Author Topic: Student loan vs. saving, Dutch-style  (Read 4776 times)

Braidie

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Student loan vs. saving, Dutch-style
« on: October 05, 2015, 05:12:59 AM »
Dear readers,

Yes, I have used the 'search' option and yes, there is an overload of questions concerning student loans. Unfortunately, they're all based on the US-rates (and sometimes a little outdated) and I could really use all your smart brains to help me solve this Dutch puzzle.

I have a student loan that I have to start paying back in january 2016. It is roughly 14.000 euros. The interest is hilariously low (0,81%, and will be changed for another solid period of 5 years on january 2019), which is lower than the interest you get from saving it (roughly 1 to 1,2% at this moment). That means that saving it instead of paying off is technically the best option, that is, until the interest rates start changing in other directions.

Now I happen to have this whole amount of money saved already. I could pay it all off and still have a liiiiittle cash cushion of about 2500 euros left, which is enough to live of for 3 months (no kids, low rent, partner, so I don't need much). Maybe even longer, if I make a stretch. I have a job, so I don't count on needing it (yet), and if I lose my job, I will have a 3-month period of time to look for other work, in which I receive 70% of my last received income. Furthermore, I will receive another 1825 euro's the next couple of months, since I have lended someone else some money and that is being paid back on a 250/monthly basis (yes, interest free, I care a lot about this person and had sympathy for the reason).

Back to the student loans. Now of course, when I get more interest out of this money when I keep it then it costs me, it would be simple to just keep it stashed for as long as the interest rates make it profitable. But the difference in interest is so small (113,4/year paying, 140 or at best 168/year receiving), that I'm actually eager to just pay the loan off (whole or partly) to be done with it.

There is, however, something else to consider. I would very much like to buy a house, since it seems like a waste to me to spend money on rent, since that money is gone forever whilst paying off a mortgage is paying for something to become more and more yours. We want to make a downpayment as large as possible, so we'll have to wait and save for some years, but still.

Now I am obliged to pay 83 euros a month on the student loan (it takes 15 years to pay it off, including the still-to-come interest of 0,81%). So when we are ready to buy a house, let's say in 5 years or so (unfortunately we don't make the dazzling numbers of MMM's blog and therefore can't save as much as he advises), I still have about 10.000 or so left to pay off. (I have this neat little spreadsheet on the computer that tells me that by the time I'll have 10.000 left to pay, it'll be july 2020, so that means I have about 10 years of paying ahead of me then).

If I use that money for a downpayment, I'll save about 1095 euro's of interest (in a case where I pay it off in 10 years annuity, like I would with the student loan, and when we have a 30-years-annuity mortgage it will be even more: 3578 euros), whereas it only costs me 414 euros of interest (the student loan). That is of course dependent on the possible change of the rate of the student loan, but still. That would be 681 euros saved, but over a period of 10 years.

And then for the final braincracker: I have to beware not to save more then 21.000 euros at any given moment in a year. Reason: this magical line has been drawn by the Dutch tax laws: if you happen to have more then this saved (and truly, I am getting there) you start to pay taxes over the fact that you own all that money ('property tax'). (for those interested: they still assume that there is a 4% interest rate, so you pay taxes over 4% of everything above that 21.000, about 30%.).


OK, so the real question at hand:
I am kinda stuck here in calculations. What should I do with the money I have stashed so far? Should I pay off the student loan sooner and if yes, how much is safe/wise to pay? Is it smart to keep it apart for a downpayment of isn't it worth al the hassle?

Note that of course, I intend to pay off the mortgage as soon as possible once we have one, and if I choose to keep the money for the downpayment, I will still try to pay off the student loan as soon as I can. I am just trying to figure out what the smartest way is to stash it for now. O, by the way: no car loans here, or any other loans then the student loan. I don't even own a car :-)

Thank you al smart mustachians, for reading this and helping me out!


valsecito

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Re: Student loan vs. saving, Dutch-style
« Reply #1 on: October 05, 2015, 06:06:44 AM »
I will say something that makes no sense mathematically speaking.

Pay back the loan immediately. Keeping a 14000 loan or paying it back immediately is not worth spending too much time thinking about it. Looking at your post, you clearly are spending too much energy thinking about it.

Trust me, you will feel better not having to spend any energy on it anymore!

Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #2 on: October 05, 2015, 07:02:50 AM »
Hi Valsecito,

Thanks for your advice! On one hand, I think you might be right and I should just get it over with. On the other hand, 14,000 is really a lot to me, and I love using my brain, calculations (and these newfound mustachian forum writers) to get myself the best possible outcome. I'd hate to regret making a decision once I can't turn it back, and when I pay the loan off completely, there is no turning back to using it for a mortgage anymore.

So although I'm happy to follow the path that I lay here for my money, I would like to be sure it's the smartest one.

nereo

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Re: Student loan vs. saving, Dutch-style
« Reply #3 on: October 05, 2015, 08:18:59 AM »
Braidie

I'll respectfully disagree with valsectito here.  There's no reason why you should pay off that loan right now with such a low rate.  As you indicated, you can get a better return just leaving it in a savings account.  Even if the difference isn't that large, the real advantage to doing that is that you still have the money - if there's an emergency you won't have to borrow money at a higher interest rate just to pay it off.  That's a layer of safety that often gets ignored in the "keep it or pay it off" scenario.

BUT - you've already figured out that there's an even better use for that money; putting it into a down payment for your home.  You didn't specify what your mortgage rate would be but it certainly would be higher than 0.81%. That's in effect a guaranteed rate of return if you've decided that buying is better than renting for you (which is an entirely different question).

The maximum 21k maximum savings for tax purposes is the fly in the ointment.  If you put the money towards a down payment does it count against this 21k maximum?  likewise, does paying down your mortgage faster count against you in this regard?  I don't know dutch tax.

Playing with Fire UK

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Re: Student loan vs. saving, Dutch-style
« Reply #4 on: October 05, 2015, 08:40:46 AM »
How is the 21k property tax calculated? Is it 21k at the end of the year or at any point. If I had a plan to buy a house, I would only be putting more into the student loan if it would keep me below the 21k point. Can you and the partner have 21k and avoid the tax if you are saving for the house downpayment.

I think that you should hold onto your savings, maybe invest some if that interests you, and work on getting savings for your house downpayment. However if your feelings towards being free of the debt are important to you then follow those. In my experience, having debt while holding the same amount of cash in a savings account feels the same as not having the debt.

How would you feel if you paid off the loan and then had an emergency or opportunity which meant you borrowed money at a higher rate?


Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #5 on: October 05, 2015, 09:19:20 AM »
YAY, more replies! I was dejectedly hitting F5 to look for new responses and finding none... until I realized it was the middle of the night for you guys when I posted my question.

@nereo: thanks for your view! You have a very good point there, stating that the real 'profit' for keeping it, is not just the interest, but also the availability of the money, which indeed I would have to borrow for a higher rate, were I to need it.

@ Playing with fire UK: that's a good question and I looked it up. As it seems, they count from the end of the year (so, if I had more than 21,000 at december 31th). I see now that it's actually not such a high tax: I pay 30% over 4% over everything above 21,000. (not exactly that digit, but I rounded it off for the math). So, say I have 22,000 at the end of the year, that's 1000 more then the tax free amount of 21,000 and the government wants me to pay tax over the interest I got on that 1000 euros. They assume interest is 4% (but there are already people lobbying to get that percentage down, since 1% is more realistic nowadays) so I would pay 30% tax over 40 euros, which comes down to 12 euros. Although unpleasant, it's not exactly a reason to stop myself from saving. I can go 10,000 above the tax free line and still pay only 120 euro's, which will be covered by the interest I get on it, more or less.

Unfortunately, I don't think I'm in the clear when I invest it, or already buy a house. We have tax rules that also let's you pay tax for those kind of possessions. Furthermore I am not yet in the position for buying a house, so I can't stash it away yet.

One alternative I do have, is investing in stuff. The automobile market (especially the one for classics) is literally booming and the boyfriend does have some experience and a lot of knowledge in this field. It however feels like a little unstable investment. I already decided to dive into the world of stockmarketing, using the helpful MMM-tips to make sure I don't become a self-overestimating dreamer :-)


Now a question to both: I see that you both advice to still hold on to the money, at least for now (if the interest rate shoots up in 2019, I can always decide to change course). But does that mean I shouldn't pay anything off at all? For example, if I pay off 5000 in november, the remaining monthly cost will be 53 euros and that does sound appealing and less like I'm a terrible stupid indebted person (but that's purely emotional, I'm afraid).

