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>> I am looking at going to graduate school for two years begining this fall. I will be taking student loan. The loans are for the amount that the school suggests as the typical expense for a student. If I live within the loan amount, can I invest the rest?
I'm not sure that it is lawful to invest student loans: they are supposed to be used for the expenses of study, and if you don't need the loan for those expenses, you shouldn't borrow the money.

However, it is sensible at least to earn interest on the unused portion of the loan, and in a sense merely depositing the funds in a bank or money-market account is a form of investment. That is certain legal.

I'd strongly recommend against investing loan funds in stocks -- stick to investments that are as free of risk as possible.

One possible problem that you should be aware of is that many people receive their loans late. At my school, most students did not have access to their loan funds until December this year, and so needed cash from some other source to cover expenses until then.
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