I learned something new about my student loans today: while I knew there was a ‘grace period’ of six months between finishing school and starting repayment, I did not realize that you got charged interest over the course of it. On the first day of the seventh month, you need to either pay the interest for both your federal and provincial loans (about $500 on every $10,000 of loans) or have that interest added to the principal, increasing each of your subsequent monthly payments.
In any particular month between then and when your loans are fully paid, you cannot pay less than 1/120th of the total amount you owe. This is to ensure that full repayment takes place within ten years of the first payment. Both the federal government and the government of B.C. offer you the choice between a fixed interest rate (prime plus 5%, based on the rates at the time of your first payment) or a floating rate of prime plus 2.5%.
I guess I know what I will be doing with that ‘extra’ paycheque.
Your conclusion about the paycheque is not necessarily valid.
What you need to do is work out what the difference in monthly loan payments will be if you tack the interest to the principal. Then, ask yourself whether the mean monthly value of having a newer computer over the next ten years is greater than that differential. Of course, it is only safe to expect a computer to last about three years, so you should probably divide whatever monthly value you get by three to account for that.
For example, if the interest from the six months is $1500, and interest rates are 10% (as suggested by the $500 on $10,000 ratio), the added cost per payment will be about $12.50 per month, over ten years. Would having a newer computer be worth about three times that for you?
And I thought doubling the interest rate on ours this month was bad…