There is a great way to earn some extra free money with your student loan. By knowing and utilising this opportunity you can make few thousands of extra dollars. Recent changes to student loans will bring limited access and availability for many students in New Zealand. However, despite these changes the student loans schema still remains very attractive as a money making opportunity. The best scenario is if student’s parents have enough available money to fund their child’s university degree but will still apply for a student loan.

The basic idea works like that:

Take the student loan money and put it into the high interest savings account. During the study earn interest. After the study, repay it in full and cash on 10% extra repayment bonus.

Technically you won’t get the student loan in form of cash paid into your hand. Instead, StudyLink (student loan administrator) will pay your university fees and tuition directly to your Uni. However, you can take your parent’s money intended for the same purpose and put the exact same amount into your savings bank account.

So, here is an example of a calculation showing how much you can earn. Let’s assume your average University paper costs $700 and you take up 8 papers per year, plus you will borrow for some other fees (student union fees, etc.). After recent changes there is a loan limit to cover maximum of 4 years of your University studies. This will usually take you to the Bachelor with Honours level. Also, assuming your tax rate is 10.5% (you have no other income except your parents’ money)

 

Year

Loan Amount or Repayment

Opening Savings Account Balance

Interest rate

Interest

Tax

Net Interest or Repay. Bonus

Closing Savings Account Balance

1

6,000

6,000

4.50%

270

28

242

6,242

2

6,000

12,242

4.50%

551

58

493

12,735

3

6,000

18,735

4.50%

843

89

755

19,490

4

6,000

25,490

4.50%

1,147

120

1,027

26,516

5

-21,600

26,516

0%

0

0

2,400

4,916

 

From this simple calculation you can see that by signing up for your student loan you can make almost $5,000 absolutely free over the 4 years period. Someone may question morality of people who would do it. However, it is important to stress 3 reasons why we think it is perfectly moral to utilise this advantage:

1. Current level of taxes in New Zealand is too high anyway and therefore immoral. Taxpayer’s money is wasted on thousands of useless state bureaucrats, senseless and illegal wars in the Middle East and the list could go on. Therefore, there is nothing morally wrong with taking back just a little bit of your or your parent’s money.

2. Most of those, who will call on your morality if you do it, have had their University education for free in the past.

3. Most civilised developed countries in the world, especially in Europe have free University education for their citizen. It is shame that New Zealand adopted a view that University education should not be free for its own people. Taking advantage of interest free student loans and making some money out of it is perfectly justified!

Posted on: September 13, 2013
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