student loan idea (not mine)

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Forums › Finance and wealth management › student loan idea (not mine)

b0untypure1

1426 posts

Uber Geek

#80961 6-Apr-2011 19:16

hi guys, first of all !~ my plan is to keep my student loan as small as possible :) less to pay back later.

however .....
my friend at uni today, said he was thinking about MAXING out his student loan, living costs, fees, everything. and depositing it all into a bank (anz) on a term deposit. the interest earned at the end of the term, will be reinvested, until he finishes university. at the end of uni, he will then pay it ALL back to his loan (the funds in the bank)

for example, deposit $5,000 get interest around $200. pay back $5200 on loan, therefore that $200 extra is beneficial since loans are interest free.

personally i think it is a stupid idea, as it would only take a few days at a part time job, to earn the amount of interest he gains in a year.

just after your responses....would you max out your student loan and invest it into a bank for 12 months?

hopefully this clears up our never ending debate :S
cheers!!!

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822 posts

Ultimate Geek

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#456071 6-Apr-2011 19:31

Yeah I know at least three people doing this. I don't think they are going the term deposit route though. It's easier to invest in more risky areas if your family is involved in finance. It's a free $200 I can't see why not.

b0untypure1

1426 posts

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#456075 6-Apr-2011 19:40

i see your point , is it worth the large risk though?

mattRSK

822 posts

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#456078 6-Apr-2011 19:47

I guess it's on par with any other investment. Except you wont be paying any interest if you lose it. If you can afford to pay your way through uni and invest the loan money it would seem like a good idea to me.

mattRSK

822 posts

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#456079 6-Apr-2011 19:48

Actually if you can get the student allowance then your on to a winner.

DjShadow

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#456086 6-Apr-2011 20:10

I was watching Back Benchers on TVNZ7 last week, Act MP Heather Roy used the example above as a reason to reintroduce interest to Student Loans

mattRSK

822 posts

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#456087 6-Apr-2011 20:14

I also believe they should tighten tax laws. I am unable to get student allowance but I know very wealthy people who can. It is a seriously flawed system.

DjShadow

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#456089 6-Apr-2011 20:18

I fully support Universal Student Allowance, I view it as if you scratch a student's back they should scratch NZ's back (if that makes sense)

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scottr

262 posts

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#456090 6-Apr-2011 20:21

Don't forget that if you voluntarily pay 500 or more back in loan year you get another 10% of that wiped off again.

So, if your friend was to get the loan and pay it back 5000 within a loan year, there would be up to 500 wiped off on top of that, dependant on what his income was and what he had to pay throughout the year.

Though if someone was to do this they would be a rather unscrupulous individual by gaming a system that is more than fair and a huge drain on the country.

mattRSK

822 posts

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#456097 6-Apr-2011 20:30

scottr: Don't forget that if you voluntarily pay 500 or more back in loan year you get another 10% of that wiped off again.

So, if your friend was to get the loan and pay it back 5000 within a loan year, there would be up to 500 wiped off on top of that, dependant on what his income was and what he had to pay throughout the year.

Though if someone was to do this they would be a rather unscrupulous individual by gaming a system that is more than fair and a huge drain on the country.

I think this is a different group of people. They are paying back the loan in full unlike the other group of people who skip the country and don't pay anything back.

I am grateful for the opportunity to study. I hopefully will remember that when I am working to pay for other people to do the same.

alasta

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#456100 6-Apr-2011 20:38

DjShadow: I was watching Back Benchers on TVNZ7 last week, Act MP Heather Roy used the example above as a reason to reintroduce interest to Student Loans

Frankly I agree even though I have personally benefitted from this policy. It was a desperate election bribe from Labour during the 1999 election campaign, and the idea of unnecessarily maxing the living allowance portion of the loan in order to get interest free cash was commonplace when I was at university in the early 2000s. It not only gave students the opportunity to leach some interest income, but it also gave the student unions some political leverage to bleat and moan about "massive student debt crippling our generation".

dolsen

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#456102 6-Apr-2011 20:54

My opinion, you would be stupid not to.

amford

92 posts

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#456117 6-Apr-2011 21:28

I wonder what percentage of people are not eligible for any allowance and how many are entitled to full allowance. Just wondering as the top income earners are usually a small percentage of our population so surely having an allowance for for everybody makes sense.

At interest free you would be stupid to retroactively pay it back. you would just pay back the minimum to get the benefits mentioned previously and bank the rest. yay free money.

Geese

1028 posts

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#456141 6-Apr-2011 22:14

I couldn't get the student allowance when I was 18 all the way through to 25, until I hit 25 when it no longer goes on parent's income. As a result, my loan is $98,000.

I was eligible under the living away from home for 2 years earning over $xxx, but as an 18 year old I binned all my payslips, and had no proof, and my employer several years later had no record either, so I couldn't even use that to get it.

I had to support myself, and I asked to use the estranged parent option, but they process quoted to us for that, was extremely involved and travel (by plane) intensive, so neither parent was willing to do it to save me needing a student loan.

Yet most of my friends could receive it. Those friends had well off parents, but could "hide" the money in the farms, businesses, or by working under the table. I knew a guy getting $100 a week from his folks, on top of getting allowance. If they could afford to pay $100 net a week, then their income was obviously not "low".

nickd

447 posts

Ultimate Geek

#456142 6-Apr-2011 22:21

I did this. It works well.

wreck90

780 posts

Ultimate Geek
Inactive user

#456145 6-Apr-2011 22:22

Morally it is reprehensible.

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