6 Tips to Help Crush Your Student Debt
Post-secondary education can be one of the most fun, important, and of course, educational experiences in a person’s life, but it’s also one of the most expensive. The cumulative cost of tuition, books, residence and more over the course of a multi-year degree can be staggering, and it only continues to rise with each passing year. This leaves many recent graduates with a serious financial burden to manage. For some, it can be crippling: it was reported that more than 1 in 6 bankruptcies (17.6%) in Ontario in 2018 were due to the individual defaulting on their student loan.
Financial ruin is no one’s ideal situation when they’re just stepping out into the world on their own. Whether you’re a recent graduate, currently studying or you’ll be starting school soon, we’ve got six tips that’ll help you get your student debt squashed ASAP.
1. Look for an employer who offers a student loan repayment plan
According to a 2018 survey by Statistics Canada, 54% of bachelors degree grads had an average of $28,000 of debt when they graduated. If you’re in debt when you’re entering the job market, why not look for an opportunity that’ll help speed up your debt repayment timeline? Many employers have begun to offer student loan repayment options as part of their benefits packages in effort to cater to Millennial and Gen Z employees. If you’ve got a considerable amount of debt and you’re serious about paying it off, tailoring your job search to find opportunities that’ll fast-track your repayment plan is a smart move. Even if what you find isn’t your “dream job”, you could shave years off your repayment timeline if you’ve got your employer matching a portion of your payments.
2. Start paying ASAP
As per federal law, you won’t be on the hook to start paying your debt until six months after you’ve finished your studies. However, you will start getting charged interest on your loans immediately after you leave school.
So, if you’re currently in school and can afford to, you need to start working on your debt as soon as possible! The more you’re able to pay off while you’re in school, the lower your principal will be when you start getting charged interest. Minimizing your principal means the effects of compounding won’t be as severe over time, reducing the amount you may otherwise pay in interest on your debt by a great amount.
3. Consider refinancing your loan
Student loans can be refinanced, which means the terms of the loan (ex. your payment schedule, interest rate, or the term of the loan) can be re-negotiated while you’re actively paying it. Refinancing offers you the chance to gain more favourable terms, and may help you reduce the amount of interest you’d otherwise pay over time. If you’re finding that your current repayment plan simply isn’t working, refinancing may make it easier for you to manage the other expenses of life while still paying down your debt.
It should be noted that refinancing does come with some downsides. For one, it may cost you a great deal in administrative fees to make the switch. You may also end up being in debt for longer if the term of your loan is extended in favour of reduced monthly payments. If you refinance with a private lender, you won’t be afforded the same protections or debt relief programs that the government would offer you. You’ll also lose claim to any student debt tax credits you could claim, as your loan will be with a financial institution. As such, if you do feel refinancing is your best bet, just be sure to do your research and collect numerous offers before committing to making the switch.
4. Live with roommates
One of the best ways to make strides with your debt repayment plan is to live with roommates. If it’s an option for you, you could also consider moving in with your parents again after school (particularly if they aren’t going to charge you for rent or food while you live at home!). Living with roommates isn’t necessarily the most glamorous option, but it definitely will save you a ton of money. Shelter is most people’s largest single line item on their budget, and living alone means you’re on the hook for rent, utilities, Internet and all other similar expenses all on your own. Especially if you already have other large expenses, like a car or a pet, opting to split the rent with a friend could be huge for you in the long-run.
5. Use your windfalls
Do your best to save any windfalls you receive and put them towards your student loan. Windfalls are any one-time boost of cash, separate from your income. This includes gifts from relatives and friends, lottery or contest winnings, your tax refund, money you earn from selling belongings and more. Many people see money received in this type of situation as prime for consumption, but there’s actually no better use for it than paying down debt.
✨ If you’re due to receive your tax return any day now, why not save it as part of a QUBER Saving Challenge? With numerous choices to pick from, you can select a Challenge that closely matches your return and save it in even instalments over the course of the year. You’ll be able to call upon that money if you need it in a pinch, but if you keep it saved, we’ll give you a cash reward worth 2% of the total you save at the end. You can then use all the money you saved AND your cash reward towards your student loan, giving yourself an extra boost towards debt-free life.
6. Be strategic with your repayment plan
Finally, one of the unfortunate realities of having student debt is that it probably won’t be the only debt you’ve got to pay off. Most people also have a credit card to manage, and may have other loans, like a car loan, at the same time. If this applies to you, you need to be strategic about where your money goes in order to get out of debt as quickly as possible. To do so, you need to focus on the debt that’s charging you the highest interest rate first. This is the debt that’ll otherwise end up costing you the most in interest charges, so focusing on it first will help you reduce the amount you’ll pay in extra fees over time.
Once that debt has been reduced to a manageable amount (or eliminated entirely, depending on your situation), you can then turn your focus to the next debt and so on. For many people, this actually means that they’d be focusing on their credit card as opposed to their student loan, as credit cards often charge 20% interest or more while the average student loan is usually lower than 5% (though this depends on the lender). Though this seems counterintuitive, your student debt is going to be that much harder to eliminate if your credit card keeps pulling you down.
