Student Loan or Savings?

You don't mention the rate, but I suspect it's pretty low. You working? The company have a 401(k) with matching contributions?

I would fund the 401(k) to capture all matching. Then, if there's more money, fund a Roth IRA. Then I would think hard about whether it's worth it to you to knock that loan down. I'd want to save first so when I moved in with someone else, nothing had to go on a credit card. Not unless it got paid in full when the bill comes in. You have the chance to get a great start, financially, take advantage of that.

JOE

Pay your parents room and board instead of mooching off them. They want to retire sooner than you. Thumper

What will be your bf's student loan balance?

If you think you can make a higher interest rate from investments, you should invest the money; otherwise you should pay down the loan.

Remember that money used to prepay the loan becomes unavailable to you; whereas money you invest is still available, at least in principle, for emergencies. So you might want to sock some money away in savings even if the loan rate is slightly higher.

That depends on the risk you are taking to make that higher interest. I happen to be very risk adverse.

These people in this room are American so you might not get much useable help without google. When they tell you 401(k) they mean RRSP.

Remember that if for any reason you need to restructure debt or declare bankruptcy that OSAP loans are NOT forgivable.

When I graduated in 2001 I had 31 K in OSAP. I elected to make minimum payments on the Federal portion of the loan because remember you will be able to claim 17% of the interest paid against your income at tax time. The provincial portion of the interest is only 6 to 8% I believe you can claim against your Ontario income taxes. So I elected to maximize payments on the Ontario portion and minimum payments on the federal portion.

The poster is not American I believe.

Not many employers offer 100% RRSP matching in Canada so if your employer offers it than take it. Also try to forward contribute. For example on JAN 1 2008 you can contribute to your 2008 RRSP contribution and fills out the form to get your tax refund for 2008 at the point of payroll deposit.

Remember that OSAP loans are a fixed percentage above prime rate. There will no likelihood that you can match or exceed the interest charged on the two portions of the loan with GIC's or High interest savings accounts therefore my suggestion would be work very hard to save 6 months worth of pay in the bank (for emergencies) then revisit how to maximise stradegies to pay-off the student debt. Remember that your student debt interest can be a tax deduction (up to 17% of interest paid within a taxation year).

If you were to save money like you suggest rronca, what purposes are you saving for? Never save too much unless you have focused plans else you fall into a trap of consumerism with all that hard work going to waste down the road.

How do you know they are mooching? Maybe they do pay board? I know my father was disappointed when I left home. He offered me 4 years rent and board free to go to school locally but I declined the offer. That was still the biggest mistake I made in my life.

He is still enticing me to come home by offering me 10 acres of land adjacent to him to build housing on. I still haven't answered yet. Most of the people I grew up with were offered financial assistance by their parents for either a first home or schooling. Some, a minority, abused this privilege, most did not.

parents who plan very well financially also plan how to assist their children when they become adults so I don;t understand why you assumed the poster was mooching.

In the US, it's typical for the first X% of income (deposited) to be matched, 50-100%. So a $60K earner who puts in $3000 will see a company match for $1500-$3000. Any amount above the $3000 would not see any match.

Can our friends to the north give some insight as to what's typical in Canada? Googling offers me random hits that aren't really helpful. This would be good to know, as we do have some posters from Canada now and then. Of course my Roth advice would be useless, too. Any Canadian equivalent?

JOE

At first glance that seems to be a very reasonable point of view. Just do the calculations and choose the best yield! In practice, however, it is quite difficult for an inexperienced person to make a higher return on investment than the interest paid on a loan, even when tax benefits are considered. Furthermore, reduction of the loan interest is a sure thing, while investments are risky and sometimes result in a financial loss. So, in times of a rising stock market, and lots of enthusiasm in the media, you might well believe the supposed investment will yield 2% more than the loan interest. However, it is entirely possible that the attractive spread will not only fail to come about, but your return will actually fall below the loan interest in future times. Personally, I would pay off the debt every time (most especially when the market is going full speed ahead and everybody is optimistic).

Personally, I would just do it half and half.

Figure the amount that you can commit to extra (over minimum) loan payments and/or to investing.

Then put fifty percent of that to each one.