Redditor betting on GameStop claimed to use profits to pay off student loans

Some student loan borrowers riding the Reddit-fueled GameStop Wave (GME) are betting they will be able to use the profits to pay off debt.

“I can’t think of anything that I’ve seen that is nearly as insane as what’s going on with GameStop right now,” Loop Capital Markets analyst Anthony Chukumba told Yahoo Finance Live (video above) .

Shares of the video game retailer have climbed more than 130% in recent days before dropping dramatically at noon Monday. The stock rally started after short sellers and Reddit users on r / wallstreetbets (WSB) clashed over the direction of the stock.

“I love you guys 😘,” posted one WSB user, along with a screenshot of his $ 23,504.45 consolidated student loan payment scheduled for Monday, Jan. 25. In the comments, the user explained that the payment is “the final student loan payment” and added that they never “thought it would be paid off so soon.”

The user, a 28-year-old man from the southern United States who has a BFA in graphic design and asked not to be identified for privacy reasons, told Yahoo Finance he has started to pay attention at GameStop in November and had started buying weekly calls before doing about. $ 80,000 last week.

When asked why they hadn’t waited for student debt cancellation during the Biden administration, they replied, “I don’t think the current administration is going to do anything about it. student debt… getting rid of this debt was more important to me. “

Sure TwitterDylan Steele, a student at Valdosta State University and director of a fitness chain in Georgia, also said he plans to use his GME profits to pay off his student loans.

In an email to Yahoo Finance, he said he bought shares for the first time on January 20 and sold on January 25 for a profit of about $ 9,000.

“I currently have about $ 12,000 in student debt. I plan to pay him back before August, the majority coming from this unexpected windfall, ”he explained, adding that he planned to attend law school after the summer.

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Another user, who had yet to cash out to pay off his student loans, also expressed his joy at his profits and the fact that he could soon be free from debt with the stock.

“ Playing with stocks is risky ”

Other Reddit users were considering spending their student loans to buy GME shares.

According to the certification statement on the Free Federal Student Aid Application Form, the student submitting it must agree to use federal and / or state financial aid “only to pay for tuition.”

“You are forced to use the funds only for the cost of education … it absolutely does not mean stock purchases and credit card payments,” Betsy Mayotte, president and founder of the Institute of Student Loan Advisors (TISLA). Finance. Mayotte added that purchases of shares with student loan money could present complications if the user files for bankruptcy downstream.

Another user also said that he puts “all my student loan money” into GameStop and Palantir. Others regretted in hindsight that they had not considered a similar approach.

The trend has some experts “worried about the market overbought,” Travis Hornsby, founder of Student Loan Planner, told Yahoo Finance. “If the Federal Reserve does anything about interest rates or if President Biden’s stimulus overheats the economy and interest rates rise, these children are going to be destroyed.

And “my advice is that I understand that an investor who has made 10 times their money this year probably thinks personal finance experts like me are dumb,” he added. “But just think about selling your initial investment and letting the rest roll. People with huge payouts are like your bachelorette party who has hit the roulette wheel 5 times and feels unstoppable. Take a little off and if it continues to skyrocket you will still be rich. If he at least crashes, you haven’t lost. “

Mayotte also advised caution.

“I mean, if you make money, how you do it, whether it’s the scholarship or the lottery, and you use it to pay off your student loans … that’s a good thing,” says -she. “But people shouldn’t necessarily gamble on the stock market in order to pay off their student loans … playing with stocks is risky.”

The markets continue to digest the rapid movements: the stock fluctuated wildly on Monday, rising more than 100% before turning negative and then rising more than 20% on the day.

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Aarthi is a reporter for Yahoo Finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami.

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