I'm having a dilemma about whether it makes sense to pay off my New Zealand student loan given that I'm now resident in the US. The loan is around $35,000 NZD. While resident in New Zealand, student loans are interest-free making it a no-brainer to get the max loan, pay off only the minimum required and keep the rest in an interest bearing savings account (or otherwise invest it). The rate on the savings account I currently have it in is 3.45%. With a bit of hoop jumping I could have it in a 4.25-4.5% savings account.
However, now that I have recently moved to the US, I'm being charged 5.5% interest on the loan plus a $40 a year admin fee.
I could pay it off, saving $1925 interest + $40 admin fee. However, the interest will be tax deductible on my US taxes and if I ever return to New Zealand for at least 6 months, it will return to being interest free. If I decide to definitely NOT pay it off, I can plunk it into a savings account or CD that will net at least 3% after tax. There is no currency risk since both the loan and the bank deposit are in NZD. 3% of 35,000 = $1050, plus let's call it the value of the tax deduction $1950*.25 = $487. That brings the cost of keeping the loan to only around $400 a year. I don't plan to go back to live in New Zealand for at least 4-5 years, which means it would cost me at least around $2000. However, then it would become interest free again. Even just keeping the cash in the bank, I could recoup that $2000 approx 2 years after moving back.
The main uncertainty is if I will go back to NZ or not.
What are people's thoughts? I could pay off all of it, half of it, or just keep paying the minimum which is $3000 a year. I don't have any other debt and our home is paid off.