The cost of student loans will double from September, but you can still earn a risk-free return of more than £400 over three years by borrowing money and investing it.

Students who do not need their loans – perhaps because their parents are funding their living costs – are normally advised to take the cash anyway and put it in a savings account because the interest charged on the loan is so low. This is still the case, but making a profit will get harder from September when the rate jumps from 2.4 per cent to 4.8 per cent.

The interest on student loans is based on the the retail prices index, which measures the rate of inflation. It is set for the academic year based on the inflation rate the previous March – and the rate of 4.8 per cent last March was the highest since June 1991. It has since fallen back to 3.8 per cent.

A student living away from home outside London can borrow up to £4,510 a year towards their living costs, or £6,315 in the capital. Everyone is eligible for 75 per cent of the full amount, but the rest is means-tested depending on your family’s income.

Someone from a family with a household income of more than £38,330 gets only the 75 per cent entitlement – £3,385 outside London or £4,735 inside the capital.

Although you do not have to start repaying your loan until you have left university and are earning more than £15,000 a year, interest starts to accumulate as soon as you draw the loan.

The key to making a profit on your student loan is to earn at least 4.8 per cent after tax on your money. As many students are non-taxpay-ers, this should be relatively easy.

If you put your first year’s loan into an Ice-save account, currently paying 6.2 per cent gross, you would make about £63 profit in the first year. Add in the next two years’ instalments and you could make around £365 over the three years. This assumes the retail prices index is 3.5 per cent for the past two years, and is based on last year’s loan entitlements.

More attractive still is Anglo Irish Bank’s three-year fixed rate at 6.6 per cent gross. Assuming similar fixed rates are available for the subsequent two years, you could make £420 profit by the end of your course.

Once you graduate you are likely to become a taxpayer, so move the money into tax-free accounts or the tax will wipe out any profit. For example, a gross rate of 6.2 per cent is worth only 4.96 per cent after basic-rate tax – hardly more than the loan interest – and 3.72 per cent after higher-rate tax. Up to £3,000 (£3,600 from next April) can be invested in tax-free cash Isas. National Savings & Investments’ Direct Cash Isa currently pays 6.2 per cent.

Alternatively, you could consider tax-free NS&I savings certificates. The three-year 15th issue certificates pay RPI plus 1.35 per cent, so based on an assumed RPI of 3.5 per cent you would get 4.85 per cent. If you moved over your entire £14,215 loan on graduation (including the accumulated interest), you would make a profit of £192 a year.

Some students are tempted to plough their loans into the equity markets in search of a better return, but financial advisers say this is a risky strategy given that you are gambling money that you have to repay.

Mark Dampier of Hargreaves Lansdown, an independent adviser, said: “Students from wealthier backgrounds often gamble it all on the equity markets, but this month’s downturn show the risks of that strategy.

“Having said that, I would be more tempted to do it after a 10 per cent correction thanI would have before. If you invested it in a consistent manager such as Jacob de Tush-Lec of Artemis Capital or Neil Woodford of Invesco Perpetual Income, the chances are that over three years you will do okay.”

Mick Gilligan of Killik & Co said you would be hard pressed to find a better return than Icesave’s 6.2 per cent with none of the risks, but his tip would be the Jupiter Second Enhanced Income trust. This pays 7.4 per cent a year until October 2009, though the return is not guaranteed. If the market falls by more than 18 per cent cumulatively over the period, you would not get that return.