BY ASHLEY NEQUEST
Students enrolled in post-secondary education understand that there is one thing scarier than their future: student loans.
Once Canadians are finished high school getting an education costs money. At least half of students in Ontario receive some sort of financial support that has interest charges. According to an article published by CBC on their website, the average student debt load is around $20,000.
So, how do you pay off your student loan? How do you budget during the time you’re in school to be able to do so? CanLearn, the Government of Canada’s web page geared toward helping students plan and pay for post-secondary education, has a few tips. CanLearn suggests making lump sum payments before and after the end of the six-month non-repayment period as well as making larger monthly payments.
The site says the best way to pay off student loans is to put as much money toward them as possible. This is just common sense. There is no quick fix button to magically pay off the loans, they have to be paid with your hard-earned money.
There are a few things you can do in order to prepare yourself to make those monthly or lump sum payments.
The first is to understand your loan. Look into the exact terms and conditions of your repayment schedule. Is there a six-month grace period? What exactly does that mean? Some loans begin accruing interest the day any of the money is used. Others advertise a non-repayment period, though the loan does collect interest during those six months. Something else to look into is what happens if a payment is missed. There may be fees attached to missed payments, increasing the amount you now owe on your loans. Missing multiple payments in a row may result in your loan going into default and being sent to the Canada Revenue Agency for collection.
“The best way to make sure you aren’t penalized is to know your loan backwards and forward,” said Samantha Holter, a finanical planner. “Penalty chargers are a pain, no one wants to pay more because they are struggling to make the payments they are already expected to make.”
Consider jobs that offer to assist with student loans. Some companies are willing to send employees to school and pay for their education. Others offer assistance in paying for student loans as long as the person agrees to work for the company for a set number of years.
Keep in mind that planning ahead and budgeting can be a huge help. Mitch and Whitney Shaw, Guelph residents, are currently trying to pay off Mitch’s student loans while Whitney is completing her final year of her undergraduate degree. The couple hasn’t figured out an official detailed plan, though Whitney has one simple rule to follow: “I rarely pay full price for anything.”
As a student, budgeting can be a huge help. The Shaws do simple things that slowly add up. When they choose to go out for dinner they skip the $5 beer or the $6 martini, water is free. They opt for going out for lunch more often than dinner because lunch is often cheaper than dinner even though the meals are the same.
“I think that when I have to start paying my loans I will have a well-paying job but also continue budgeting the same way,” said Whitney. “It’s a really effective way to save money.”
Finally, plan now for when you are done school. Some student loans will offer more money than is actually needed to pay for tuition. If you’re able to live on the money you are currently bringing in don’t take the entire loan being offered to you. It may make things even easier now, but it will have to be paid back in the future. If you have to take the full amount of the loan put the part that you don’t currently need in a savings account. You might as well collect interest on that amount to help you pay the loan when it comes due.