overseas, student loan, and other

[thishastowork]

Hey guys im stuck for a strategy at the minute so was hoping for your advice and thoughts on my situation. I would think that many of you have found yourself in a similar or the same position over the years.

While studying I managed to accumulate a nice little student loan. After studying i packed my bags and headed overseas. Since that time i have managed to accumulate small holdings in IFT and RYM, totalling approximately half the value of my student loan.

Ideally i would like to expand my exposure to the market aswell as wiping out the loan (keeping in mind that as im overseas i do get charged interest). I plan to start sending money back to NZ, so i see my options as,
- selling up, wiping out half my loan and then repaying the rest as i earn. Then starting again in the market
- Ignoring my student loan entirely and focusing on increasing my portfolio
- Having a foot in each shoe, spend say 50% on the loan and 50% on the portfolio.
- Do neither and continue to spend all my money on having a good time and travelling, which isnt really an option since i already been doing that for the last three years ;)

would be interested in your thoughts

[buns]

Hey bud

I’m about to step into your boots later this year, so have thought this through for a bit.. 2 things to think about.

- Can my portfolio (in your case a pf worth half your loan) return more than the interest charges on my student loan?
That answer is hell yes. Regardless of your strategy with stocks, I think you should be aiming for 15%+ a year, any lower than that you can find another investment more low risk. RYM and IFT alone (well managed) should give you a great chance to reach this. Compound your portfolio at a minimum of 15% PA and your growth will be better off.

- The other thing is. Student loans are commonly ignored when a bank evaluates your net worth.
This is a big one. If this doesn’t hold you back getting a mortgage, it’s another reason to leave on the back burner. Don’t rely on this though, and get it checked with a few banks before you take this on board.

Hopefully these two points get you thinking enough to start doing some back of the envelope calc’s.

[CJ]

What is the Sl interest rate
Do you intend to return to NZ and when.

The student loan is a very cheap margin loan (I assume) with no margin calls. If you do intend to return to NZ, especially if sooner rather than later, it then converts to an interest free margin loan.

Having said that, repaying the loan gives you a guaranteed return. Who knows for certain we wont get a double dip.

Also, on an ethical basis, the student loan scheme is provided to enable you to get an education, not to fund share purchases. However, provided you are paying at least the minimum repayment each year (and not lying on the form as I know people have done), you are keeping your social bargin.

[Pumice]

Good to know I'm not the only one with the same issues.
I have been investing and saving up for a fair while now, with the value well over my student loan balance ($55k after paying off $19k over the last 5 years - Yes my parents were apparently too "wealthy".)
I currently save 90% of my after tax income
We paid off my partners SL and I have now put all my assets and cash in her name and continue to save 1 full income without SL deductions.

I have no ethical issues with only paying what I signed up for (No different to the way many investors pay no tax through property investing, or hiding behind trusts to mitigate tax or to get welfare payments etc)

The way I see it is I will be paying an extra 10c in the dollar in taxes for teh rest of my paye days. I'll let inflation do the rest.

Can I also point out, that the cost (Investment) of education is pretty minimal, I have an issue with being forced to take on a loan to simply exist, pay for rent, food, electricity etc.
I would never expect someone on the dole to take out a social welfare loan, or retired people to take a superannuation loan.


Anyway that’s my angry rant, feel free to pick it to pieces, maybe someone can change my mind….

[buns]

Very good points Pumice

Without sounding like a right toss pot, I would forget that ethical stuff right away. Actually this isn't even an ethical decsion so lets leave that.

"ruin it for the folk coming behind you".....

For the 20 somethings right now living in NZ it is a constant struggle to get by as it is. Baby boomers who got free (or even paid to) education, driven up housing prices, leaving us in a low growth economy with low paying jobs, huge burdens to education, wrapped in huge loans.

The best result for any of us AND NZ is to leave NZ, make money, get smart and bring those $$ and ideas back to NZ. Without a lot of risk or luck, getting ahead in NZ out of uni is like pushing cra*p uphill.

[Pumice]

I fear we may have just sommoned Balaal, the 13 headed demon of the Stygian abyss, and his horde of undernourished gypsy children, harbinger of the apocolypse.... aka the boomers....

