How do to use line to credit to pay off gov student loan?

[coffee3567 0]

I have heard of others do this to take advantage of the lower interest rate.  Line of credit with Scotiabank.  I would like to make a one time payment, any advice on how to do this efficiently? 

[LeoandCharlie 295]

I'm not entirely sure what you mean by how to do this efficiently, as you just make the payment from your line of credit account. I would however suggest waiting until a few days before interest would otherwise start accruing on your government student loan before paying it down. i.e., if you're still in school for the winter 2021 term, don't pay down the student loan with LOC as the student loan will be interest free while in school whereas the LOC will start accruing interest once funds are drawn upon from it. 

 

[Luckycharm 1867]

8 hours ago, coffee3567 said:

I have heard of others do this to take advantage of the lower interest rate.  Line of credit with Scotiabank.  I would like to make a one time payment, any advice on how to do this efficiently? 

Have you set up "Govt student loan" as a payee on your bank?

All you have to do is to take money out from LOC and pay off the Govt loan directly or through your bank account.

Edited January 2 by Luckycharm

[OyVey 10]

I hope it is not too late, but I want to almost point out how misguided your decision to pay off your government student loan is with a line of credit is. 
 

I do not know which Province you are from, but I know that your government student loan will include a portion that is federal. You can call the student loan service centre or submit a call back request to find out how much is federal and how much is provincial. For 2021/22 fiscal year, federal student loan interest has been eliminated. If your student loan is from BC, the Provincial portion is also interest free. I cannot speak to other provinces. 

Why you would decide to pay interest on a government student loan by paying it off with a line of credit is beyond me. 

A few years ago it would have made sense - but even then, I had a friend who took a bank loan at lower interest to get rid of her student loan and actually ended up regretting it due to all of the changes that happened and benefits. 

The interest you pay on your government student loans is tax deductible. 

I want to encourage all of you here to stop doing what you "hear of others" doing. Do your own research. This is your money, and could potentially be significant money. You should know enough that when you do get to the point that you need to hire a financial advisor, you can identify if you are being taken advantage of and what is actually in your best interests. r/personalfinancecanada on Reddit is an excellent resource. Use the search function there before asking your questions. Note that if it has any relationship with anything government related, things change so an answer within the past 12 months will be best. 

But honestly... still shaking my head at the thought that paying off an interest free loan with a line of credit is a good idea. 

[harveyspecter993 839]

On 1/2/2021 at 1:47 PM, OyVey said:

 

I want to encourage all of you here to stop doing what you "hear of others" doing. Do your own research. This is your money, and could potentially be significant money. You should know enough that when you do get to the point that you need to hire a financial advisor, you can identify if you are being taken advantage of and what is actually in your best interests. r/personalfinancecanada on Reddit is an excellent resource. Use the search function there before asking your questions. Note that if it has any relationship with anything government related, things change so an answer within the past 12 months will be best. 

But honestly... still shaking my head at the thought that paying off an interest free loan with a line of credit is a good idea. 

Maybe my views will change as I age but for now I think financial advisors are a complete waste of money. 

[masterofnut 70]

On 1/2/2021 at 1:47 PM, OyVey said:

But honestly... still shaking my head at the thought that paying off an interest free loan with a line of credit is a good idea. 

Isn't it possible that OP has graduated, their government loans are no longer interest-free because they've graduated, and now they're paying interest on their government loan at prime+1% or whatever, while their LOC has an interest rate of prime+0%? (Even if their government loans are interest-free for this year, maybe they're planning on doing this next year when that's no longer the case.) 

[Luckycharm 1867]

1 hour ago, masterofnut said:

Isn't it possible that OP has graduated, their government loans are no longer interest-free because they've graduated, and now they're paying interest on their government loan at prime+1% or whatever, while their LOC has an interest rate of prime+0%? (Even if their government loans are interest-free for this year, maybe they're planning on doing this next year when that's no longer the case.) 

OP apparently is a first year call

[masterofnut 70]

4 hours ago, Luckycharm said:

OP apparently is a first year call

Right, then I'm confused as to why they're getting ripped on by OyVey for paying off their government loans with their LOC, when it's likely that their LOC has a lower interest rate than their government loans (or at least it regularly would, notwithstanding COVID's effect on government loans). I know mine does.

[Luckycharm 1867]

1 hour ago, masterofnut said:

Right, then I'm confused as to why they're getting ripped on by OyVey for paying off their government loans with their LOC, when it's likely that their LOC has a lower interest rate than their government loans (or at least it regularly would, notwithstanding COVID's effect on government loans). I know mine does.

OyVey probably assumed that OP is still in school.

[HarveySpecter1997 15]

Cool idea would be take your LoC and invest it into the S&P 500 if you're not an experienced investor. With all the fed pumping money into the market, its free money. 

[Eeee 1269]

51 minutes ago, HarveySpecter1997 said:

Cool idea would be take your LoC and invest it into the S&P 500 if you're not an experienced investor. With all the fed pumping money into the market, its free money. 

Better idea to buy "digital" gold i.e. bitcoin. Unlimited upside

[HarveySpecter1997 15]

1 minute ago, Eeee said:

Better idea to buy "digital" gold i.e. bitcoin. Unlimited upside

Depends on your risk tolerance but yeah I think thats a great way to go too haha

[choijonesjr 55]

55 minutes ago, HarveySpecter1997 said:

Cool idea would be take your LoC and invest it into the S&P 500 if you're not an experienced investor. With all the fed pumping money into the market, its free money. 

Most LoC don't allow this and can pull your credit if they find out you're doing this with the funds. 

[OyVey 10]

On 1/5/2021 at 6:06 PM, masterofnut said:

Right, then I'm confused as to why they're getting ripped on by OyVey for paying off their government loans with their LOC, when it's likely that their LOC has a lower interest rate than their government loans (or at least it regularly would, notwithstanding COVID's effect on government loans). I know mine does.

Because the BC Government removed student loan interest (https://studentaidbc.ca/news/general/eliminating-interest-bc-student-loans)  and so are the feds (https://www.ubyssey.ca/news/feds-eliminate-student-loan-interest-2021-22/). I do not have the capacity right now to go through the Federal budget and find the line item. 

It seems to me that none of you that have drawn attention to my comments did look into why I said what I said. I cannot speak for other provinces - but if you have a BC student loan, the BC portion of your student loan is interest free. Even if you are done school. For the 2021/2022 year, the Federal portion is also going to be interest free. 

Edited January 8 by OyVey

[OyVey 10]

On 1/5/2021 at 7:08 PM, Luckycharm said:

OyVey probably assumed that OP is still in school.

I didn't. 

You will see my reply above this. 

 

There have been changes to the student loan programs as a result of changes in government (NDP in BC), and as a response to the pandemic (Federal changes to student loan interest).