Author Topic: Pay back my excess student loan money or invest it until I'm done school?  (Read 3018 times)

Charm14

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Hi all,
I'm trying to decide to do with my extra Ontario Student Assistance Program (OSAP) money that I finally received for the 2014/15 school year. I can keep my OSAP loans, interest free, until 6 months after I finish school; at which point, I need to pay them back at approximately 7% interest. 
Since I didn't receive the money until this month, I've already made it through the whole school year without needing it, and they loaned me more than I expected. I will need some of it for tuition next year, but I have around $4000 that I really won't need.
My question for you all: should I give it back to OSAP so that I don't have to pay it back when I graduate (2017), or invest it now, hope it grows, and pay it back before my loan starts accruing interest?
As an addendum, if you think I should invest it, what are your recommendations? (I live in Ontario, Canada)

Thanks in advance :)

rafiki

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Pay it back and save yourself the hassle. $4k itself, and the hypothetical gains you might make if it generated a decent return over a couple years, might as well be nothing. If you want to play the arbitrage game over a few hundred dollars be my guest but I'd just as soon pay it back early and not have that hanging over my head.

Prairie Stash

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High interest savings account with tangerine, it's the safest option. They use to deduct my savings from the next years loan amount, so for 2015-2016 expect to get less. It'll work out the same long run except next year you'll have cash at start of term. It use to be on the honour system, my student loan form would ask and I would lowball the answer.

The payments start 6 months after graduation, the interest starts the day you graduate. It's been a few years, however that's one of the pitfalls I recall. It's only interest free during school, not the following 6 months which are just a grace period from payments; pay attention to the fine print.

waffle

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How long do you have left in school. Are you planning on doing grad school right away? If you have several years left I might consider investing it, but if you are almost done I'd probably not bother and just repay it.

Charm14

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I'm graduating May 2017 from my grad degree. I don't plan on doing any further schooling after that.

Vandal09

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Pay it back now and be done with it! 7% is high.

BBub

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Pay it back..

This post reminds me of a childhood experience when my best friend & I decided to go catch snakes in the woods.  We informed his dad of our intentions, and he replied "if you go looking for trouble you'll find it".

Cathy

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This topic could be rephrased as: Should I throw away $105 for no reason?

I certainly wouldn't prepay this $4000 loan at 0% interest. (It's not 7% until some unknown date in the future.) Invested in a 1.3% two-year GIC (the actual rate offered by Tangerine), this would yield about $105 risk-free before you need to repay the loan. Is $105 pocket change to you? Would you be willing to throw $105 away?

The loan requires no payments while in school, and the effort required to deal with it is exactly zero. If you are willing to sign up for a credit card or bank account to get a free $105, you should be willing to keep this 0% loan.

If you were already a multimillionaire, perhaps you could justify throwing away $105. It doesn't sound like you are though.
« Last Edit: April 06, 2015, 03:27:10 PM by Cathy »

Charm14

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Thanks everyone for your input. I really appreciate it.