I am moving to Aus in June, NZ has provided enough incentive to leave and Aus will welcome us with open arms.
But at the end of the day I have no problem with paying interest on my loan if im overseas. Just moving to Aus will mean a 10-20% pay rise plus the exchange rate difference. NZ will lose productive citizens and taxpayers. Hopefully they can fix it, if they deem it an issue.

[Zaphod]

Can I also point out, that the cost (Investment) of education is pretty minimal, I have an issue with being forced to take on a loan to simply exist, pay for rent, food, electricity etc.
I would never expect someone on the dole to take out a social welfare loan, or retired people to take a superannuation loan.

The fiscal cost of your education is actually far larger than your SL balance would have you believe. Tertiary institutions receive substantial EFTS funding on top of that which is collected from you through your SL. In addition to this, further pools of 'top up' funding is provided from the government, as well as the revenue that the University generates from research, sponsorships and partnerships to off-set the short-fall between the government + SL funds and the true cost of your education. The fiscal cost of Education is far from minimal.

[Pumice]

The fiscal cost of your education is actually far larger than your SL balance would have you believe. Tertiary institutions receive substantial EFTS funding on top of that which is collected from you through your SL. In addition to this, further pools of 'top up' funding is provided from the government, as well as the revenue that the University generates from research, sponsorships and partnerships to off-set the short-fall between the government + SL funds and the true cost of your education. The fiscal cost of Education is far from minimal.

You are correct, I meant the cost of study ($6-$8k per year - back in the day) to me was minimal, especially when compared to the costs I had to borrow to simply exist ($10-$12k per year).
The government and society get a massive return on thier investment in education, so i dont think there is an issue there.
In fact if they invested more, maybe we wouldnt be hearing about the current and ongoing skills shortage. (Yes I see the irony in many of us bailing on NZ)

[POSSUM THE CAT]

Pumice the Govt get a terrible return on their education spend as there are to many useless degrees. A degree in in how to wipe your rear end properly would be as much use as a lot of them. And with some degrees like geology there are no jobs so they are being educated for Australia to use at our expense

[Pumice]

Pumice the Govt get a terrible return on their education spend as there are to many useless degrees. A degree in in how to wipe your rear end properly would be as much use as a lot of them. And with some degrees like geology there are no jobs so they are being educated for Australia to use at our expense

So the government should spend $0 on education? just like in 3rd world countries, are you also saying all the baby boomers that got free education are giving us a negative return? I agree that some degrees seem pretty useless, but that is fairly subjective. I've also heard of baby boomers doing multiple degrees for fun and to top up thier super payments by an extra $150 a week from SL (Which they will simply die with and pass the cost onto the next generation of tax payers.) should we put an age limit on education? what about health? thats subjective as well.

[Pumice]

I guess we could sit here forever arguing points. Is anyone prepared to offer a solution to the current problem? If you think there is one.

[CJ]

should we put an age limit on education? . Yes.

With the possible exception of a Doctorate but if they are researching something useful, they should be on a scholarship only.

[Pumice]

Is that because an old person getting further education offers no economic benifit?
What about health? should we have a cuttoff point for that as well?

Thats a decision future governments will have to make I suspect.




Haha I need to chill out, whiskey time

[thishastowork]

thanks for the responses, enjoyed reading through them. Should just clarify the situation. When overseas the interest rate on the student loan is 6.6%. Currently im on a repayment holiday which means that i do not have to make any compulsory repayments for 3 years (and i havent as yet). Even when i do have compulsory payments it is only going to be 1000nzd every 6 months. So making minimum payments wont be a big strain.
Ethically speaking, i dont want to leave it on the backburner forever and do plan on paying it back. At the moment my main decision is whether i should be doing this overseas or when i return. Although ideally ill return to london (currently ski hosting in the alps) next year and land on my feet with a super high paying job and then the decision on where to send money will be easier. But considering that this is unlikely i feel i need a better plan.

