Should I pay off my student loan now or later?
15 April 2008
Student loan schemes in Australia in the form of HECS-HELP or other government supported initiatives often offer discounts for those paying their student contribution upfront. If you can manage this, then it should turn out as more worthwhile in the long run to pay now. However, the existence of such student loan schemes is because many students cannot pay upfront, so if you do come across the money later, should you repay it immediately?
It all depends on if you will still receive a hefty discount. If you are paying for the entirety of the student loan, then it may not matter. If you were only intending to pay a portion of the loan, though, you may find it more profitable to keep the money in a high interest savings account for a short period of time.
Your HECS-HELP loan only increases by the inflation rate or at least near it, yet a savings account will probably offer a much higher rate on your money. This is a unique situation, where your loan will increase more slowly than you can gain money through interest to repay it. You will need to have a considerable amount already for this to be effective, however, as interest on a large amount could easily outdo your savings through sheer scale.
Please visit our comparison page for a selection of personal loans that could give you the financial assistance you need while relying on a student loan.
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