Wannabe Traders Chase Dream of Student-Loan Payoffs Via Market Wins

Viral success stories of people who used the post-pandemic stock market to trade their way out of mountains of student loan debt keep inspiring do-it-yourself investors.

But while equities have provided a time-honored route to wealth creation for generations of Americans, aspects of these latest get-out-of-debt-quick efforts sit uneasily with Wall Street’s conservative-investing old guard. With the fight against inflation whipping up volatility across asset classes, and exotica like cryptocurrency still finding its way into retail portfolios, they warn that the risk of bad outcomes is as high as it’s ever been.

“The majority of people managing their own portfolios have only known how to generate returns using growth stocks,” Julian Emanuel, chief equity & quantitative strategist at Evercore ISI, said of once-lofty sectors like tech that have seen valuations come down to Earth this year.

Ilianna Salas is undeterred. The 25-year-old Los Angeles native, is investing in companies like Sweetgreen Inc. and Olaplex Holdings Inc.

“No one wants to pay off their loans using regular income,” said Salas, who’s trading stocks in the hopes of earning enough to cover her payments of about $300 a month. “I feel like a lot of people are in the same boat.”

Americans owed $1.7 trillion in student loan debt at the end of last year, according to the Federal Reserve. There are no statistics on how many student debtors are currently investing, but they probably had cash available: In March, the Federal Reserve Bank of New York estimated that nearly 37 million student loan borrowers had roughly $195 billion worth of paused payments.

Now that the Biden administration has again extended the pause on federal student loan repayments, many retail traders are doubling down on stocks and crypto.