Repaying your student loan as SLOW as possible

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Forums › Finance and wealth management › Repaying your student loan as SLOW as possible

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#862889 21-Jul-2013 08:25

Gooseybhai:

I dont believe a student loan counts against you when getting a home loan.... It didnt for me (even though I thought it would)...the bank wasnt interested in this. They were more interested in how I was going to pay it off !

Banks look at your total debt and take this into account before granting you a home loan.

If you were granted a homeloan and were still servicing a student loan you would have found that you would have probably qualified for a bigger homeloan if you had no student loan.

It makes no sense to keep debt.

mudguard

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#862891 21-Jul-2013 08:29

I think another consideration is the 12% payrise you get once it's paid off!

Klipspringer

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#862892 21-Jul-2013 08:35

mudguard: I think another consideration is the 12% payrise you get once it's paid off!

If that's not an incentive to pay it off I don't know what is.

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#862894 21-Jul-2013 09:01

jeffnz: when you guys use the word "government"maybe use the word 'taxpayer' to put in into another perspective. I realise it makes you feel better about reneging on your loans when its the government.

Where has anyone talked about reneging on their loans. The discussion has been about whether to pay off the loan at the proscribed rate, or faster.

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#862896 21-Jul-2013 09:08

Handle9:
jeffnz: when you guys use the word "government"maybe use the word 'taxpayer' to put in into another perspective. I realise it makes you feel better about reneging on your loans when its the government.

Where has anyone talked about reneging on their loans. The discussion has been about whether to pay off the loan at the proscribed rate, or faster.

well you maybe have noticed I was referring to those that were using the term "government" and inferring it was some faceless institution when in fact its we the tax payers money that is being discussed. That i used the word "reneging" was more my take on it.

Suffice I think most got what I was getting at, next time I'll clarify it for those that didn't get it the first time.

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nickb800

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#862900 21-Jul-2013 09:22

Klipspringer: Pay it off as soon as you can. The less debt you have the better.

It does not matter that its interest free.

When it comes time to buy a house or car, or applying for any credit. Your student loan will count against you.

In terms of a mortgage, yes. But by not paying more than the minimum loan repayment and accruing a lump sum in the bank, you might be able to avoid needing credit or a car loan at all (if you buy a car outright with money that could have otherwise been used to repay your student loan, then you are in a sense buying the car on an interest free loan).

If you are happy with profiting at the taxpayers expense, then you are best to repay the minimum and build up savings with your surplus income. If the government of the day decides to start charging interest, then pay off the loan lump-sum then (it would be incredibly unlikely that you wouldn't receive advance notice of a change in the interest-free policy). If you need to apply for credit that might be adversely affected by your student loan, then pay it off lump-sum then. Cross those bridges when you get to them, in the meantime reap the interest.

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khull

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#862901 21-Jul-2013 09:28

No institution out there will hand out 0% interest loans. And that is the best you can get - every additional money you'd have should go towards zeroing out any credit card balances or equivalent high interest charges first, next would probably be your mortgage then you it will go towards any savings/term deposits.

Basically for the majority of people (as the article mentions about excluding plans to live overseas etc) the priority of paying off student loan should be at the bottom of the list - right below death and bankruptcy. i.e. just leave it.

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#862911 21-Jul-2013 09:37

nickb800: If you are happy with profiting at the taxpayers expense, then you are best to repay the minimum and build up savings with your surplus income.

As someone who paid off their loan years ago and full taxpayer ever since I have no issues with current day graduates doing this. The interest free loans are an incentive to stay in nz and work\pay taxes. The benefits outway the costs imo. There are many other far worse misuses of tax payer funds than giving young people an education and incentives to stay in the country...

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#862915 21-Jul-2013 09:43

jeffnz:
Handle9:
jeffnz: when you guys use the word "government"maybe use the word 'taxpayer' to put in into another perspective. I realise it makes you feel better about reneging on your loans when its the government.