Disc, My useless degree was geography

[POSSUM THE CAT]

Thishastowork what job does this degree qualify you for. As I can not understand why you would pay to do such a degree. So please educate me

[Pumice]

I have a friend who picked up a job in Brisbane working for a mining company who starts on $70k AUD who studied geology.
Thats damn good money in my books.
No nz company would offer anywhere near that kind of money.
Maybe if we had a mining industry.......

[CJ]

Is that because an old person getting further education offers no economic benifit?
What about health? should we have a cuttoff point for that as well?Benefit of oldies eductation - none - they dont use it to be productive (ie. earn income for them or the country)
Benefit of oldies healthcare - save a life. - potentially you could value a life (diminishes with age) to determine whether to spend money

There are cheaper ways to occupy old people if they get bored but wasting money on educuation doesn't see any payback

[Lego_Man]

I've got no problem with people "abusing" the interest free student loan system.

If the facility is there i expect it to be used.

Those proactive enough to use it to make money are simply using their ingenuity and because of this will repay the government 10000 fold in tax receipts over their lifetime, compared to your average dole bludger.

Also if people are doing this, it exposes the ridiculous nature of the system, discrediting the government who introduced it and making its repeal more likely.

[Pumice]

I've got no problem with people "abusing" the interest free student loan system.

If the facility is there i expect it to be used.

Those proactive enough to use it to make money are simply using their ingenuity and because of this will repay the government 10000 fold in tax receipts over their lifetime, compared to your average dole bludger.

Also if people are doing this, it exposes the ridiculous nature of the system, discrediting the government who introduced it and making its repeal more likely.

They will certainly pay all that tax IF they stay in NZ.
(Which many of us would love to.)
If they remove the SL scheme, what would they replace it with? Fully subsidised education and a universal student allowance?

I think those that wield the voting stick are not likely to favour that sort of policy.

[POSSUM THE CAT]

Pumice at least Geology is useful even if there are at present few jobs in NZ but what use is a geography degree.

[Pumice]

Value is pretty subjective isn’t it? Some people pay millions for dodgy bits of art.
I’m sure there’s some value in it. Even if it proves they’re ability to learn.

I’m an economist; so many people would say I’m the scourge of the earth.
I wouldn’t say they are wrong…..

[thishastowork]

Pumice at least Geology is useful even if there are at present few jobs in NZ but what use is a geography degree.

While there is no direct job with a geography degree in the same way that someone would study dentistry to become a dentist I dont know of anyone from my graduate year that has failed to find meaningful work after their degree. Myself I moved over to the UK and immediately found a good job for a town planning, development and regeneration firm. Having a geography degree here was the bare minimum requirement.

Others from my year are doing a variety of different jobs. One girl has moved to australia and is working in mining. Another is working for hamilton city council. And a good mate of mine is working in auckland for an environmental planning firm. Many decided to stay on and further their qualifications, going for masters in planning or completing research on their own interests.

Does this clear the mud?

[ENP]

Thishastowork...

I'm 22 been working for a year and have a $30k student loan. About $20k in savings. I don't plan on doing an OE for 2-3 years so am in a slightly different boat but I would suggest you pay it off as slow as possible.

I assume when you come back to live the interest on the loan goes back to 0% or does it stay at 6.6% when you are back living in the country?

Banks don't take into account student loans when you are applying for home loans if that is what you want to get into.

Also, if you save up and pay $50k off your student loan asap. Think of how long it would take you to save up again for another $50k if you had to start from scratch.

But if you simply want the weight of it off your shoulders and the debt is a burden, then by all means pay it off.

(Side note, did you go on an OE to the UK? Did you enjoy it and would you recommend the UK as a working OE?)

[thishastowork]

(Side note, did you go on an OE to the UK? Did you enjoy it and would you recommend the UK as a working OE?)[/QUOTE]

Im in france at the moment. But i started in the UK. I would recommend the UK as a start. For these reasons,
- Great place to start because it is an english speaking country so you dont get quite the culture shock.
- It is geographically close to the rest of europe (and the rest of the world) and with low cost airlines its easy to fly
- You will probably know someone whose couch you can sleep on when you arrive
- Its easy to get a job. Even easier for a new zealander
- Every kiwi (under the age of 30) is entitled too a two year visa, and if your grandparents (like mine) are born here you could probably get a 5 year visa

Although if you are in the UK for solely travel purposes i wouldnt recommend that you stay for any longer than a year. Because to be honest i think there are many better places to visit

[thishastowork]

I assume when you come back to live the interest on the loan goes back to 0% or does it stay at 6.6% when you are back living in the country?



