Real Talk: Student debt

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There’s a lot to love about your post-secondary years. It’s a chance to pursue passions, build friendships, and begin mapping out your future. For many students, it’s also the first real taste of freedom and independence—you make your own schedule, your own rules—and your own budget. Between cramming for exams, dealing with roommates, and let’s be honest, a fair share of partying to balance it all out, there’s also the reality of having to pay for everything. And while student loans can help cover tuition fees, living costs, and extras like textbooks and class supplies, they can also sneak up on you once you leave the campus bubble and head out into the real world.

Student debt isn’t uncommon in Atlantic Canada. In fact, we carry some of the greatest undergraduate debt in the country. The average cost for university tuition in Canada is around $6,500 per year. According to Statistics Canada, that means the average university student now graduates with over $26,000 in debt. The good news is that this kind of debt can be manageable. Once you start working steadily and get comfortable with your monthly payments, student debt can be tackled—even if it’s over a decade.

But what happens if you’re not so lucky in those months and years post-graduation? For those that don’t walk into a steady pay cheque, student debt can feel overwhelming. And if you’re not able to make your loan payments, the ramifications can be serious.

We spoke to Lauren* who relied on student loans for both her undergraduate degree and post-grad diploma and is now working to get on track with her debt payments, along with Dale Roode, Manager, Financial Services at Teachers Plus Credit Union. Dale shares some practical advice on tackling student debt, and what happens when life doesn’t go as planned after graduation.

Lauren, like many of her peers, didn’t consider all of the implications of taking out student loans for her studies, or the timeline for paying down her debt.

“As a student starting university, I didn’t think much about the debt I was accruing and what that would mean for me in the future,” she says. “For the first six months after you’re finished school, you have a grace period, but then reality hits and you need to start making your payments. I was surprised by how quickly that happened.”

Once you graduate, it’s up to you to contact your loan providers to set up a repayment schedule after those initial six months. From there, it’s your responsibility to decide on a repayment plan that works with your income.

But what if you don’t have a full-time income just yet? There are a few courses of action, but the key is communicating with your loan provider. According to Dale, if you have student loans from both the government and your financial institution, it’s best to prioritize those from your financial institution before tackling the provincial and federal loans.

“For the government loans, there is a bit more leniency when it comes to repayment,” he says. “There are extended amortization options, for example—and if you’re struggling to make payments, you have the option to go as many as 180 months at a reduced rate. There are also interest relief programs that can be helpful if you’re not making an income. And depending on the degree you graduated with and the field you’re working in, you may even be granted money back through your loans.”

For Lauren, the first couple of years post-graduation were tough. When your budget is already tight, it can be tricky to find room for monthly loan payments.

“I was able to defer my loan payments for a year, but once I started working, I had to begin making minimum payments,” she explains. “My income was still modest, so I struggled to manage those payments and keep up with my other monthly expenses. My debt felt crushing.”

Though budgeting for loan payments each month can be difficult when you’re just starting your career, missing those payments can come with major consequences that could impact you for years to come.

Most notably, it can mean a hit to your credit score.

“A lot rides on your credit score, and missing even one or two payments can impact it,” says Dale.

“If you want to apply for a credit card, or if you have another short-term goal like buying a car, you may end up getting declined, or facing a much higher interest rate. In addition to impacting your ability to borrow, there’s a chance you won’t receive student refunds on your tax return.”

If you’ve already missed payments and are feeling overwhelmed, the best thing to do is talk it through with a financial expert. No matter how far behind you are, a financial expert can help you restructure your budget and develop a plan moving forward.

“Even if you have a blemish on your credit score, there’s always a way out—but you have to be willing to get serious about your monthly budget,” says Dale. “Your credit score will eventually improve if you keep making every payment on time. If you stay in communication with your financial institution and other loan providers, we can find a solution—even if it’s starting with partial payments for the short term. Just make sure that you’re staying in touch and acting as your own advocate. The last thing you want to do is hide from your debt.”

When it comes to getting back on track with your budget, a few lifestyle changes can go a long way. It starts with having a clear sense of your monthly expenses, then keeping track of where every dollar is going.

For Lauren, this was a difficult, but ultimately worthwhile lesson to learn.

“The best advice I have when it comes to keeping up with student loans is to make a budget and stick to it. After taking a hard look at my expenses, I knew I had to make some changes—I got rid of my car and made an effort to go out less. It was tough, but now I don’t have to worry because I can comfortably make my loan payments.”

At the end of the day, it’s worth remembering that it’s not all doom and gloom when it comes to managing student loans. Dale reminds us that the toughest financial times are often when you can cut your teeth when it comes to managing your money—these are skills that will serve you well for life.

“Good financial habits are the key to being financially better off. It’s not always about making more money—it’s about being smart with what you have. If students learn this lesson early on while they’re in a more challenging financial situation, they’ll be set for life.”

*Name has been changed for privacy.