phdloans

TL;DR: I&#x27;m a BME PhD student with $100k in student loans. I have a year left before I graduate and want to do a startup before then. I can get $20k in federal loans. Is it stupid to fund my startup ventures by taking on more student loans?<p>BACKGROUND: I graduated with my BS in BME from a top 5 engineering school and have been in a PhD program since. I expect to graduate in 2015. I don&#x27;t see myself working on stuff related to my PhD after I graduate.<p>I have over $100k in private&#x2F;govt loans already from my undergrad, but I haven&#x27;t taken any loans during my PhD since I&#x27;m funded. I do feel like I&#x27;ll be able to land a high paying job if I decide to go into industry. (A complete burn disaster wouldn&#x27;t be the end of the world for me, but it&#x27;d suck really bad.)<p>PREMISE: The only excuse I&#x27;ve always had for not starting something was my lack of capital. I&#x27;m like the Jack of all trades, King of none when it comes to programming, web servers, startups, entrepreneurship, hustling, making stuff happen. I know enough so that people can&#x27;t take advantage of me, and if I really spend time on something, I can figure it out. I&#x27;m in no way a ninja in anything specific, but I am a ninja in getting things done.<p>SITUATION: I can get $20k over two semesters in federal unsubsidized loans at 6.5% interest. Since I&#x27;m fully funded, I got back one refund check of around $10k and will get another check in a few weeks when the semester starts. Is it stupid to fund my startup ventures by taking on more student loans?<p>I know there are stupid risks and calculated risks. I feel like this is a calculated risk that limits my failure, and I can still succeed if I fail. I want to succeed in this, and I think in this situation, my back is against the wall, my money is where my mouth is, and if I fail, it&#x27;s on me, which will drive me even more to succeed.
======
nummy
Student loans are distributed directly to your school, where they take out
tuition and cut you a check for the remainder. How do you plan to intercept
the school loan before the school cuts their part out?

~~~
phdloans
I already received the first refund check. Basically, it goes into my student
account, which is paid in full, so they send the remainder back to me through
check or direct deposit.

~~~
nummy
In your promissory note, you agree to only use the money for "qualified"
educational expenses (books, rent, etc.). They really have no way of checking
what you use the money for. But, if they find out one day ... you would be in
violation of the contract. In which case, the lender may want to end the
agreement, take legal action against you (assuming they can prove you violated
the contract), and take their money back.

~~~
phdloans
Right, so the way I see it, the money from the loans goes into my account for
educational expenses. The money from my funding (grants/advisor/etc) that is
used to pay for my tuition/fees is returned to me. Once it's in my account and
it's refunded, the lending institution would have no way of proving if it was
their money or another money source that was refunded to the student. All of
the money is technically still being used for "qualified" educational
expenses, right?

I guess if they did find out one day I'd still be paying the money back, and
by that time I'd be hopefully successful in this so I wouldn't mind returning
it.