It stays interest free for 6 months, then it backdates to when you left the country. It returns to interest free once you get back to new zealand

[lou]

Hi Thishastowork

I was in a similar situation to you a few years ago when the interest free loans were first made available. I went for the max and invested the excess. At the end of my studies I had around $12,000 in shares with the same mentality as you. Basicly it is a interest free margin loan.

After that I went and did a working holiday overseas with the plan that it was going to be zero cost to my savings. I was going to work to cover all my expenses plus I had a Job lined up in Canada before leaving. I would also like to add I am one of the most responsible people I can think of when it comes to money management and planning (also I am an accountant) so I thought I could do this.

However temptation got the better of me one way or another. When I got to Canada I need $4000 proof of funds so I had to sell some shares to have the funds available in a savings when I crossed the border. I did not purchase the share back as once I had done that I need to get a season pass, and snowboarding set up, and enough to cover me until my first paycheck.

This is not to bad only $4000 down.

A year later I had saved some money up from working in Canada and was going to do a central american tour. While on the tour I deceide to sell my portofilo [end of 2007 :)] Partly because of what was happening in the market and partly because I needed an extra $1500 dollars to get home.

This is not to bad only $5500 down.

Once I got home I was thinking now I need to get a Job and start doing some saving.
On arrival I thought I better pay of my Credit card $500, and Buy a car $3500.

Only $9500 gone, $2500 left
By this point I was felling a bit gutted. I though I could job and start saving. My Job did not start for three months and I had to spend the rest to live on before my first paycheck.

While it is the best strategy on paper to not pay off your student loan it is not always the reality.

While I am not saying you are wrong in doing what you are doing there are potential downsides.

Hope you guys liked my anecdote.

[Year of the Tiger]

It's Sunday, a long weekend in Auckland and while I was reading the posts above, I see the ongoing "beating the Baby-boomers around the head" going on so have put some thoughts down.

Gen Y kids come out of University with their degrees and immediately head off overseas to delay or avoid paying their student loans. They whinge about Baby-boomers (B-b’s) being greedy, buying rental properties as investment vehicles for their retirement and basically stuffing up the future of NZ for them. Many B-b’s have now sold their properties and invested in “safe” finance companies, only to see the likes of Hotchin, Watson and many others, send their life savings into oblivion.

As a B-b myself, I’d like to offer a few things for our Gen-Y’s to think about:

Pros of being a Baby-boomer:
Free University education

Cons of being a Baby-boomer:
Not a lot of parents could afford to support their kids while they were getting this “free education” as the majority of families were one income only. Dad worked while Mum stayed home with the kids as there was no such thing as any sort of day-care. Usually society frowned upon “mothers working” and no such support existed to encourage mums out to work. (And funnily enough, there were very few jobs available for them anyway.) Usually it was the kids from more well-off families who went on to University at Auckland, Wellington, Christchurch or Dunedin. Even Massey was still known as Massey Agricultural College. Hostels were the norm for kids living away from home. Students living alone in flats were rare and mixed-flatting a serious no-no!!

You had to be lucky to have parents who could support you through your studies, as night and weekend jobs didn’t exist for most kids. No supermarkets, or bars and brasseries in those days. Drinking age was 21 so you couldn’t go into a pub and work the bar and shops closed at 8.30 Friday night and opened again at 9.00 Monday morning.

Instead of living in a “me-me” society, it would be great to think that the Gen Y’s were looking at the history of post-war New Zealand, understanding the role that B-b’s and Gen-X’s currently play in NZ, think about how the Gen-X’s will ultimately take over the position of the B-b’s as we retire and die, and how well they are placed to move into the gutsy role of keeping New Zealand a great place to live and raise kids. The country has moved from a manufacturing economy of the B-b’s through a service economy with the Gen X’s to the current technology economy with the Gen-Y’s.

