The military’s HPSP scholarship program pays for all expenses related to medical school training including tuition, books, and necessary supplies such as a stethoscope. The scholarship fund also provides money for room and board in the form of an annual salary. Currently, the military pays us just over $21,000 a year. While this amount sounds like a lot for a student, it is hardly enough to get by when attending a school in a major urban area. A few weeks ago I had a realization that military students can use the HPSP program to their benefit and generate additional income through investing.
The Department of Education currently allows graduate and professional students to take out federally subsidized loans up to $8,500 each academic year. That’s a free loan. And for students who can invest the money, all of the profits made off of the interest is theirs to keep.
Let’s say I withdraw $8,500 annually and invest the money, for a grand total of $34,000 borrowed over the course of four years. For this scenario, I will pay back all of my student loans the day I graduate medical school. I started running some numbers and here’s what I found:
If I invest in a relatively safe mutual fund that has a 7% gain each year, I’ll graduate with just over $40,000. That’s $6,000 for free. Now that may not sound like a lot, but six grand can pay for quite a few toys leading up to residency.
If I invest in a high yield mutual fund and it brings in 20% a year (and there are quite a few of those), I’ll finish with $54,000-a total profit of $20,000! Now that’s a new car.
I wish I had thought of this scheme when I first started medical school. I’ve already filed my FAFSA and am waiting to hear back on withdrawing a lone starting in the spring semester. If my calculations are correct, I might be able to pull in between $1,000-$5,000.
I wonder if anyone else has thought up this idea. I haven’t seen it online anywhere, but I’m sure that other students have tried it before.