Q: I have a very small student loan, and my income is lower than the repayment threshold. I haven't paid off any of the loan. I thought it was best to pay back as little as possible because it was interest-free. So I haven't given it much attention.

But recently I noticed that my loan had grown much bigger. What I hadn't realised was that I was being charged a $40 annual administration fee.

My initial loan was $370, so with a fee of $40 I was paying over 10 per cent in fees! It's now $570. I'll pay it all off before I get charged the next fee, which would be about 7 per cent of my current loan.

My partner has a $25,000 student loan, so she's paying less than 0.2 per cent in fees. It makes sense for her to pay it back as slowly as possible.

But your readers should know that the flat-rate administration fees will mean it is best to pay back any student loan that's less than about a couple of thousand dollars asap.

A: Thanks for another "challenge" to my frequent advice about student loans.

What I usually say is to repay a student loan as slowly as possible, because they're interest-free as long as you live


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