Give the Gen-Y’s 20+ years. Many thousands of the current B-b’s will be dead from cancers, diabetes and other illnesses. (It’s happening already). The chance of many of us reaching the 90’s and 100’s is pretty unlikely and the Gen-X’s will start following closely behind us. Recreational drugs will shorten the lives of far more in decades to come than we are seeing now so there will be fewer to contribute to the Govt purse than we are seeing from the B-b’s at the moment.

As the Healthcare purse tightens, medicines will not keep us alive so don’t worry that we will be an increasing drain on society. We will be dead.

So, I guess I can finish with a final thought. Thank you to the Gen-Y’s who see fit to flit off overseas with their outstanding student loans that have been financed by the taxes of all of us B-b’s and Gen-X’s. If you choose to do what you say is legitimate, and avoid paying your loans for years to come, be prepared for the next couple of generations to feel aggrieved when they find there is NO student loans because the Govt purse is empty.

YOTT

[Pumice]

O.k. so I’m going to crunch some numbers for you and see what feedback I get.

My partner and I (Both graduates on averageish incomes) after Tax, Student loan, Kiwi saver/Retirement and charitable donations have in the hand about $6,150 per month ($73,800 p.a). We only have normal expenses like food, rent, savings etc as we don’t want any debt.

When we look at the numbers we can’t get it to work for us.
We have $100k +/- in cash and stocks. (Not including KS and other retirement funds)

We live in Wellington, where the average house is $450,000.
If we used the entire $100k as a deposit, that would leave a $350k mortgage.
Assume we drop an income to 1 to have children and we assuming we get no government assistance (?) we are left with about $37,800 to play with.
(also note that both our parents are too poor to have been able to help in any way)

$350k mortgage with an ave interest rate of 8% equals $28,000 (just in interest)
Add on principal, rates, insurance, normal bills, transport, cost of kids and we are well below the zero mark.

Live further away in a cheaper place? (Unlike the days of old) and you simply pay a fortune in transport ($2 a litre anyone), maintenance, parking etc.

Without making any assumptions about baby boomers.
HOW THE HELL DID YOU DO IT???

What are we doing wrong?

My parents bought an ave house in an average area on 1 ave income in their early twenties and had 4 kids soon after and claim it was a piece of cake. And my mother is a full time shopper!!!


P.S YOTT, my parents feel aggrieved that we couldnt have had free education like they did (just like your children no doubt). So are very understanding when we say we are heading to higher wage countries so we can pay back our student loans quicker. its just unfortunate we wont be here as tax payers either.
Really what you want is for all loan borrowers to have insurance against it so even if they die with it, it gets paid back.

[buns]

Any graduates leaving NZ should not feel bad about these possibilities to future generations. Are you saying grad leaving is going to force govt healthcare spending down and more intake of drugs? That’s ludicrous. If the govt woke up they have another $1.5b in there back pocket they are willing to waste on a fibre roll out no one wants/needs. Anyway govt spend is another story.

For NZ to get ahead we do need these high flyers in NZ, agreed. But NZ needs highly skilled employees, not graduates. I probably know of 20+ people who have gone and worked overseas, and all of them have or intend to come back once finished, or once accelerated there career/skills and have some good $$ behind them.

The problem occurs when these guys don’t come back, and in lots of cases there is good reason not to come back. Anyone wanting to work in business (a high growing rapid one like they have worked in overseas) will come back to work in a small capital restrained companies (baby boomers you pumping capital into houses), a workplace half full of old school twits who just want to get by with no win/compete attitude you find in Aust/US/UK. Then if you get ahead you will become regulated or forced to open up to competition. I look at the management team of a place like XRO – they did not learn there bold thinking from NZ.

Then you find the same sorts of actions from a personal sense, the tax system favours everyone not hard/innovative workers/companies, people who are lazy can carry on being lazy and live quite nicely. Any talk of rewarding the richer/smarter, forcing investment/savings will create an up roar.

