According to a study conducted in 2015 by Statistics Canada, 54 % of Bachelor’s degree graduates owed an average of $28,000 to the source at graduation. After years of arduous studying and working part-time to make ends meet, the last thing a student wants to feel is the pressure of settling for any job in order to pay back their loans after graduation. Below, you will find the perfect guide for paying off your student debt.
Calculate the total amount you owe
Though student debt generally has to do with federal and provincial loans, that’s typically not the only debt that students have to worry about paying off. Student lines of credit as well as money owed to their credit cards needed to be factored in. In order to make a plan on how to go about repaying student debt, it’s important to calculate the total amount you owe. It’s only once you calculate how much debt you actually owe that you’ll be able to create a budget that will help you pay everything off.
Prioritize the repayment of debts with the highest interest rate will save you money
Prioritize your debts
After calculating the total amount of money that you owe, it’s important to prioritize your debts. Do this by looking at how much interest each debt is incurring and prioritize them in order of highest to lowest. This means that you should be paying the minimum on all of your debts, but if you have any money left over after doing so, put it against the debt with the highest interest rate. Once that debt is paid off, tackle the one with the second highest interest rate, until all of your debts have been paid. Doing so will ensure that you will pay less interest in the long run.
Make a budget
The most crucial step in any repayment plan is to create a budget. A budget will help you keep track of all your expenses and properly manage your money. Although you may feel like you’re drowning in debt and that there’s no way out, don’t panic. Just make the conscious effort to make your payments every month, even if that means just paying off the interest. It’s especially important to do so because, just like any other debt, skipping out on student loan payments can have an impact on your credit report. So if you’re planning on applying for another loan or a mortgage, you want to ensure that your credit rating is up to par.
Luckily, there are many tools at your disposal that can help you create the perfect budget so that you never have to worry about missing a payment.
Look into assistance plans
If you’re having trouble making your payments, there are still many options that are available to you. You can apply and see if you qualify for the Repayment Assistance Plan — a repayment plan in which the Government of Canada will help you pay off your loan. Repayment methods depend on your income. In many cases, it will not be necessary for you to make payments that exceed your income by 20%. Your monthly student loan payments will be reduced or, depending on your financial institution, you won’t even need to make any payment at all.
If you do not qualify for the Repayment Assistance Plan, you can always apply for the Deferred Repayment Plan with the government of Quebec. Like the name suggests, if you are unable to meet the repayment plan established between yourself and your financial institution, the Deferred Repayment Plan will allow you to repay your loans in accordance with your income for a maximum of six consecutive months. This plan even allows you to renew your application after the six months are over.
Consult with a professional
If you have applied for these plans but have not met the qualifications, and feel as though you are struggling to make ends meet, do not hesitate to contact a licensed insolvency trustee. Your LIT will explore all of your options and will help you find a way to pay off your student debt. No one should have to spend years after graduation worrying about money. The sooner you make a move to repay your debt, the sooner you can live your life free of financial burdens.
