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I am admitted to a business school in France and I have just got a quote from Prodigy Finance. The loan amount is about 30000 euros, the fee is 2.5%, and the term is 15 years. The first repayment will be made six months after graduation. It means that I need to pay about 300 euros every month for 15 years, though there is no penalty for early payments. Do you guys think it is worth it?

To make it more answerable, could you guys also tell me what the interest rate of a typical euro student loan is? And is the monthly payment deductible from the tax?

  • "I don't know much about euros." Strange statement. There is no special property on euros than on any other currency. – glglgl Dec 7 '18 at 13:52
  • Sorry, English is not my first language. I have deleted it. I want to say that I don't know much about the typical interest rates of an euro student loan. – Chen Dec 7 '18 at 13:59
  • Aah, that makes more sense. – glglgl Dec 7 '18 at 14:01
  • It's great that you've done the maths and are trying to understand what it will mean for you financially after graduating... but it sounds like you're asking whether we think €300 a month is good or not, which would just be our opinion. You might want to edit the question a little, to make it answerable and so it doesn't get closed. – trashpanda Dec 7 '18 at 14:08
  • 7% would be quite high for a student loan (in the US at least). 2.5% would be reasonable. Of course, a student of business should know to go into as little debt as possible at the lowest rate possible. :) So maybe you don't need a full 30K now. Maybe you can get a part-time job. – topshot Dec 7 '18 at 15:17
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If there are no early repayment penalties, you cannot make much wrong.

7.5% is quite high, but if you don't have credit history, that might be quite good.

Back in 2008, I also took a loan for repaying my BAFöG (German mix of stipend and loan, issued by the government, 30% bonus if paid back at once).

I don't remember the details, but I calculated a interest rate equivalent to these 30% and then took a loan to repay it. While this loan had a higher interest rate as well, it could be repaid earlier as well, so I still benefited from the deal.

  • I don't have any credit record as I am just a college student and I don't have a job before. And this loan doesn't require any co-signer, who I need if I want to take a loan in a french bank, or any collaterals. – Chen Dec 7 '18 at 14:08
  • @Chen Under these circumstances, I think you might be quite good with this loan. – glglgl Dec 7 '18 at 16:53
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Forget about the interest rate. The difference in loan payment between a 7% loan and a 5% loan is only about 30/month. Think about what your situation will be when you graduate. You will graduate with a 30,000 euro debt (plus accrued interest, if applicable) hanging over your head that you can't get rid of (unlike a car loan or mortgage where you can sell the underlying asset to cover the loan). How much more do you expect to make with this degree? How long can you pay off 30,000 after you graduate? Are you prepared to live like a college student after graduation in order to pay off your debts?

Also, if you do not complete your degree, you still have to pay back the money you borrowed.

I encourage you to pursue your dream in business, but don't let it become a nightmare. Save up enough money to pay for your education with cash, and/or do some part-time work while you're in school. The less debt you graduate with, the better your chances of success, since you won't be burdened with a large student loan debt, and can start investing right away.

  • Actually my family can borrow some money up to 8000 euros from my relatives with a low or even zero interest rate. But I am not sure if the exchange fee will be significant and I don't really feel like asking them for help. Maybe borrowing some from them will be a better choice? By the way, my program lasts only 1 year and seems to be very intense so I don't think it is viable to take a part-time job during the program. – Chen Dec 7 '18 at 16:19
  • I'm not sure how much more I can make after I graduate either. I think if I get a job in Paris or London and pay 1500 euros every month, then I will be able to pay off the loan in about 2 years. But it seems not very viable. Do you know whether this kind of loan is tax-deductible? – Chen Dec 7 '18 at 16:26
  • Borrowing from family is generally not a good idea (from a relationship standpoint). Is there a cheaper (or less intense) program that you can afford? 30,000 euro is a lot of unsecured debt to deal with. – D Stanley Dec 7 '18 at 16:26
  • If your income does not significantly improve, then is the degree worth 30,000 euro? – D Stanley Dec 7 '18 at 16:27
  • I'm in the US and know nothing about european taxes. – D Stanley Dec 7 '18 at 16:28

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