Tips on How to Manage Your Student Debt and Loans

Key Points

• Explore Your Career Options
• Familiarize Yourself with Your Investment Risks
• Understand OSAP Payment Requirements
• Work While Pursuing Your Studies
• Avoid Debt. Make All Efforts to Repay Your Student Loan Quickly
• Get Professional Debt Help When Needed

While post-secondary students often aren’t certain about the career path they want to take, many know they want to attend a particular college or university and that a Canada Student Loan can help fund their education. Being accepted for admission into a program of choice isn’t easy but getting a Canada Student Loan the first time is through the Ontario Student Assistance Program (OSAP). The general requirements for eligibility entail being a Canadian citizen, a permanent resident of Canada or designated as a protected person, meeting the full-time or part-time enrolment requirements at an approved school, demonstrating financial need and passing a credit check if you are 22 or older. Getting a student loan the first time easily makes higher education accessible. The question is how to manage the repayment costs. Various suggestions are provided here.

Explore Your Career Options

Before applying to college or university, it is prudent to realistically assess what career path interests you, what educational or training requirements are needed and if and how you can implement your goals. Everyone wants to work in their field of choice but there is no practicality in pursuing a career that is not in demand. The Government of Canada’s Canlearn.ca website provides a helpful starting point in developing your plan, including the ability to explore careers by occupation, educational program, wages, outlook, skills and knowledge.

Familiarize Yourself with Your Investment Risks

Your ability to find work after your education will depend on the job market, employment trends in your chosen industry, how marketable you are personally and how much your personal network in your job search can help you. Whether you are willing to relocate or consider other employment also affects your employability.

Unfortunately, earning your degree or diploma is no guarantee of finding a job. In fact, many graduates are finding that their degrees are simply not marketable in the workforce. Today’s university graduates often take post-graduate college programs in order to find employment, which then increases the size of their student loan.

Understand OSAP Payment Requirements

It is best to ensure you fully understand the commitment you are making before you take out an OSAP loan. Under this program, you can borrow money needed to fund your education and interest for the first six months is covered by the Ontario government. However, your repayments are expected to start six months after graduating, regardless of your employment status and income.

If you are unable to find work after six months to begin paying your student debt, one of the ways to keep your loan in interest-free status is to return to school so that you do not have to begin repayment while you are still studying. You do not have to take out a new loan but you may be eligible for one. If you return to school, your confirmation of enrolment must be submitted as proof along with a paper copy of the Canada-Ontario Integrated Student Loans Continuation of Interest-free Status/Confirmation of Enrolment form.

There are also opportunities to apply for interest relief. You should check the appropriate Service Canada web links to see if you qualify.

If you have returned to school, it is important to keep your loan provider up-to-date with the enrolment confirmation form, on time. Failing this, you might have to begin making payments while you are still in school and pay interest that accrues beyond the six month non-payment period up to the date you submit the required form. Your loan standing and credit rating will be affected negatively due to missed payments.

Work While Pursuing Your Studies

If you can work some before going to school and work part-time while you are in school, you will lessen your debt load and may have a job that you can fall back when your studies are done. Managing your debt before, during and after your college or university studies is a crucial skill to learn and achieve for your financial future.

Avoid Debt. Make All Efforts to Repay Your Student Loan Quickly

If you are working, you can repay your loan faster by making payments above the minimum monthly amount. You can pay your principal directly by increasing the size of your monthly payments and/or by making lump sum payments. Any extra payment you make reduces the outstanding loan amount and the total interest you will have to pay.

Avoid Debt. Make All Efforts to Repay Your Student Loan Quickly

If you are working, you can repay your loan faster by making payments above the minimum monthly amount. You can pay your principal directly by increasing the size of your monthly payments and/or by making lump sum payments. Any extra payment you make reduces the outstanding loan amount and the total interest you will have to pay.

Get Professional Debt Help When Needed

If you cannot pay back your government student loan each month and need more time to pay, you can request to have the terms of your loan changed through the National Student Loan Service Centre (NSLSC) and/or your financial institution. Under a revised plan, you may temporarily or permanently extend the terms of your loan to reduce your monthly payments or make interest-only payments for a short period.

There is also a Repayment Assistance Plan (RAP) available if you cannot make your payments, subject to your application’s approval. Under this program, the Canadian and Ontario government will pay the interest owing that your revised payment does not cover. This could last for up to 10 six-month periods or 60 months during the 10 year period after you leave school. Additional RAP applies for borrowers with a permanent disability.

If you are considering bankruptcy, then you need to be aware that your student loan will only be discharged if you file bankruptcy or consumer proposal at least seven years after the last date where you were a full or part-time student. This will reduce to five years if you qualify under the hardship provision.

If you need assistance in managing your student debt, our specialists at Harris & Partners Inc. Trustee in Bankruptcy can help. We can discuss your debt management options and help you get back on track. Contact our office locations in Toronto, North York, Barrie, Brampton, Brantford, Hamilton, St. Catharines, Markham, Oshawa and Pickering by calling 1-800-268-8093 or 905-479-5712.