I Have Student Loans in The USA. Best Repayment Approach with The Falling Australian Dollar

[Deactivated] on 12/09/2015 - 13:31
Last edited 12/09/2015 - 14:41 by 1 other user

So I've got some loans from going to college in the USA (have dual citizenship-mother was American). Anyway…

I owe about $64K USD which is currently about $90K AUD.

The interest on these loans is 6.2% and I have two options:

1)Pause the loans and stop repayments for up to 5 years(interest still accumulates @6.2%)

2)Reduce my repayments from $1100 AUD a month to $650 for as long as I want.

Actually my third option is to combine the two above options and pause the loans for 5 years and then make the repayments less.

I need help answering the question: which of these options should I take out while the $AUD is tanking?

Should I pause completely and just wait for the dollar to come back up to US 75c or thereabouts (if that will probably happen in the next 5 years?)
Or should I pay minimum repayments of $650 a month to keep chipping away at the balance?

What should I do? Thanks for your help, I'm pretty clueless with these things.
Does anyone see the AUD coming back to US80 cents in the next 5 years? It would take more of a downturn in the USA for us to get much benefit right?

Financial

Comments

  • ItsMeAgro on 12/09/2015 - 14:56
    +3

    Aussie dollar is more like the fall further, or stay the same, than to rise again, according to what I've read:

    https://au.finance.yahoo.com/q?s=AUDUSD=X

    If the last few decades are anything to go by, the AUD fluctuates around 55-75 US cents. Staying somewhere near 100, as it did a couple of years back, was an extremely rare anomaly.

  • altomic on 12/09/2015 - 15:00

    don't pay your loans using paypal.

    • [Deactivated] on 12/09/2015 - 16:18

      actually paypal's exchange rates are often much better than the big banks.

      • [Deactivated] on 12/09/2015 - 16:19

        and that includes fees.

        • 973728 on 13/09/2015 - 10:11
          +1

          Well, you need to get onto currencyfair.com or xe.com then.

          They don't charge fees.
          Currencyfair charges a withdrawal fee - but you can pay that in AUD if you leave the $4 in AUD on your account
          XE.com charges a margin of 1-2 basis points in the spread.

          Anyone transferring money abroad regularly should be using one of these sites. Way cheaper than banks and PayPal!

      • currentfad on 12/09/2015 - 16:36

        Ok so what this means is that if you keep paying A$650 a month forever assuming an interest rate of 3% p.a. then you will be paying a total of A$260k in present value.

        Now, A$260k at the current spot you used is equivalent to US$185k.

        This means that if you can repay this entire loan in less than n years, where $185k = 64000(1.064)^n, n = 17 years, then you are better off NOT repaying A$650 a month forever.

        Best case scenario
        At A$0.8/US$, the equivalent amount is US$208K.

        This means that if you can repay the loan in less than 19 years, you are better off NOT repaying $A650 a month forever.

        Further depreciation of AUD
        Now, lets assume that AUD depreciates further to A$0.60/US$, the equivalent amount is US$156000.

        This means that if you can repay the loan in less than 14years, you are better off NOT repaying $A650 a month forever.

        Therefore if I was you, I would probably hold off the repayments.

  • Heizenberg on 12/09/2015 - 15:55
    +1

    jesus its expensive going to uni in america

    • [Deactivated] on 12/09/2015 - 16:19
      +1

      yeah it is, but it's gotten me a pretty good job so I can't really complain.

    • gimli on 12/09/2015 - 18:56

      don't have to worry about cost if your selling good blue sky candy eh?

  • sickllama on 12/09/2015 - 16:56
    -2

    Is there an option of just not paying them back? Is it worth exploring this option? Can US creditors seize foreign assets?

  • gimli on 12/09/2015 - 18:55

    1) The real questions is what else would you do with that $1100 aud.

    If you have nothing better to do with it than avoiding paying 6.5% interest and possibly more cost due to falling AUD then repay your loan.

    2) I wouldn't try guess the direction of exchange rates. I would consider fluctuations in the exchange as a risk and you need to consider if you wish to continue that risk or get rid of it as soon as possible.

  • richox on 12/09/2015 - 21:18
    +2

    6.2% is an awful rate, is there any way to refinance in the US, I understand very cheap loans are available there against property etc

  • tonyjzx on 13/09/2015 - 11:40

    Yeah gee there's no good outcome here. If you flat out have no intention of returning to the US I'd go down that path.

    With the currency the way it is you're pretty much forced into a lifetime of crippling debt. While many would say that you shouldnt have entered into this I have sympathy for a kid at the time who really doesnt have any other choice.

  • [Deactivated] on 13/09/2015 - 12:57

    Yeah I mean my wife and I both work and the debt isn't exactly 'crippling'- she has a really high paying job.

    I'm just trying to work out which option will likely save us the most money in the long run.

    We do go the USA regularly and have family there so avoiding the debt is not an option hehe.

  • dfr on 14/09/2015 - 14:55

    Can you get a loan in Australian dollars with an interest rate <= 6.2%? If so, pay off the US loan ASAP and then you have no currency conversion risk.

Login or Join to leave a comment
Login Join