I recently graduated from a university in Alberta with just about $19000 of student loan debt, between my provincial and federal loans. However, as a graduation present, I was given $20000 to either pay back the loans immediately, or to invest. In addition, I have around $8000 of other savings from internships during university, and I've got a stable job in my field that covers my living expenses with enough excess to contribute to the limit to my RRSP and have more left over to be invested elsewhere/make the normal payments on the loans. I don't really have any investments right now at all, how should I invest/pay down these loans to maximize return? My first thought is to pay down the Canada student loan as quickly as possible because the interest rate is high (and already accruing - the Canada loan accrues interest from the day your degree ends, the Alberta doesn't start accruing until the end of the grace period 6 months later), and then either pay down the Alberta student loan, or invest the remainder of the gift into a TFSA based investment and pay the loan off over time.
Details of the Loans:
- Canada Student Loan - $8000 at Prime + 2.5% floating - currently 5.95%
- Alberta Student Loan - $11000 at Prime floating - currently 3.45%