# Almost 30 /w student debt, living in QC



## Sparks (May 24, 2011)

Hi all,

I just joined after some lurking, and hoping to get your opinion. Previously, I hadn't even considered investing in RRSPs/TFSAs due to my debt - my goal was to pay that down first, then think about investing. However, given the income tax rate in Quebec (16%), I realized it may be beneficial to put some $$ in RRSPs instead of being so focused on paying down debt. 

Current situation: 
Salary around $35k/year
LoC: $7k at 7.5%
OSAP student loan: 15k

In the past year I've reduced my overall principle by over 12k, which I'm happy with though I could be more aggressive I realize.

I rent, pay less than $30/mo for cell, no car, limited extravagent expenses, but still enjoy lower budget vacations, (camping, weekend getaways, etc.)


Any thoughts regarding how I should proceed? I don't expect to stay in QC much more than another year, so eventually my tax bracket will certainly be lower. 

Let me know what I forgot to mention!


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## Jungle (Feb 17, 2010)

Your salary is low, so TFSA would be better than RRSP. 
With that said, pay your school debt first, then do TFSA. If your income goes up, consider RRSP.


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## Echo (Apr 1, 2011)

I would focus on eliminating your LOC, at 7.5% that's a brutal rate in this environment. The interest rate on OSAP loans is Prime plus 1% isn't it? I would reduce your payments on that loan to the minimum and try to get rid of the LOC as quickly as possible. 

I wrote a post about not rushing to pay off your low interest student loans:

http://studenomics.com/debt-reduction/paying-off-student-loans/ 

You live a pretty frugal life, but that may change in a few years if you have additional responsibilities to look after. Eliminating that LOC will free up some cash to sock away in your TFSA and will give you some freedom if you need to buy a car or an engagement ring without going into more debt.

Can investing return more than 7.5%? Maybe, but it's not guaranteed.


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## the-royal-mail (Dec 11, 2009)

Before we do the no-brainer pay off debt thing, ask yourself why you racked up that debt Student loans are one thing, but how did you rack up the LOC debt? What was the purpose? 

Remember, you need to change the behaviour that lead to the debt load you have. That is the key element to this whole exercise.

Can you shed some more light on that for us?


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## Sparks (May 24, 2011)

Thanks all for your comments - that was my plan until I had some thoughts about the 31% income tax rate I would be paying here in QC.

I should have the LoC paid off latest by Feb of next year, but hopefully earlier. 

I got the LoC for.....---edit---.

Now, working full time and staying stationary, my debt load has steadily decreased. I was hoping for debt free by 30, but it looks like it will be by 31. 

*Echo*, my OSAP loan is currently being paid back at 5.5% (floating rate). Thanks for the link as well, I will read it over today.


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## the-royal-mail (Dec 11, 2009)

Thanks for the explanation. I understand better now.

I'm sure you'll be fine. I am encouraged to hear that the cause of this debt was not an ongoing spending issue.


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