Oh, and another question. It is possible for me to request a 'payoff free period' of time, I believe with a maximum of 5 years. During this given amount of time, I don't have to pay off the loan (not even the monthly 83), which of course I will have to do longer for that same amount of time afterwards. Only: the interest keeps adding up. If I do that, say, for the next 5 years, I'll have a downpayment of 14,000 ready by the time we might (or might not) buy a house (of course that is on top of everything else I manage to get saved before then). Would you advice to do that, or is it better to start paying off now?
« Last Edit: October 05, 2015, 09:23:36 AM by Braidie »

Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #6 on: October 05, 2015, 09:37:03 AM »

The maximum 21k maximum savings for tax purposes is the fly in the ointment.  If you put the money towards a down payment does it count against this 21k maximum?  likewise, does paying down your mortgage faster count against you in this regard?  I don't know dutch tax.

O, forgot to react to this one.

No, I don't believe we pay extra tax if we pay off our mortgage earlier (there are banks/mortgage suppliers that give you some kind of 'fine' if you do, because of the interest they'll miss out, but we just have to be sure not to pick those for a mortgage).

I'm not exactly sure how it works, it is something I should dive into on another 'I feel like searching everything out until the bottom' day, but I believe houseowners pay tax for the fact that they own a house and could, in fact, rent it out to someone. Because you're your own landlord, you technicly rent the place from yourself and you pay taxes over that rent.

On the other hand, the interest on your mortgage is tax-deducatble (hypotheekrenteaftrek), but that advantage is being heavily discussed in the Dutch politics right now - the left-left-leftiewing parties call it a 'subsidy for villa's', because most of their voters are poor or unemployed renters with a very poor judgment on their own - and the countries - finances. And often a raging jealousy towards the people that do manage to live a good life on their own strength, even though the highest incomes already pay more then 50% tax on that income (and later on their possessions, and even more when they inherit, etcetera). But that's another discussion ;-)
« Last Edit: October 05, 2015, 09:45:55 AM by Braidie »

nereo

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Re: Student loan vs. saving, Dutch-style
« Reply #7 on: October 05, 2015, 09:38:10 AM »
Quote
Now a question to both: I see that you both advice to still hold on to the money, at least for now (if the interest rate shoots up in 2019, I can always decide to change course). But does that mean I shouldn't pay anything off at all? For example, if I pay off 5000 in november, the remaining monthly cost will be 53 euros and that does sound appealing and less like I'm a terrible stupid indebted person (but that's purely emotional, I'm afraid).

Oh, and another question. It is possible for me to request a 'payoff free period' of time, I believe with a maximum of 5 years. During this given amount of time, I don't have to pay off the loan (not even the monthly 83), which of course I will have to do longer for that same amount of time afterwards. Only: the interest keeps adding up. If I do that, say, for the next 5 years, I'll have a downpayment of 14,000 ready by the time we might (or might not) buy a house (of course that is on top of everything else I manage to get saved before then). Would you advice to do that, or is it better to start paying off now?

I'd advise paying the monthly minimum on your loans and no more.  Put the remainder into a savings account (which can serve as a downpayment later, or to pay off the loan if rates shoot up in 5 years, or even as an emergency fund with the best loan rate you're ever likely to get).

I'm not sure what the consequences of a 'payoff free period' are - if you are able to do this for five years and only accrue the interest of 0.81% than I see no reason not to do it.  But, if it changes your credit score, payoff period or has other unseen consquences I wouldn't bother.  Those are details I can't help oyu with because our systems are different and I lack the knowledge.

Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #8 on: October 05, 2015, 09:44:46 AM »
@ nereo, I think that just following the 'payoff pattern' might indeed be the smartest move. There are no other consequenses to the payoff free period, other then the interest building up and the payoff period being extended with the same amount of time, but still, it feels nice to finally start getting rid of that debt.

By the way, @ all: of course you don't know the Dutch tax, rules and regulations. So I'm trying to give you the most relevant information possible and don't expect you to advice on anything else but that information, since you probably don't read Dutch and it is hard enough to come by this info even if you are :-) I am very happy just with your extra brainpower to ponder these things that I have laid out, and very grateful that you invest that time in my case!

