Paying down LOC or saving for OSAP repayment?

[californiadream]

If you came into some money (about $5000) would you use it to pay down your LOC while in med school or save the money for when you need to pay back OSAP after 6 months of graduating med school? sorry if this is a stupid question - I'm not one that is too familiar/smart with finance lingo etc. thanks.

[PhoenixFlare500]

Unless you're a genius at investing and are guaranteed to make more money off of that $5000 than the interested accumulated on your LOC and guaranteed not to lose that $5000 (you likely are not guaranteed these), pay back the line of credit.

[rmorelan]

It is an asset that would reduce OSAP funding in the next cycle considerably more than any potential gain. I would pay down the debit to absorb the funds where they cannot hurt you.

[Leon]

OSAP is interest free at the moment so I would repay the LOC

[Satsuma]

Put it on you LOC.

 

You can always pay off your OSAP with your LOC when you are done, if you have enough left.

 

The interest you pay on your LOC is less than OSAP, so it makes sense to put your OSAP on your LOC later.

 

Since you aren't paying any interest on your OSAP now but are on your LOC, it doesn't make sense to be saving money to put on your OSAP later.

[JohnDakota]

Easy answer man..

 

It's not just $5000.

 

It's $5000+saved interest on LOC from now until 6 months after you're done medschool. If interest rates stay at prime (~3%), then that's a savings of an additional $600 - assuming your time frame is 4 years.

 

If you have a good financial adviser... maybe throw him/her the cash.. the markets did 4% in the last 6 weeks - which is massive. But that's pretty risky obviously.

 

If you put it on OMSAS, your savings is 0 dollars.

[rmorelan]

Not that any possible return will be off use - any asset you have like that, anything really, will simply cause a dollar for dollar reduction in osap when the OP applies for it (since he/she is in medical school) the following year. The grant (free money part of osap) will simply be lost - and heaven forbid you have the asset again the following year because you will just lose the same amount AGAIN - flushing 5000 a year down the toilet (assuming you have structured things correctly to max the grant, and of course you should as that is 7200 a year in free money that is very easy to get).

 

All to save money to pay back a loan that is not currently charging interest - by the time it actually does charge you then you will simply move the entire osap loan to your LOC anyway as the interest is lower. Thus in both causes you actually just paying off your LOC either way.

[future_doc]

rmorelan's approach is the only one that makes sense.

[leviathan]

Pay down the LOC.

[JohnDakota]

Not that any possible return will be off use - any asset you have like that, anything really, will simply cause a dollar for dollar reduction in osap when the OP applies for it (since he/she is in medical school) the following year. The grant (free money part of osap) will simply be lost - and heaven forbid you have the asset again the following year because you will just lose the same amount AGAIN - flushing 5000 a year down the toilet (assuming you have structured things correctly to max the grant, and of course you should as that is 7200 a year in free money that is very easy to get).

 

All to save money to pay back a loan that is not currently charging interest - by the time it actually does charge you then you will simply move the entire osap loan to your LOC anyway as the interest is lower. Thus in both causes you actually just paying off your LOC either way.

 

Interesting.. what kind of 'free money' is there available for funding med students in Canada?

 

All the other available monies are just differed payments... but free money actually displaces liability.

[future_doc]

Provincial loans (with interest being charged much later) and provincial bursaries are available depending upon your financial circumstances. Employment income and assets (I have neither) can adversely affect your entitlement.

[JohnDakota]

Provincial loans (with interest being charged much later) and provincial bursaries are available depending upon your financial circumstances. Employment income and assets (I have neither) can adversely affect your entitlement.

 

Sounds selfish I suppose; but if you have assets, say from an inheritance, can you shelter it in ways so it wouldn't affect accessibility to bursaries? Or are there bursaries that don't evaluate financial circumstances?

 

I'm trying to form a financial plan well ahead of time... for example my wife has an income and I wont have an income during med school. I've discovered that she can loan me up to $15500 year and charge me prime interest rate on the loan. This effectively exchanges her income tax liability on to me for the principle and assumes the tax liability for 3% of the principle instead. I could have an income of up to ~20000/yr - say due to investments - and still soak up the tax liability on $15500 at 0%. Tuition/books will offset the $20000 income. Currently you don't pay income tax until income is >$15500. This alone will save the family in excess of $6000/yr.

[future_doc]

Sounds selfish I suppose; but if you have assets, say from an inheritance, can you shelter it in ways so it wouldn't affect accessibility to bursaries? Or are there bursaries that don't evaluate financial circumstances?

 

provincial loans & bursaries take into account your financial circumstances. So, I would imagine an inheritance will affect your financial circumstances and therefore, impact the loan and bursary. I am from Quebec, so the details change but the broad strokes should be the same. If I had worked in the summer, my entitlement would have been reduced by the amount of my earnings.