Australian dollar dropping, American dollar rising - HELP!

[Adventure Chick]

Hey :) New here.

I have ~$31k USD in student loan debt that's being run by an agency in the US.

Currently I live and work in Australia. I have about $7k AUD which is only about $5444 USD ready to be transferred into my loans.

HOWEVER, when I moved to Australia, the AUD was about .86 to the USD when I got here in 2013 (or maybe even higher?). Now, it's dropped to .78!!! I'm gutted to transfer that money over and lose a lot of money in the transaction (I can move money between bank accounts without penalties). To combat this, I've tried to take on freelancing American writing jobs but that hasn't turned up any money that equate over my minimum payments so isn't looking like a viable option.

WTF do I do? I'm working here for another year before relocating possibly to the US or Europe. Transfer $500/month? Transfer all? I have no guidance or direction on where to go to minimize my losses.

Thanks so much!!!

[Ocinfo]

I think it depends on what your interest rate is on the loans and if you think the AUD will strengthen against the USD. If your interest rate is low (<4%)you might be better off paying the minimum and waiting, if it's medium (4-6%) hedge your bets and pay a bit extra, and high probably pay as much as possible since it would be difficult for the AUD to gain more on the USD than you would pay in interest. The USD strength can be a challenge, I was recently recruited for a job in Melbourne but the exchange rate made it impossible for me to seriously consider it.

[JohnnyDollar]

Interesting - your case seems to spotlight literally *dollar cost* averaging!  You are, effectively, asking whether you can time the currency market.  Can you provide us some details about the loan - interest rate, required payment schedule, your planned payment schedule, prepayment penalties, etc?  Do you already have an emergency fund?  My advice will be very different if the loan is at 4% vs 18%...

--Johnny

[deborah]

It's really bad for you - I suspect that you may have come when $1AUD = $1.04USD - because that was the case not very long ago at all.

There appear to be a couple more questions that could be asked here (I do not know the answers, but the answers would help):

1. Where is the best place to transfer AUD to USD - there are a number of places that gouge. There was an article in fairfax media yesterday about this, and they recommended a comparison site http://www.finder.com.au/international-money-transfers/repatriate-funds - which may be good/bad.

2. Will the AUD rise against the USD? For quite a while is was a bit less than it is now. Then, after the GFC in 2008 it went up for a few years. Now it has just gone down. The Australian reserve bank wants to get the AUD a bit lower (back to where it was originally), but several economists have said that it is about to go up a bit (not much) over the remainder of the year before it heads down again - and in the last few days it went up a bit (not much). Depends who you believe.

3.How much does it matter to you for a payment? I'm really not sure it matters much. If I were you, I would look at my payments, and figure out how much difference it really makes if the AUD goes up or down 10 cents. Last time I travelled overseas the AUD was sliding against the USD, but when I did my sums, it didn't make that much difference to me (a bit, but not that much) because I was taking a couple of thousand dollars. Once you have made this payment, you might consider keeping an eye on the exchange rate, and transferring some amount of money at intervals, so that you are taking advantage of any upward swings.

[Adventure Chick]

(Sorry I haven't figured out how to directly reply to anyone yet!)

So these are my loan details:
FFEL Unsubsidized Stafford $330.27 6.550%
FFEL Subsidized Stafford $2,750.58 5.35%
Rolled into a total of $3,085.47 --- this is the one I have been trying to knock out recently as I'm using the "snowball method" but honestly I have only self-educated myself in this stuff, and admittedly am really ignorant to the whole process in general.

Then I have this one as well:
Direct Subsidized Stafford $4,084.72 4.250%
Direct Unsubsidized Stafford $2,037.15 6.550%
Direct Unsubsidized Stafford $2,161.21 6.550%
Direct Unsubsidized Stafford $4,947.98 6.550%
Subsidized Stafford $4,972.15 3.150%
Subsidized Stafford $2,528.31 3.150%
Unsubsidized Stafford $967.54 6.550%
Unsubsidized Stafford $2,396.27 6.550%
Rolled into a total of $24,129.01

Both of these are managed by great lakes -- don't know if that means anything or not.

My next one is managed by ECSI

Perkins $4,677.50 5.00%

So seems like they vary between 3.5% - 6.5% What would you do?

[dungoofed]

Ouch.

The snarky answer would be that you should have taken into account the risk of currencies moving when you first took out the loan and hedged accordingly.

I think you're just going to have to pay it back to the best of your ability. What would you be using the money for otherwise?

To try and put a positive spin on it, due to the low AUDUSD exchange rate since you graduated there are less Australians in your field who can afford to study in the US and therefore less competition in Australia.

[FIRE Artist]

Any chance of getting an equivalent or lower interest loan in Australia to pay off the USD liabilities now?  This way you are protected from further drops in the AUD.  This would be the way I would go in your shoes.  I am Canadian, we are also dealing with the dropping currency, but I actually think it is normalizing back to where it should be.

[choppingwood]

The same thing has been happening to the Canadian dollar, after I'd made some expensive commitments to travel in the US.

Whatever you actually owe on these loans needs to be paid, regardless.

Beyond that, you have more choices. There is no saying that the US $ has stopped going up, so this may be the cheapest price you have for some time. The Cdn $ has gone from 88 cents to 78 cents in recent months, but I've also travelled to the US when it was 65 cents. Do some research on what legitimate forecasters say is likely over the next year.

On the other hand, if you don't know what the US dollar is going to do, you could do some dollar cost averaging, and make payments over the year you are in Aus. (You will be adding interest costs by doing that, though.) If the US $ continues to go up, you've lost some money, but not as much as if you waited until you were out of Aus.

The optional part could wait, but you'll incur interest. If you go to Europe, the exchange situation won't be better.

Do the math for different scenarios.

It sucks, but some decisions work out and some only work out partly. Don't let it take the joy out of the year.