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.