Personal Finance

OSAP debt payment advice

  • Last Updated:
  • Nov 10th, 2017 7:08 am
[OP]
Newbie
Nov 7, 2017
3 posts

OSAP debt payment advice

Looking for some advice on how to pay my partner's OSAP debt.
OSAP debt: $44,000
TFSA total: $47,000
Available cash: $10,000

We have an additional +$60,000 of cash but can't use it to pay off OSAP (not in a Canadian bank).

We were thinking of paying off half of the OSAP ~$22,000 then asking for reassessment of monthly payments (would likely decrease to between $200-300/month). So we'd have to take out $12,000 from TFSA to add to the $10,000 available cash. Does this sound like a good plan?
We both have full-time jobs, would like to make real estate investments within the next 2-ish years, would be nice to buy a car soon as well.

Cheers
17 replies
Newbie
Dec 7, 2016
91 posts
26 upvotes
Paying down debt is always a good idea. If it was me I'd use my cash plus some of the TFSA to pay off OSAP.
Deal Addict
User avatar
Mar 23, 2008
4737 posts
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Edmonton
Why can't you bring the foreign cash into Canada?

C
Deal Fanatic
Feb 15, 2006
6829 posts
1461 upvotes
Toronto
Why not pay off the OSAP. It's a loan. Usually you want to pay down your debt asap, especially the interest cannot be deducted like investment loans.
Member
Aug 10, 2015
227 posts
143 upvotes
Toronto
Arrgh wrote:
Nov 8th, 2017 1:06 pm
Why not pay off the OSAP. It's a loan. Usually you want to pay down your debt asap, especially the interest cannot be deducted like investment loans.
But can't you claim it during tax time?
[OP]
Newbie
Nov 7, 2017
3 posts
funkynassau123 wrote:
Nov 8th, 2017 10:52 am
Paying down debt is always a good idea. If it was me I'd use my cash plus some of the TFSA to pay off OSAP.
Pay off as close to 100% as possible or should I go 50% to still have cash for other things (eg. Car).
[OP]
Newbie
Nov 7, 2017
3 posts
CNeufeld wrote:
Nov 8th, 2017 11:38 am
Why can't you bring the foreign cash into Canada?

C
It's needed in the foreign country. Plus you lose money transferring between banks internationally.
Deal Addict
User avatar
Mar 23, 2008
4737 posts
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Edmonton
Kicia0587 wrote:
Nov 8th, 2017 2:47 pm
It's needed in the foreign country. Plus you lose money transferring between banks internationally.
If it's needed in the other country, why even mention it?

As far as "losing money" doing the transfer, losing a small percent now but allowing you to save the interest you'd otherwise pay by paying off debt should be a worthwhile exchange.

C
Newbie
Dec 7, 2016
91 posts
26 upvotes
Kicia0587 wrote:
Nov 8th, 2017 2:45 pm
Pay off as close to 100% as possible or should I go 50% to still have cash for other things (eg. Car).
Obviously that's your decision but for myself I dont like debt so I would pay off OSAP totally. But if you need a car, that could affect your decision.
Deal Fanatic
Mar 24, 2008
5170 posts
1206 upvotes
Toronto
viiveyy wrote:
Nov 8th, 2017 1:42 pm
But can't you claim it during tax time?
Paying $1 in interest to claim 35 cents on your taxes is stupid. I am assuming a 35% marginal rate, you could plug in your tax rate.

OP, pay it all off ASAP as if I recall correctly, OSAP's interest rate is pretty high (prime + 2.5%?). Is your TFSA making ~5.7% because that's what you are paying for this loan.

I'd pay it off completely and then start putting money away... If you pay 50% of the outstanding OSAP loan and buy a car with the rest of it, you are essentially paying ~4% for that privilege. That's nuts IMO... build wealth the old fashioned way! Good luck, you are asking the right questions. :)
Last edited by ksgill on Nov 8th, 2017 4:42 pm, edited 3 times in total.
Illegitimi non carborundum
Newbie
Oct 25, 2010
40 posts
2 upvotes
Cornwall
OSAP interest is deductible... but by the same token, at prime + 2.5% (so 5.7% right now), it's still much higher than the typical deductible investment loan. If it was me, I'd pay it off.
Deal Guru
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Feb 24, 2008
13467 posts
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Gatineau
BrianV wrote:
Nov 8th, 2017 4:46 pm
OSAP interest is deductible provides a tax credit... but by the same token, at prime + 2.5% (so 5.7% right now), it's still much higher than the typical deductible investment loan. If it was me, I'd pay it off.
fixed.

djino
Deal Addict
Jul 18, 2016
1839 posts
669 upvotes
Kicia0587 wrote:
Nov 8th, 2017 4:37 am
Looking for some advice on how to pay my partner's OSAP debt.
OSAP debt: $44,000
TFSA total: $47,000
Available cash: $10,000

We have an additional +$60,000 of cash but can't use it to pay off OSAP (not in a Canadian bank).

We were thinking of paying off half of the OSAP ~$22,000 then asking for reassessment of monthly payments (would likely decrease to between $200-300/month). So we'd have to take out $12,000 from TFSA to add to the $10,000 available cash. Does this sound like a good plan?
We both have full-time jobs, would like to make real estate investments within the next 2-ish years, would be nice to buy a car soon as well.

Cheers
Given that you want to buy real estate and will need a down payment in the next two years, you can't invest your money for the long term. Investing your money for the long term, is the only way you could possibly exceed the interest cost of your loan through investment income.

Grab 34K from your TFSA before December 31st. Add the 10K to it, and pay off your loan. Forget the car for now, and focus on saving as much as possible and then deposit the savings back into your TFSA.

You could also shift a portion of that remaining cash into your RRSP and then save the tax refund back into your TFSA. When it's time to buy the house, you could use the HBP as a downpayment.
Deal Addict
User avatar
Jan 27, 2007
4843 posts
794 upvotes
Peterborough
If you are not earning a rate higher than the interest rate on the osap loan (adjusted for tax credit) in your tfsa, paying off osap ftw.
Jr. Member
Jul 8, 2017
113 posts
90 upvotes
NA
Kicia0587 wrote:
Nov 8th, 2017 2:45 pm
Pay off as close to 100% as possible or should I go 50% to still have cash for other things (eg. Car).
It would be nice to get a C or a bimmer after you graduated. I have seen a lot of millennials do that, get a nice ride once they are graduated. And as time goes when you are seeing your friends and peers getting into buying their first home but you can hardly come up with a down payment, you will regret it for the rest of your life that you had lost half a decade in paying into a depreciate asset. Unless you are born with the bank of mom and dad, otherwise don't do it.

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