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Finance & Stock Groups Forum Index » Financial Planning » Student Loan or Savings?
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| rronca |
 Posted: Sat Jul 07, 2007 12:45 am |
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I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings? |
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| joetaxpayer |
| Posted: Sat Jul 07, 2007 1:21 am |
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rronca wrote:
Quote: I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
You don't mention the rate, but I suspect it's pretty low. You working?
The company have a 401(k) with matching contributions?
I would fund the 401(k) to capture all matching. Then, if there's more
money, fund a Roth IRA. Then I would think hard about whether it's worth
it to you to knock that loan down. I'd want to save first so when I
moved in with someone else, nothing had to go on a credit card. Not
unless it got paid in full when the bill comes in. You have the chance
to get a great start, financially, take advantage of that.
JOE |
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| Thumper |
| Posted: Sat Jul 07, 2007 3:11 am |
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On Fri, 6 Jul 2007 15:45:25 -0500, "rronca" <roseronca@hotmail.com>
wrote:
Quote: I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
Pay your parents room and board instead of mooching off them. They
want to retire sooner than you.
Thumper |
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| PeterL |
| Posted: Sat Jul 07, 2007 3:11 am |
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On Jul 6, 1:45 pm, "rronca" <rosero...@hotmail.com> wrote:
Quote: I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
What will be your bf's student loan balance? |
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| Andrew Koenig |
| Posted: Sat Jul 07, 2007 8:17 am |
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"rronca" <roseronca@hotmail.com> wrote in message
news:b9947995578046a0d62201b0e202a066@localhost.talkaboutinvestments.com...
Quote: So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
If you think you can make a higher interest rate from investments, you
should invest the money; otherwise you should pay down the loan.
Remember that money used to prepay the loan becomes unavailable to you;
whereas money you invest is still available, at least in principle, for
emergencies. So you might want to sock some money away in savings even if
the loan rate is slightly higher. |
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| Daniel T. |
| Posted: Sat Jul 07, 2007 5:26 pm |
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"Andrew Koenig" <ark@acm.org> wrote:
Quote: "rronca" <roseronca@hotmail.com> wrote:
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
If you think you can make a higher interest rate from investments, you
should invest the money; otherwise you should pay down the loan.
That depends on the risk you are taking to make that higher interest. I
happen to be very risk adverse. |
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| The Henchman |
| Posted: Sat Jul 07, 2007 6:24 pm |
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"rronca" <roseronca@hotmail.com> wrote in message
news:b9947995578046a0d62201b0e202a066@localhost.talkaboutinvestments.com...
Quote: I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
These people in this room are American so you might not get much useable
help without google. When they tell you 401(k) they mean RRSP.
Remember that if for any reason you need to restructure debt or declare
bankruptcy that OSAP loans are NOT forgivable.
When I graduated in 2001 I had 31 K in OSAP. I elected to make minimum
payments on the Federal portion of the loan because remember you will be
able to claim 17% of the interest paid against your income at tax time. The
provincial portion of the interest is only 6 to 8% I believe you can claim
against your Ontario income taxes. So I elected to maximize payments on the
Ontario portion and minimum payments on the federal portion. |
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| The Henchman |
| Posted: Sat Jul 07, 2007 6:33 pm |
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"joetaxpayer" <joetaxpayer@nospam.com> wrote in message
news:pvCdnU21ZPK-LxPbnZ2dnUVZ_tSunZ2d@comcast.com...
Quote: rronca wrote:
I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
You don't mention the rate, but I suspect it's pretty low. You working?
The company have a 401(k) with matching contributions?
I would fund the 401(k) to capture all matching. Then, if there's more
money, fund a Roth IRA.
The poster is not American I believe.
Not many employers offer 100% RRSP matching in Canada so if your employer
offers it than take it. Also try to forward contribute. For example on
JAN 1 2008 you can contribute to your 2008 RRSP contribution and fills out
the form to get your tax refund for 2008 at the point of payroll deposit.
Remember that OSAP loans are a fixed percentage above prime rate. There
will no likelihood that you can match or exceed the interest charged on the
two portions of the loan with GIC's or High interest savings accounts
therefore my suggestion would be work very hard to save 6 months worth of
pay in the bank (for emergencies) then revisit how to maximise stradegies
to pay-off the student debt. Remember that your student debt interest can
be a tax deduction (up to 17% of interest paid within a taxation year).
