Dear Mustachians,
I live in New Zealand. We have a government student loan system that is 0% interest as long as I do not leave the country for more than six months of a calendar year. If I do this the interest rate changes to 12% of the remaining balance, from the date of departure till I return. The original plus whatever interest incurred becomes my new 0% interest balance after I return. I have $52,000 New Zealand Dollars (~38,000 USD) in student loan debt. A portion of my pay check depending on income level (currently 3%) is garnished by the government to go toward repaying my loan.
As far as I can tell I think I should continue to pay this minimum 3% of my pay check while investing the money I would have paid above that amount (in amounts as if, as MMM would say, I was being stung by a swarm of bees and paying would make them stop) and earn money off of it instead.
A few questions:
Do you think that the benefits of earning interest on the money earmarked for paying off the loan justifies the risk of not officially paying it off? (If I somehow spend (not likely!), lose, or otherwise misplace the loan money I am taking care of, the government will still want the total amount owed on their books).
Should I continue paying the minimum 3% of wages even when the amount of money I have collected equals or exceeds the balance of the loan or should I pay back the full amount and start collecting retirement money from scratch? It makes sense to me that unless I am moving overseas I should not pay back more than the minimum 3% of my pay and if I am moving I should pay the total of all the money saved to reduce the interest payments and perhaps (hopefully) clear the loan entirely?
Have I got the right idea or is there something I'm missing here?
Thank you for your time.