Pursuing postsecondary education is often seen as a crucial step toward better job prospects and a more versatile career. However, it can also come with a significant downside: debt. In Canada, this is a reality for many students. According to the Canadian University Survey Consortium, in 2015, around half of Canadian students reported having debt related to financing their education, with most of that debt coming from government student loans. The average debt for these students was $26,819.
To manage this debt effectively, it’s essential to start making smart financial choices while still in school. Here are some practical tips to help you minimize your debt and set yourself up for financial success:
1. Use Loans Wisely
The first step in managing your student loans is to determine how much money you actually need. The University of Ottawa recommends creating a realistic budget that accounts for all your income sources and expenses. Their financial aid page emphasizes that setting goals can help you stay focused on controlling spending and provide a sense of security about your financial future.
When applying for loans, Alice Pelkman, manager of financial aid at the University of Guelph, advises prioritizing government loans. These loans often come with benefits like interest relief for graduates who demonstrate financial need and no interest while you’re still in school. “If you qualify for government aid, take it, because it’s always your cheapest form of aid,” she says.
Remember, loan money is meant to help you get through school, not fund an extravagant lifestyle. Being resourceful now can save you from significant financial stress later on.
2. Remember: Time is Money
The longer you spend in school, the more you’ll pay for tuition, textbooks, housing, and other expenses. Plus, you’re likely not earning much income while studying, so your living costs continue to add up.
Pelkman warns against dragging out your studies by dropping courses or taking a lighter course load. “Every year you’re in school is costing you,” she explains. That’s another year of tuition, books, and living expenses, which can quickly increase your debt. Completing your degree on time is one of the best ways to keep your debt in check.
3. Make a Plan to Repay
It’s crucial to understand how your loan repayments will be calculated and how long it will take to pay them off. Patricia White, executive director of Credit Counselling Canada, stresses the importance of handling debt properly. “That means repaying your debt as agreed, whether in instalments for a loan or paying credit card bills in full and on time. Not paying as agreed will negatively impact your credit rating,” she says.
Once you graduate, you’ll need to start working to repay your loans. It’s important to include loan repayments in your post-graduation budget and to create a realistic plan for managing your debt.
4. Manage Other Debt Wisely
Just because you’ve qualified for a student loan doesn’t mean you should take on more debt, like a credit card or an extended credit line. “Be cautious about obtaining additional credit when you already have a student loan,” White advises. Credit cards represent future income, and your ability to repay could be affected by many factors down the line. It’s better to save for purchases and build an emergency fund instead.
According to the Canadian University Survey Consortium, 92% of graduating students have at least one credit card, and 23% of them don’t pay their balance in full each month, with an average unpaid debt of $2,224. If you find your student loan isn’t enough to cover your expenses, you have two options: reassess your budget or find a part-time job to supplement your income.
5. Get Resourceful
If your finances are tight, don’t just accept that debt is inevitable. “Look for supplemental sources of income, such as part-time work during your school year,” White suggests. Cooperative education programs can provide valuable work experience and income between semesters, which can help you borrow less and manage your finances better in the long run.
While student loans might be the most obvious solution to financial challenges, they’re not always the best one. “Any type of financial assistance is useful,” says White, “but bursaries and scholarships have their own particular criteria, and students should explore all the resources available to them.” Additionally, some employers, either of parents or students, offer financial support for postsecondary education, so it’s worth exploring these opportunities as well.
By making informed financial decisions while in school, you can reduce your debt load and set yourself up for a more secure financial future.
Student Credit Cards
Student CIBC Aeroplan Visa
CIBC Dividend Visa For Students
Scotiabank Scene+ Visa Credit Card for Students