Lanthiriel

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Re: Student loan vs. saving, Dutch-style
« Reply #9 on: October 05, 2015, 01:08:38 PM »
I will say something that makes no sense mathematically speaking.

Pay back the loan immediately. Keeping a 14000 loan or paying it back immediately is not worth spending too much time thinking about it. Looking at your post, you clearly are spending too much energy thinking about it.

Trust me, you will feel better not having to spend any energy on it anymore!

If it were me, I would also just pay it. That said, a large part of my strategy to reach FI is to reduce what I owe monthly. I may leave some money on the table by not leveraging debt, but I also am able to live on much less should I be laid off. And yes, I realize you could just pay the debt off if you were laid off or pull from your savings to pay the monthly minimums, but... I just like the simplicity of not having debt. YMMV.

Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #10 on: October 05, 2015, 01:51:05 PM »
@ Lanthiriel, thanks for your view on things. Although mathematically I feel towards the 'keeping it for now, but paying off the monthly money', I emotionally still feel your way. Have it off my shoulders, have a fresh start, knowing that everything I have is, and will always be my own (until I decide to spend it on something): sounds pretty good to me.

I think that for now I'll stick with the keep-it-strategy, since I can always change that situation (I can decide to pay more off at any moment, should it become more advantageous, whereas I cannot take back the loan that I already paid off). So for now I'll suck up that feeling of wanting to be done with it, and keep an eye on the interests (both saving as wel as on the loan) and other events that may be relevant to this.

Thank you all so much for helping me with your views on this!

DagobertDuck

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Re: Student loan vs. saving, Dutch-style
« Reply #11 on: October 05, 2015, 01:54:54 PM »
I'd advise paying the monthly minimum on your loans and no more.  Put the remainder into a savings account (which can serve as a downpayment later, or to pay off the loan if rates shoot up in 5 years, or even as an emergency fund with the best loan rate you're ever likely to get).

+1
Keep it as an emergency fund, or use it wisely when buying a house (whatever is most beneficial mortgage- and taxwise)
Just don't blow the money on silly consumer purchases, but hey, mustachians won't do that anyway ;-)

Some other reasons NOT to pay down your student loan immediately are bad/worst case scenario's, but important enough to take into account:
-if your income ever happens to drop (disease, disability, unemployment) , your monthly payments will be lower, meaning you might end up NOT having to pay down your entire study loan.
-if you die, you study loan will be cancelled, so your family will inherit more in case you keep the money as an emergency fund.
« Last Edit: October 05, 2015, 01:58:21 PM by DagobertDuck »

Susan

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Re: Student loan vs. saving, Dutch-style
« Reply #12 on: October 05, 2015, 01:58:02 PM »
Some things to keep in mind. You can deduct your student loan from your 'vermogen', so you won't have to pay taxes on your capital any time soon. Your student loan will be taken into account when your max mortgage will be determined. Not a problem if you want to buy less than you're able to, but otherwise it may count heavier than your money in the bank.

I would't invest it in something as risky as oldtimers, but then again, I know nothing about it. I also wouldn't pay it off faster than you should.

Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #13 on: October 05, 2015, 02:21:28 PM »
Wow, two Dutchies all at once! Starting to get cozy here :D (Ow c'mon MMM, are we too frugal to add some emoticons?)

@Dagobert: that's a good one you have there. First about the 'maybe not having to pay off' scenario: I did some calculations and figured that chances are really, really low that any of my loan will be let off. At this moment, my earnings are low enough to request a re-calculation of the monthly amount (about 20 euros), but anything I don't pay off will just keep clinging to my loan until I earn enough to pay it still. And honestly, 14,000 in 15 years means less than 1000 a year, you have to be almost under the international poverty line not to be able to come up with just a 1000 euros a year.

I do expect to start earning more, somewhere in the next 15 years, and I also have a partner to which I intend to get married somewhere in that period. When that happens, his income will be counted as well, and it is high enough to be sure that I have to pay everything off. So unless we break up + I stay single for the next 15 years + I get struck by a terrible disease and/or end up in 'de bijstand' for the years yet to come, I don't really see a scenario in which I wouldn't pay the whole loan off.

