How to Manage Your Student Loan Debt
Along with tuition rates, student loan debt has steadily increased over the past 20 years across most of the country. Canadian Federation of Students statistics show that average university tuition costs in Canada are almost $6,200 for undergrads for this current school year and about $16 billion in Canada Student Loan debt has been borrowed by about 425,000 students. This debt accounts for only 60 percent of all student loans.
How to Manage Your Student Loan Debt
More students are finding alternate funding sources to access a postsecondary education, such as loans from banks, family members, friends and credit cards, at a rate of more than double in the five-year period between 2005 and 2010. The Canadian Federation of Students estimates the typical student debt at $27,000, which takes ten years on average to pay back in full. As a result, high tuition costs coupled with necessary loans has resulted in greater debt per student in recent years.
There are several ways you can avoid accumulating an overwhelming amount of student loan debt as discussed below. You should also be aware that professional advice is available, including debt help in Ottawa, Kingston and surrounding areas from D. & A. MacLeod Company Ltd.
Research What Funding is Available in Advance
Being accepted for admission into a program of choice isn’t easy, but getting a Canada Student Loan through the Ontario Student Assistance Program (OSAP) generally is. For eligibility, you must be a Canadian citizen, a permanent resident of Canada or designated as a protected person, meet the full-time or part-time enrolment requirements at an approved school, demonstrate financial need, pass a credit check if you are 22 years of age or older, and you must not have defaulted on a student loan or declared bankruptcy in the past. For many students, an OSAP loan is more attractive than borrowing from the bank or using a credit card because the funding is interest-free while you are in school and repayment begins 6 months after you have left your program of study.
Research the Demand for the Career You Seek
Be sure to research demand for the career path you are interested in, for there may limited practicality in pursuing a career where there are few job opportunities. Government of Canada’s Canlearn.ca website provides a helpful starting point in developing your plan, including the ability to explore careers by occupation, educational program, wages, outlook, skills and knowledge, etc.
Know Your Investment Risks
Unfortunately, earning your degree or diploma is no guarantee of finding a job. In fact, many graduates are discovering that the education they worked hard to achieve is simply not marketable while applying for jobs. Today’s university graduates often take post-graduate college programs in order to find employment, which then increases the size of their student loan. Many graduates who are struggling with debt also return to live with the parents after graduation to save money.
Get to Know the OSAP Repayment Rules
While an OSAP loan is generally considered more attractive than a bank loan, the repayment rules are strict. Repayments are expected and interest costs start accumulating six months after graduation, regardless of your employment status and income. The only way to keep your loan in interest-free status is to return to school, which then makes it difficult to earn enough income to pay your existing debt, new tuition and living expenses. You do not have to take out a new loan if you return to school, but you may be eligible for one.
If you return to school, you must inform your loan provider with the enrolment confirmation form within the required time limit. If you forget to do so, you might have to begin making payments while you are still in school and pay interest that accrues beyond the six month non-payment period. Your loan standing and credit rating may be negatively affected due to missed payments.
Look for Jobs You Can Do While Pursuing Your Studies
You may be able to pay off your student debt loan quicker if you can work before starting school, work part-time while you are in school, and potentially have the same job for a while after you graduate as you seek employment in your desired industry. If you can work to make payments while you are still in school, those payments go straight towards the principal and you will avoid the interest on that amount. This habit of paying a monthly amount regularly will also help you to reduce your total loan outstanding once you graduate.
Understand the Importance of Repaying Your Student Loan Quickly
It is important to grasp why you should try to pay off your debt as soon as you can, for every bit that you can contribute towards the loan in advance will make the cost of borrowing less. Repaying later and over a longer period of time significantly increases your costs and the size of your debt. Employ available debt reducing strategies such as paying above the minimum amount, increasing the size of your monthly payments and making lump sum payments when possible. Any extra payment you can make will reduce the outstanding loan amount and the total interest. Understandably, this means living on a budget, avoiding costly expenses and new debts, and always looking for ways to save money to achieve your goals.
Know that Professional Financial Advice is Available
A Licensed Insolvency Trustee (LIT) will outline the options available to you for debt help if you cannot pay back your student loan each month and need more time to pay. For example, the terms of a loan may be changed through the National Student Loan Service Centre (NSLSC) and/or your financial institution. Under a revised plan, you may temporarily or permanently extend the terms of your loan to reduce your monthly payments or make interest-only payments for a short period.
A Repayment Assistance Plan (RAP) is also available if you cannot make your government loan payments, subject to your application’s approval. Under this program, the Canadian and Ontario government will pay the interest owing that your revised payment does not cover. This could last for up to 10 six-month periods or 60 months during the 10 year period after you leave school.
If you are contemplating bankruptcy, your student loan cannot be discharged unless you file for bankruptcy at least seven years after being enrolled in your studies. This provision which is set out in Section 178, of the Bankruptcy and Insolvency Act, has been the subject of a number of court interpretations and you need to speak to a professional to consider how you may be affected. However, if you qualify for the undue hardship provision, the time period will be reduced to five years. There will also be significant damage to your credit rating and an initial bankruptcy will stay on your credit report for at least up to six years after discharge.
Contact D. & A. MacLeod for Debt Help in Ottawa, Kingston & Surrounding Areas
If you need assistance in managing your student loans, our trustees at D. & A. MacLeod Company Ltd. can assist you. We will explore all your debt management options to help you to manage your payments. We offer student loan debt help at our 8 locations in Eastern Ontario, including Kingston, Ottawa, Brockville, Orleans, Smiths Falls, Kanata, Cornwall, and Pembroke.
Contact us today at 613-236-9111 to book your free, no-obligation consultation and the office nearest you.