For the financial gurus out there.....

jinbo · 30 January 2015 at 9:35AM

A graduate has a student loan of $20,000. It is a government loan and thus is at the very low interest rate of 1.5% (linked to his country's rate of inflation).

A relative dies and leaves him $40,000. The best savings account that he can find is offering 1.65%.

Would it be better financially to repay the student loan or put all of his money in savings?

[Deleted User] · 30 January 2015 at 9:52AM

What rate does he get on the savings after tax? Unlikely to me more than 1.5%.

However, I'm sure he could find an alternative investment that pays more than that.

Fruit_and_Nut_Case · 30 January 2015 at 1:07PM

jinbo wrote: »

A graduate has a student loan of $20,000. It is a government loan and thus is at the very low interest rate of 1.5% (linked to his country's rate of inflation).

A relative dies and leaves him $40,000. The best savings account that he can find is offering 1.65%.

Would it be better financially to repay the student loan or put all of his money in savings?

We also need to know what country the graduate lives in so that we could Google for the rules for repayment of student loans in that country.

JimmyTheWig · 30 January 2015 at 1:11PM

Depends greatly on future plans.
If buying a house, I'd rather have the money as a deposit to reduce my LTV than have no student loan repayments to make. [Though if affordability of the mortgage was an issue paying down the student loan may help, depending on the rules of repayment.]

Fruit_and_Nut_Case · 30 January 2015 at 1:38PM

Actually, the more I look at the OP, the more it looks like a homework question

JimmyTheWig · 30 January 2015 at 1:56PM

Pah! Yes I think you're right FaNC.

For the financial gurus out there.....

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