Now of course, you mentioned they were worst-case scenario's, but still. The dying scenario is very true indeed, and something to keep in mind. On the other hand, if it became better for me to pay the loan off, I probably still would. I have no children to inherit from me, and as much as I love my little sister, I won't change my financials so she can inherit more if the unlikely event of my death takes place in the upcoming decade. You are however right about these things (I stared at your comment wide-eyed, thinking HOW the hell does he know all this shit?! - only to discover later that you're Dutch as well) and it makes the choice of keeping it for now, easier :-)

@ Susan, seriously? I didn't know that, about the loan-deductables. That's incredible! That is truly indeed a very good tip, which I didn't know. That makes it all the more easy to start saving more. And you're right by the way, about the mortgage and the loans, but it works a little different in our case. Seeing too many thirty-something couples in deep shit after the crisis hit (a mortgage higher then the actual price of the house since the housing crash, wanting to divorce but unable to 'cause the house can't get sold because of the debt it would leave them, etc) we decided that we want to put the house solely on my partners name. Of course we'll make good official arrangements about the amount of money I put in there and the possible decrease or increase in value, etc. But we don't want to find ourselves stuck to each other and an unsellable house, ever. The partner doesn't have loans, so he can get one (a lot lower than we could together, of course, which is a good thing I guess).

The oldtimer thing was just a flip of the mind, I guess. I am already wondering why I came up with it in the first place, cause reading back it sounds kinda wild to me, haha...
« Last Edit: October 05, 2015, 02:24:02 PM by Braidie »


nereo

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Re: Student loan vs. saving, Dutch-style
« Reply #15 on: October 05, 2015, 03:39:03 PM »
Wow, two Dutchies all at once! Starting to get cozy here :D (Ow c'mon MMM, are we too frugal to add some emoticons?)


You know... it's funny.  This forum used to have emoticons.  I have no idea where they went, or why they went away.  Can't say I ever used them in a forum posting, but.... no idea....

Braidie

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Re: Student loan vs. saving, Dutch-style
« Reply #16 on: October 05, 2015, 11:06:29 PM »
@ Susan: thanks!

@ nereo: I might have an idea why, came up with it last night. Recently I learned that moving objects on a page (like moving emoticons) take more processing from the laptop and therefore drive up the heat. I recently have installed Fan Control (a program that monitors the temperature of the laptops core and enables you to manage the fan speed in order to cool the device faster), as part of my 'keeping an old laptop running smoothly' plan. It came with an option to show the temperature of the laptop in the background of my computer.

Now I do reckon that when I watch moving stuff (like movies, clips, GIF's or even emoticons, when they are the moving kind) the temperature of my device gets higher. So that would shorten it's lifespan and therefore be not very frugal :P

Mr FrugalNL

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Re: Student loan vs. saving, Dutch-style
« Reply #17 on: October 06, 2015, 12:02:29 AM »
The oldtimer thing was just a flip of the mind, I guess. I am already wondering why I came up with it in the first place, cause reading back it sounds kinda wild to me, haha...

Yes, 'kind wild' about sums it up. :) Depending on my goals, putting part of it into a stock index fund would be about as adventurous as I'd dare to get.

I concur with my fellow Dutchies Dagobert and Susan that it's best not to pay off your student loan any faster than absolutely necessary. In fact, take your repayment-free period right now if possible to keep the balance as high as possible for as long as possible. I'd only start considering repaying it faster if the loan balance was very low, at or below the threshold for deducting it from your assets for tax purposes (3,000 for a single person in 2015) and/or the interest rate I paid was higher than the interest rate I received.

Keeping it in a savings account with higher interest than 0.81% in the meantime is a sound strategy. So is putting it in a term deposit that gives you slightly more interest (assuming you're confident you won't have to access the money). You have until 9 October (exclusive) to open a one-year term deposit with NIBC Direct for 1.6% interest. (http://www.spaarinformatie.nl/ and https://www.nibcdirect.nl/sparen/termijndeposito/) That's a pittance, of course, but it's high compared to what other banks will give you.

Eventually using the money to buy a house seems like a sound strategy as well. The housing market in the Netherlands is skewed towards buying, as far as I can tell.

