For the thousands of college students graduating this spring, the joy of receiving a diploma is quickly followed by the reality of a ticking clock: student loan repayment. The challenge of repaying loans can be overwhelming, especially when students realize that those payments are due every single month for years to come.
Bridget Casey, a blogger at moneyaftergraduation.com, describes this experience as a wake-up call. “They’re lost! Students have no idea what $40,000 is in real terms when they’ve borrowed it and now must pay it back,” she explains.
As a recruiter for the University of Alberta Department of Engineering, Casey sees many students mistakenly believe that government loans come without real consequences. “At 17 or 18, you’ve never had that sort of money. You don’t know what it buys or what it takes to earn it. When you get it all at once in a lump sum, of course it makes you feel rich,” she says.
While student loans must be repaid like any other loan, government loans often come with lower interest rates and deferment options until after graduation. For instance, through the Canada Student Loans Program, the federal government offers loans that do not accumulate interest while you are a full-time student. This can provide some breathing room, but it’s important to remember that the clock starts ticking as soon as you graduate.
Students are required to start repaying their loans within six months of graduation, which can be a rude awakening for those who haven’t kept the debt in mind during their studies. Casey herself is dealing with $16,000 in student debt and recalls struggling to grasp the reality of her loans. “It didn’t feel like real money to me. It was just a number in my bank account, just one transaction after another,” she admits.
For those with private or non-government loans, interest may start accumulating as soon as you receive the funds, making it crucial to understand the terms of repayment. If you have multiple loans, consider keeping a spreadsheet to stay on top of different terms and conditions to avoid any surprises.
If you find yourself struggling to make payments, there are options available. The Repayment Assistance Plan (RAP) through the National Student Loans Service Centre (NSLSC) is designed to help borrowers who are having difficulty. The RAP can set up an affordable plan that ensures you pay off your loans in 15 years or less. Payments are based on your income and family size, and will not exceed 20% of your income. However, it’s important to note that enrollment is not automatic; you must apply through the NSLSC and reapply every six months to maintain eligibility.
The key takeaway for recent graduates is that finishing school marks the beginning of a new level of responsibility. While you may no longer be juggling assignments from different professors, you will need to pay close attention to your finances, especially as those student loan bills start rolling in. Taking proactive steps now can help you manage your debt and avoid financial stress in the future.
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