Where has anyone talked about reneging on their loans. The discussion has been about whether to pay off the loan at the proscribed rate, or faster.

well you maybe have noticed I was referring to those that were using the term "government" and inferring it was some faceless institution when in fact its we the tax payers money that is being discussed. That i used the word "reneging" was more my take on it.

Suffice I think most got what I was getting at, next time I'll clarify it for those that didn't get it the first time.

It appears to me that you are suggesting that there is a moral imperative to pay off student loans at a faster rate than is required. If the OP is paying off at the required rate then where is the moral issue? He's meeting his obligations to the taxpayer, should everyone repay their interest free loans to GE finance because they have shareholders?

nickb800

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#862919 21-Jul-2013 09:47

sidefx:
nickb800: If you are happy with profiting at the taxpayers expense, then you are best to repay the minimum and build up savings with your surplus income.

As someone who paid off their loan years ago and full taxpayer ever since I have no issues with current day graduates doing this. The interest free loans are an incentive to stay in nz and work\pay taxes. The benefits outway the costs imo. There are many other far worse misuses of tax payer funds than giving young people an education and incentives to stay in the country...

And interestingly if you read the article that the OP posted, the IR minister himself expresses no concern for the behaviour, suggesting overseas borrowers who ignore their loans completely are a much bigger problem.

Personally I find the practice to be a bit immoral, but at the end of the day, I don't think I could ever bring myself to make a voluntary repayment unless it was in my selfish interest

richms

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#862934 21-Jul-2013 11:21

A majority of those taxpayers bitching about it will have had a free ride thru their education and now be expecting the same graduate's they want to pay back more than they have to to also be propping up their absurd pensions which they also have not paid for.

Current and recent students have had it so much harder than the loud 50+ bunch who are shortly going to become a long term burden on taxpayers so just ignore the old whiners.

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#862939 21-Jul-2013 11:45

richms: A majority of those taxpayers bitching about it will have had a free ride thru their education and now be expecting the same graduate's they want to pay back more than they have to to also be propping up their absurd pensions which they also have not paid for.

Current and recent students have had it so much harder than the loud 50+ bunch who are shortly going to become a long term burden on taxpayers so just ignore the old whiners.

Well I don't think the majority of people here "complaining" are in the group you say we are. I am certainly not. I paid for my education and then paid my student loan as fast as I could and that was well before interest free came in.

The attitudes displayed here and in some of the other threads, usually all by the same people, lead me to despair for NZ's future.

Thankfully not everyone is out for themselves.

jeffnz

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#862972 21-Jul-2013 12:55

richms: A majority of those taxpayers bitching about it will have had a free ride thru their education and now be expecting the same graduate's they want to pay back more than they have to to also be propping up their absurd pensions which they also have not paid for.

Current and recent students have had it so much harder than the loud 50+ bunch who are shortly going to become a long term burden on taxpayers so just ignore the old whiners.

Bit emotive and a gross generalization, I'm 56 never went to University because working class people couldn't afford it and mostly didn't go, that doesn't make us lesser people or contributors to the country.

I've been made redundant 4 times and on the unemployment benefit for a maximum of 2 months in my 40 years of full time work. Being single the benefit was under $200 so didn't even cover mortgage payments, off topic but just to clarify I wasn't creaming it nor have a I been a burden on society.

Don't dismiss people that disagree with you by insulting them due to age, maybe they/we are right.

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mattwnz

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#862987 21-Jul-2013 13:03

mudguard: I think another consideration is the 12% payrise you get once it's paid off!

If you already have the savings to pay it off then you are already benefiting from that though.

JimmyH

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#862988 21-Jul-2013 13:03

My take on the OP's question:
- pay down interest-bearing (credit card, loan) debt first if you have any.
- if you don't then buy a second-hand vehicle and pay down the student loan rather than buying a shiny new one. Better to climb out of debt than have a debt and a depreciating asset if you don't really need one.

Get rid of the SL as fast as practicable. It will make you more bankable if you want to start a business or buy a house, and will make going overseas much less of a hassle.

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