Spruit

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Re: Student loan vs. saving, Dutch-style
« Reply #18 on: October 06, 2015, 01:42:30 AM »
Hello! A fellow indebted Dutchie here :)
We are in a pretty similar situation, it seems. I own DUO a chunk as well, and... I have no intention in paying it off early, or following the proposed rate. Because my stufi started before 2009, I was offered the choice: pay back via the current rules or previous rules. I chose the previous ones, because:
- You can choose five years in which you don't have to pay back a penny. Even in high income years, but also if you are laid off or whatever. Consequent years, or intermittent. Up to you to choose them wisely ;) I call them my "joker years" (think Rummikub etc.)
- "Draagkracht" is not calculated on family income, but individual income. My income is a whole lot lower than our joint income, and I am responsible for paying my own study loans so it seems only fair this way.
- Based on my current income, my monthly amount is ... 0 euros. Works for me!

Is the payback amount you mentioned (83 euros/month I believe?) the absolute minimum you'd have to pay? If not, I would set it at minimum. Just consider this; inflation is higher than the loan's interest. Yes, even taken into account the interest-on-interest (stacked interest) effect of the loan - because the interest is so low! This means that the longer you wait, the less you have to pay back (in buying power = koopkracht). Which goes completely against any (US centered) common wisdom. No "geld lenen kost geld" in this case. Your loan is slowly disappearing by itself over time. Weird, but true. With "safe" savingsaccounts giving you another 1% back, you are actually letting the loans pay for themselves (partly, at least).

Just like you, I started out saving my student loans on a normal savings account at 1% interest. Just to have it at the ready as a "buffer" to weather out bad times. I have needed it in the past during a period of after-school unemployment (2013 graduation, no bijstand, no ww). Because I'm in  steadier waters now, I'm saving up for an eventual downpayment. Because this is approximately three years down the road, I've also invested some of the chunk in low-cost indexfunds and will increase that portion this year, but to an amount that feels okay in a worst case scenario. My strategy is that if everything fails and I lose it all (worst-worst case scenario, this has never happened in history), I could still "make up" for the lost sum in a reasonable timeframe by saving the part of my income that is left over after my expenses.

From your previous comments in this thread, I deduct that I'm probably more risk tolerant than you. So, I would advise you against index investing because you need to sleep soundly at night no matter what happens. However you should definitely consider a 1-2-3 year "deposito" just like MrFrugalNL mentioned. That's as safe as it gets, with a slightly better interest than a normal savings account.

I think buying a reasonable house with the student loan as a downpayment is a good call. Better a loan at DUO than at the bank, in my opinion. A mortgage doesn't scale down if you lose your job; the student loans will. But, you have to consider that since 2008 banks take DUO loans into consideration if you apply for a mortgage. So, this means that the loans amount (and more!) is substracted for the amount you get to loan for the mortgage. So let's say you are eligible for a 200K mortgage based purely on income. With, say, 10K of loan saved up, you are eligible for 160K mortgage. Weird stuff, right?
Banks only consider the size of the loan at time of your graduation, they don't take repayments into account (yes, this is unfair and inaccurate!).
It is not technically illegal to keep your DUO loan info to yourself (it is not BKR registered, after all), but that way you are in big trouble if you decide to take on a NHG mortgage. The NHG insurance may not pay out if they find out you kept info like that to yourself when taking on the mortgage. So... conundrum.
More info in this link

Btw, if you are into finding more dutchies on the forum: there's a thread in the Meet-up section of the forum ;)
« Last Edit: October 06, 2015, 02:04:46 AM by Spruit »

Playing with Fire UK

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Re: Student loan vs. saving, Dutch-style
« Reply #19 on: October 06, 2015, 11:42:50 AM »
I second the 'time value of money', I think it is also important to think about the % of your income that your payments will take up. We pay back our student loans above a certain earnings, when I was newly into the workforce I saw the interest growing and thought this was a terrible thing and maybe I should pay off more, now I hadn't found MMM and wasn't saving much, but in order to pay more of my loans I would probably have saved less (or had less fun). As I got to my 30s and earned more, even though I was paying more in s, I didn't miss the money at all, because I had so much spare income compared to when I was first out of university.

If I were you then I would also be taking advantage of the five 'joker' years now. As I understand then if you stopped earning you would not need to pay back the loan. The only reason I would hold off using the jokers is if you see a future expense that you would prefer to save them for.

Of course, if you think that you would spend the savings if it were in a savings account or spend the income if you took the joker year, then paying off the loan would make more sense. You seem much more sensible than that.