Instead of your pessimistic view of NZ falling apart, I think we will see growth once a good portion of these people (20 something’s) come back from overseas. The govt needs to set a platform however, and I think they are slowly getting there.

[trackers]

O.k. so I’m going to crunch some numbers for you and see what feedback I get.

My partner and I (Both graduates on averageish incomes) after Tax, Student loan, Kiwi saver/Retirement and charitable donations have in the hand about $6,150 per month ($73,800 p.a). We only have normal expenses like food, rent, savings etc as we don’t want any debt.

When we look at the numbers we can’t get it to work for us.
We have $100k +/- in cash and stocks. (Not including KS and other retirement funds)

We live in Wellington, where the average house is $450,000.
If we used the entire $100k as a deposit, that would leave a $350k mortgage.
Assume we drop an income to 1 to have children and we assuming we get no government assistance (?) we are left with about $37,800 to play with.
(also note that both our parents are too poor to have been able to help in any way)

$350k mortgage with an ave interest rate of 8% equals $28,000 (just in interest)
Add on principal, rates, insurance, normal bills, transport, cost of kids and we are well below the zero mark.

Live further away in a cheaper place? (Unlike the days of old) and you simply pay a fortune in transport ($2 a litre anyone), maintenance, parking etc.

Without making any assumptions about baby boomers.
HOW THE HELL DID YOU DO IT???

What are we doing wrong?

My parents bought an ave house in an average area on 1 ave income in their early twenties and had 4 kids soon after and claim it was a piece of cake. And my mother is a full time shopper!!!


P.S YOTT, my parents feel aggrieved that we couldnt have had free education like they did (just like your children no doubt). So are very understanding when we say we are heading to higher wage countries so we can pay back our student loans quicker. its just unfortunate we wont be here as tax payers either.
Really what you want is for all loan borrowers to have insurance against it so even if they die with it, it gets paid back.

Assuming the average is about the same as the median (or near enough), 50% of homeowners out there are living in houses worth less than $450k. As first home owners should you not be looking at the cheapest houses possible?

I'm still in my twenties, own a house and my wife stays at home full-time with our baby and we manage fine - But we're in Chch in a $300k house

[POSSUM THE CAT]

Pumice It was not that hard really house prices were not inflated by dreamers using supposed tax losses to build a supposed propety empire,1969 tradesmans gross wage approx $3000.00 per year. Run down neglected 8year old home $5350.00 deposit required At least 40% so $2350 plus lawyers & mortgage fees payment at 6.5% $16.21 per fort night Rented it for $26.00 per fortnight for 6 months. Went from skint with an $80.00 bomb of a car to meeting my future Wife having the house exterior profesionally painted and paying my share of a simple wedding & $250.00 car seven days after the end of the 6months rental interest rate on mortgage raisedto 7.5% about 12months later and after anoter aproximatly 18months to 10% so just paid of the balance In this time the wife had assisted assisted with financing the furnishing & decorating and increasing the quality of the car plus a child after 18months of marriage but we lived simply might have gone to the movies about twice in that time.You just have to knuckle down and the shortage of credit kept property prices a lot lower. The rental return on a good property purchase was very good & helped a lot not like the rentals that do not even return your costs.

[ENP]

Any updates on what you have decided to do...

Thishastowork?

[thishastowork]

Any updates on what you have decided to do...

Thishastowork?

No real action yet ENP.

In terms of student loan the plan is (at least until i get back to new zealand) to keep the interest under control. While at the same time will try to increase what i have available for investing.

Have sold out of IFT. So looking for new opportunities.

- thoughts on my plan?

[ENP]

I like the fact that you aren't going to pay off your student loan in full.

It will mean you will have to re-save/invest from scratch if you pay off your loan which to get to the amount of $ you are today would set you back quite a few years.

Can I ask you what you are saving/investing for? Is it to get enough to buy a house? For more travel? Or are you investing for early retirement?

[Corporate]

I'm in a similar situation to you. I left University 4 years ago with a student loan balance of $45k. I'm now down to about $30k. I could pay it all but prefer to invest the cash, even if it is just on deposit.