If you were to save money like you suggest rronca, what purposes are you
saving for? Never save too much unless you have focused plans else you
fall into a trap of consumerism with all that hard work going to waste down
the road. |
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| The Henchman |
| Posted: Sat Jul 07, 2007 6:38 pm |
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"Thumper" <jaylsmith@comcast.net> wrote in message
news:laft839ror6lu3okanl89vshraioabojf9@4ax.com...
Quote: On Fri, 6 Jul 2007 15:45:25 -0500, "rronca" <roseronca@hotmail.com
wrote:
I am a recent university graduate with a 23K OSAP student loan. I have
chosen to move back home in order to save my money or pay off my debt. I
have a year and a half before my boyfriend and I move in together (he
still has another year of school) and I pretty much have no financial
responsibility other than my loan.
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
Pay your parents room and board instead of mooching off them. They
want to retire sooner than you.
Thumper
How do you know they are mooching? Maybe they do pay board? I know my
father was disappointed when I left home. He offered me 4 years rent and
board free to go to school locally but I declined the offer. That was
still the biggest mistake I made in my life.
He is still enticing me to come home by offering me 10 acres of land
adjacent to him to build housing on. I still haven't answered yet. Most
of the people I grew up with were offered financial assistance by their
parents for either a first home or schooling. Some, a minority, abused this
privilege, most did not.
parents who plan very well financially also plan how to assist their
children when they become adults so I don;t understand why you assumed the
poster was mooching. |
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| joetaxpayer |
| Posted: Sat Jul 07, 2007 8:28 pm |
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The Henchman wrote:
Quote: The poster is not American I believe.
Not many employers offer 100% RRSP matching in Canada so if your employer
offers it than take it.
In the US, it's typical for the first X% of income (deposited) to be
matched, 50-100%. So a $60K earner who puts in $3000 will see a company
match for $1500-$3000. Any amount above the $3000 would not see any match.
Can our friends to the north give some insight as to what's typical in
Canada? Googling offers me random hits that aren't really helpful. This
would be good to know, as we do have some posters from Canada now and
then. Of course my Roth advice would be useless, too. Any Canadian
equivalent?
JOE |
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| Don |
| Posted: Sat Jul 07, 2007 9:39 pm |
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"Andrew Koenig" <ark@acm.org> wrote in message
news:btEji.288060$p47.285121@bgtnsc04-news.ops.worldnet.att.net...
Quote: If you think you can make a higher interest rate from investments, you
should invest the money; otherwise you should pay down the loan.
At first glance that seems to be a very reasonable point of view. Just do
the calculations and choose the best yield! In practice, however, it is
quite difficult for an inexperienced person to make a higher return on
investment than the interest paid on a loan, even when tax benefits are
considered. Furthermore, reduction of the loan interest is a sure thing,
while investments are risky and sometimes result in a financial loss. So, in
times of a rising stock market, and lots of enthusiasm in the media, you
might well believe the supposed investment will yield 2% more than the loan
interest. However, it is entirely possible that the attractive spread will
not only fail to come about, but your return will actually fall below the
loan interest in future times. Personally, I would pay off the debt every
time (most especially when the market is going full speed ahead and
everybody is optimistic). |
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| Usenet2007@THE-DOMAIN-IN. |
| Posted: Mon Jul 16, 2007 1:07 pm |
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Guest
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In article <btEji.288060$p47.285121@bgtnsc04-
news.ops.worldnet.att.net>, ark@acm.org says...
Quote: "rronca" <roseronca@hotmail.com> wrote in message
news:b9947995578046a0d62201b0e202a066@localhost.talkaboutinvestments.com...
So my question is: Should I make high payments and pay off my student
loan before we move in together or should I be making low payments and
putting money aside into savings?
Quote: If you think you can make a higher interest rate from investments, you
should invest the money; otherwise you should pay down the loan.
Remember that money used to prepay the loan becomes unavailable to you;
whereas money you invest is still available, at least in principle, for
emergencies. So you might want to sock some money away in savings even if
the loan rate is slightly higher.
Personally, I would just do it half and half.
Figure the amount that you can commit to extra (over minimum)
loan payments and/or to investing.
Then put fifty percent of that to each one.
--
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