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Oslo, Norway – Financial advisor Astrid Ganji suggests prioritizing investments over aggressive student loan repayment, particularly given current interest rate dynamics and the unique benefits of norwegian student loans. This comes as more young Norwegians grapple with balancing debt and investment opportunities in a fluctuating economic landscape.
Ganji, speaking in reference to the case of a woman named Lofstad, explained that while paying down debt is ofen seen as prudent, it isn’t always the most financially advantageous strategy. Lofstad had the chance to pay down her student loan more quickly since 2018, when interest rates were lower. Today, with rising rates, the same payment amount yields less debt reduction.
“If you compare it with investment, it is indeed not necessarily the smartest choice to pay down the loan, in the long term. But simultaneously occurring, this flexibility gives her the opportunity to invest a higher amount now,” Ganji stated.
Norwegian student loans offer unique protections not typically found in other debt instruments.They include built-in disability and death insurance, meaning the loan is automatically discharged in such circumstances, and no debt is passed on to heirs. This feature, combined with generally lower interest rates compared to mortgages, makes them a less urgent financial priority for many.
Lofstad initially only had student loan debt, but now also carries a mortgage.Ganji advises prioritizing repayment of the loan with the higher interest rate – in Lofstad’s case, the mortgage. The current average interest rate on student loans in Norway is approximately 3.8% (as of November 2023), while mortgage rates vary but are generally higher.
The State Educational Loan Fund (Lånekassen) is the primary provider of student loans in Norway, and manages approximately NOK 750 billion (roughly $70 billion USD) in outstanding loans as of late 2023. Recent data from Statistics Norway shows that approximately 60% of young adults aged 25-34 have outstanding student loan debt.
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Ganji suggests that, given Lofstad’s time horizon, investing the funds earmarked for