I am looking to head overseas in the 12-18months and will have to make a call on whether to pay it back or not. At the moment my thoughts are that I'll only be away for 2-3 years so I might just take the interest hit.

[thishastowork]

Good to know that there are a few others in the same boat.

Not really sure what i am saving for. Not really interested in buying a house at the moment even if i could afford. But i prefer to be saving rather than spending so when something does come up ill be able to purchase.

Something interesting to know. If you away from new zealand for less than 6 months then it is still interest free. But if you stay for over 6 months the interest gets backdated to when you left.

[voltage]

also if you pay it all off they will give you a 10% discount

[ENP]

also if you pay it all off they will give you a 10% discount

That's a one off return for losing all your capital. Why not compound your investment returns with your load of capital instead.

[thishastowork]

Correct me if im wrong but if you pay back more than 500 at a time you receive 10% discount? what are the minimum repayments on the paye scheme?

[777]

Correct me if im wrong but if you pay back more than 500 at a time you receive 10% discount? what are the minimum repayments on the paye scheme?

For someone with a student loan I am surprised you have to ask that question. All that information is on the IRD website and you should be familiar with it before you make any decisions on whether to repay or not.

http://www.ird.govt.nz/studentloans/

[Pumice]

How about this!
For UK borrowers, if you leave the country for more than 5 years, they wipe your loan completely. even if you return after that date.
If only NZ was so generous.

[Pumice]

Does anyone out there know if Student loan payments are tax deductable in NZ?
I'm off to Aus and have been told that my student loan payments are tax deductable there. anyone know if thats true?

[buns]

Does anyone out there know if Student loan payments are tax deductable in NZ?
I'm off to Aus and have been told that my student loan payments are tax deductable there. anyone know if thats true?

Pumice - did you find an answer to this? I would be interested.

[modandm]

guys thought i might add my 2c to this discussion.

Im 1 year into a 3 year repayment holiday (while im overseas). Cash is invested.

My view is that once the repayment holiday is over I will pay the lot back and get the 10% off.

My thinking is:
1. Currently any interest incurred will be 10% off anyway (cheap margin loan)
2. Once holiday ends pay off because
- its easier than dealing with calculating annual repayments hassle
- compulsory repayments do't get the 10% off cherry.

Note that re#2 compulsory repayments I haven't worked out exactly if it better to make the payments (paying non tax deductible interest the whole time) and see the loan slowly evaporate and never get the cherry VS take the cherry in full, but my thinking is that since I can at that point probably get a margin loan at the same after tax interest rate as the student loan I might as well take the cherry then and there.

Its simpler to get it out of the way anyhow. And TBH after milking the cow for so long already maybe its time to send the cow to pasture.

[modandm]

Does anyone out there know if Student loan payments are tax deductable in NZ?
I'm off to Aus and have been told that my student loan payments are tax deductable there. anyone know if thats true?

if thsi si true I would also be MOST interested as it may invalidate my theory above

[Pumice]

So a quick update on my move to Aus.
Well i can say it was the best financial decision I have ever made.
When I arrived I got a job in about 8 days, basically doing the same job as I was doing in Nz. 5 month later, thing couldnt be better.

Pros: a 157% pay increase. (I was paid cr@p in NZ) I pay a bit more tax.
Cons: none, other than I pay a few % on my student loan.

If you are young, skilled and/or educated, GET THE HELL OUT OF NZ!!!

anyone else had a similar experience?

[Corporate]

Great to hear. How are you finding brisbane?

[Pumice]

Bit of a change to Wellington.
Pretty good all in all though. The Brissy economy seems to be quite strong with the APLNG and GLNG projects underway. I think we are still short about 3500 workers.
In saying that, the housing market is very soft, which seems counter intuitive.

[Lizard]

Here's an interesting article re UK Student Loans and debate over whether they should be considered "debt" or more appropriate to see repayments as an earnings-based "contribution" to the cost of education:
http://www.telegraph.co.uk/finance/personalfinance/borrowing/loans/9558187/Martin-Lewis-Its-time-to-stop-calling-student-loans-debts.html

I think, for comparison, that our hurdle before paying is only just over $19k per annum and then pay 10% of income above that (but will be 12% from 2013). No interest charged if staying in NZ, but don't think we have the 30-yr write-off either.

