As some of you know, I took out a student loan when I was back in Cegep for the purposes of investing. Currently I owe RBC $25 258 and, seeing as I finished my schooling last month, it’s become due (although, I’m not sure… shouldn’t they have emailed me or called me?).
I’ve decided that I’m not going to pay back my student loans.
Woah, what? You might be thinking. Well, I’ve thought this through extensively.
First of all, just the fact that I’ve been earning 5.5%/year when the interest rate is 3.5% should be reason enough. However, markets are unpredictably and so I don’t feel comfortable enough with that small of a spread for my decision to have been cut and dry based on the numbers alone.
If I were a perfectly rational person I would pay my loan back and live off of my savings because they are more than adequate to cover my living expenses for a very long time (if I stop going on trips and “shopping sprees” of $300). However, I am a normal irrational person and am freaking out that I will go broke. I haven’t been broke since fall 2005 and it sucked SO badly that I never want to return to that place again. And so I will take my $25 000 cushion and just bank it to reassure myself every day that I am not going to be destitute and homeless.
Finally, I live in a place where tuition is nominal. I can take a university course for like… $400. I can take a Cegep course for $150. I can, literally, stay in school forever at a very low cost and never have to pay back my loan. Technically.
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They give you a 6-month to a year grace period, and the accumulated interest hits all at once on the last day.
ScotiaBank did that for me, and was unhappy when I cleared the loan without paying much in interest.
What if you get a job? If you get a job and can cover your living expenses, would you put all the money back in?
Or why not put in a chunk like $20,000 and keep some of it out for living? Why does it have to be all or nothing?
Mochi and Macarons recently posted..December 2012: What I Bought
@Vanessa: You will get bored of school eventually.
@Mochi and Macarons: Isn’t all or nothing easier to manage.
Rohit @ The Money Mail recently posted..Roth IRA
Wait, I didn’t read that you had savings in addition to this $25K cushion
ARE YOU CRAZY?!
… Pay it off. You don’t want that debt hanging on your conscience.
I always found that having a clear conscience was better for me to sleep at night, than having the (false) cash in your bank.
That is, unless you are a magical genius and can predict that 2013 will give you a return beyond and above your loans. In that case, keep the money and invest it.
Mochi and Macarons recently posted..2012 Final Year End Budget Roundup = Net Worth +44,928.58 or 29% increase from 2011
I know what you mean about a clear conscience… BUT if I stay I’m school it won’t technically become due
It really depends on how you feel about debt. I have over $150,000 of investment loans, but I feel like I can make more over the long term in the financial markets than my 4% interest rate on the loan so I’m in no hurry to pay it off. I don’t know what kinds of funds or investments you have with your $25K so I can’t determine your risk but I don’t think interest rates are going up any time soon so you can take your time to decide. How’s your employment situation btw, are you currently looking for work now?
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Yup, I’m looking for work. I’m sure that once I get a job I’ll feel more secure and will pay it off
So RBC hounded me every semester when I was a student, for proof. Then, as soon as you graduate, they ignore you for a year and let you keep (and use) the LOC. (Assuming it’s a LOC.) That’s how I had an investment loan and made some money when I finished school
So, assuming you have the same type, I’d pay the loan off and know that you can borrow from it again. That, or try to sort out a LOC for yourself.
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Noooo, the way that our loan system works in Quebec is that a bank loans us money, not the government. It’s not a LOC, it’s a regular loan
Shit, you have a $25k savings cushion and just graduated? WHOA WHOA. I’m trying not to get the green eye here. You are so together.
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Lmao no. I have savings plus $25k of debt. If I pay off the debt I’ll just have my savings
Can you make a repayment plan based on the difference in interest? You are making say 2% spread, that will help you pay down 2% of your loan balance every year, without even having to touch the savings. Of course you will not be able to use the money you have saved, but in time if the difference in interest continues, you will be out of debt free of cost!
Rohit @ The Money Mail recently posted..Roth IRA Conversion
I feel you. Student loans suck!
If you take a $150 course each year for life they never ask for their 25K back?? Wow, it looks even better than France
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There’s two things to do here.
1. Hold out and keep earning interest until you have to start paying and just dump a ton of money on it to kick back the interest from the grace period and lower your debt.
2. Start a new degree immediately when they come due:P
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