iDeCo Allocation (is my major investment account)

[Haystack]

Scholarships and loans are not the norm (20% or less of students). 80% of students have their education funded by their parents.

It is expensive, and getting more expensive. They are killing the J-Nisa too, which is very aggravating. Use it when you can....

The question is, how much does it matter to you that your Child(ren) start off life with 0 debt, and what can you afford?

https://www.nippon.com/en/japan-data/h0 ... till.html

[Bubblegun]

Scholarships and loans are not the norm (20% or less of students). 80% of students have their education funded by their parents.

It is expensive, and getting more expensive. They are killing the J-Nisa too, which is very aggravating. Use it when you can....

The question is, how much does it matter to you that your Child(ren) start off life with 0 debt, and what can you afford?

146192.png



https://www.nippon.com/en/japan-data/h0 ... till.html

Well that's a multi million dollar question isn't it. I think the question should be, how do we/they manage that debt.
Now that the legal age of an adult is now 18, they can now get themselves into contracts/debt, without the parents consent.


I spoke to a teacher today who took out student loans and the interest rate according to him was less that 1%. and his payments after graduation were 10,000 yen .So not exactly back breaking debt. However he brought up one point. He would take out a loan for his daughters, knowing the money he has in the TNISA would grow at say 6% per annum ( averaging) so the interest on those investments should be enough to pay off any loan after graduation.
I chipped in with saving the money, and letting it grow for when they need to take on the number one debt....a home loan.
Although to be honest, I'm really having a hard time with the numbers when I see an interest rate of 1.5% but my investments are returning 4% ++
on say 10 million yen.
Is it better to keep the investments rolling and GROWING, and just let the FULL loan be fall away by the value of inflation over 35 years, and buy only paying 1.5% interest.

[beanhead]

Although to be honest, I'm really having a hard time with the numbers when I see an interest rate of 1.5% but my investments are returning 4% ++
on say 10 million yen.

Where did you find 1.5%?
I just checked a few banks and the rates seem much higher, range of 3 to 3.5%.
My bank would give me a discount to 2.475% since I have my mortgage with them...

[Haystack]

Although to be honest, I'm really having a hard time with the numbers when I see an interest rate of 1.5% but my investments are returning 4% ++
on say 10 million yen.

Where did you find 1.5%?
I just checked a few banks and the rates seem much higher, range of 3 to 3.5%.
My bank would give me a discount to 2.475% since I have my mortgage with them...

Type 1 loans are awarded based on both merit and need. They are interest-free and not indexed to inflation. Type 2 loans are interest-free during university years, with a maximum interest rate of 3% after graduation, and are awarded based on economic need, though the eligibility criteria are widening to include those from middle-income families. The interest rate charged on Type 2 loans is negligible at 0.33% for the fixed interest rate option and 0.01% for the variable interest rate that is altered every 5 years (as of May 2017—see JASSO, 2017). Neither loan type is associated with fees.

https://www.sciencedirect.com/science/a ... C%202017).

Student loans are quite different than mortgage loans.

[Tkydon]

https://www.aeonbank.co.jp/housing_loan/

Aeon Bank is offering 0.52% Variable or 0.67% Fixed for the first 10 years, or 1.44 Fixed for durations over 21 years.

[beanhead]

Student loans are quite different than mortgage loans.

Understood. I thought the 1.5% mentioned was for an education loan, and I couldn't find anything close to that.
See SMBC, below, as just 1 example.

https://www.smbc.co.jp/kojin/mokuteki_loan/kyouiku_m/

[beanhead]

Where did you find 1.5%?
I just checked a few banks and the rates seem much higher, range of 3 to 3.5%.
My bank would give me a discount to 2.475% since I have my mortgage with them...

To sort of answer my own question, the national education loan scheme rate is 1.65% at the moment.
https://www.jfc.go.jp/n/finance/search/ippan.html

As noted earlier, bank rates are around double this.

[Bubblegun]

Although to be honest, I'm really having a hard time with the numbers when I see an interest rate of 1.5% but my investments are returning 4% ++
on say 10 million yen.

Where did you find 1.5%?
I just checked a few banks and the rates seem much higher, range of 3 to 3.5%.
My bank would give me a discount to 2.475% since I have my mortgage with them...

I got my number from a few juku teachers who took out government loans to pay for uni.
However some things may have changed. So hopefully some others who are more up to date can update us on the system, rules, qualifying elements etc etc.

Haystacks point is excellent that the loans are interest free until graduation. I suppose if that is the case it might be a good idea to let the money grow for those four years, and "if they graduate", they could either pay off their loan themselves, and keep the savings to grow in the index fund,( that's my preferred choice) or give them the money to be debt free.( probably the worst choice).
15 years worth of savings just handed over to bank/uni seems like a complete waste of the COMPOUNDING interest which we all say is so important.

I think there is some math about saving $5000 every year for 10 years and never contributing again beating, the person who waits until they're in there late 30s and has to play catch up.but must contribute for the next 20/30+ years. That's my thinking. This would be the situation we find ourselves in.

[beanhead]

I got my number from a few juku teachers who took out government loans to pay for uni.

Yep, we were comparing different things. I was not looking at the government loans.

If the money is in a parents name, do we have to be careful about the tax-free gift limit per year?
I don't think so, but lots of references to the exemption for education fees talk about grandparents gifting money for education, not parents.