[Pumice]

Here's an interesting article re UK Student Loans and debate over whether they should be considered "debt" or more appropriate to see repayments as an earnings-based "contribution" to the cost of education:
http://www.telegraph.co.uk/finance/personalfinance/borrowing/loans/9558187/Martin-Lewis-Its-time-to-stop-calling-student-loans-debts.html

I think, for comparison, that our hurdle before paying is only just over $19k per annum and then pay 10% of income above that (but will be 12% from 2013). No interest charged if staying in NZ, but don't think we have the 30-yr write-off either.

Interesting read Lizard, thanks for posting it. I'm pretty sure we don’t have a 30 year write off like the UK (they also write it off after 5 years if you leave the UK for 5 years or more). NZ does have a similar flaw in that those of us overseas are only obliged to pay a maximum of $3500 NZD even if the interest charge is higher than this. For me that would just cover the interest. Although I pay about $10k a year (of which $3400 covers interest) on my $50k loan, I was certainly tempted to only ever pay the interest cost and view my payments as simply a higher tax and let the loan grow, however one can’t underestimate the political risk involved and fortunately I was able to secure a very good job, so it’s affordable to knock it off. I don’t know if others have been so lucky.

[p2r]

If you set up a business before you study, all your costs would be tax deductable. You would build up a big tax loss and any future profit would get deducted off that until paid off.

Got to wonder if getting a NZ degree and student loan is a good idea in 2013.

Some smart people send their kids to Aussie for tertary ed.

I think UK you have to be resident 3 years before you are not considered a overseas student. Even if have uk passport.

[Pumice]

I need some ideas on how to deal with my student loan and investment funds. Since we left NZ a little under two years ago we have managed to accrue about $150k (NZD) in spare funds that isn’t earning much interest over here in Aus. I was thinking about a couple of options a) buying an investment property outright (Wanganui/Palmy area – if that’s still possible) or b) buying an investment property and clearing my student loan by putting it on the mortgage ($50k NZD) which would then effectively allow my student loan interest to become tax deductable (Mortgage rates are roughly the same, if not slightly less than my S/L interest)

We could substitute property for stocks or any other leveraged investment. P.s so we don’t get sidetracked in the morality/ethical debate over paying my student loan off now/faster, assume the funds are 100% my girlfriends who no longer has a S/L. I am currently paying my loan down at around $15k (NZD) p.a before interest. If that makes any difference.

What are people thoughts? Also note that there is currently a 10% bonus on S/L payments until April 1.

Cheers.


4283

[Corporate]

I don't think you should bring property into the equation, there are just too many unknowns. I would just be looking simply at what total returns you earn on the funds in Australia, compared to, the interest accruing on the structure loan and the opportunity cost of missing out on the repayment bonus.

Personally I wouldn't go near property in Palmy or Wanganui.

I borrowed as much money as I could under my student loan knowing it was interest free. My loan started at $45k and 6 years later (December 2012) it was down to $14k. As I am heading to the UK shortly, and because the voluntary repayment bonus finishes on 31 March, I paid off the remaining balance this month.

[buns]

I'd pay the whole loan off right away as the costs on that exceed what you get from the bank and then just carry on as you are. You aren't far off finishing with your loan, so won't get enough benefit from the tax idea you through up.

You can get about 4.5% risk free in Aussie right? That compounded will most probably exceed any growth scenarios you run on Palmy/Wanganui property.

[CJ]

Since you are oversea, paying interest, and the 10% repayment bonus ends soon, I would repay before end of March.

As a taxpayer, I recommend you pay in full in April ;)

[Pumice]

Cheers guys. I'm not so keen on property as it is.

I can also access my Kiwisaver account since I have been out of NZ for more than 12 months. My gf will do the same and chuck it on my S/L. that should all but wipe it out. I'm not sure if we get the government portion though, would seem a bit rough (on NZ taxpayers) to pay off with S/Loan with taxpayer dollars and recieve a 10% bonus as well.