Here’s How to Get Help With Student Loan DebtFeb 12, 2016
Whether you’re in university or just graduated, student loan debt is probably on your mind. According to a statistic from summer 2015, young adults who require a loan to get through university or college, are graduating with an average debt of $28,000. With interest rates kicking in after graduation, this amount of money can take years to pay off.
Student debt can stand in the way of university graduates getting ahead in life, making it difficult for adults in their 20s to truly participate in the Canadian economy. So how can this age group get out from under their student loan debt? Start by looking at all of your current debts, and educate yourself on credit and debt solutions. But that doesn’t begin until one is realistic about paying down the debt, a mindset many Canadians aren’t feeling at the moment.
In a recent poll from BDO Canada and Ipsos Reid, half of Canadians believe their debt levels will be better by the end of the year. Those aged 18 to 34 were most optimistic about their net worth rising in 2016, with 50 per cent expecting it to increase.
Despite this optimism, 44 per cent say that paying for post-secondary education would be challenging to their financial health. This makes sense. With tuition costs going up, and the downside of large student loan debt becoming more evident, it’s understandable to be nervous about the true cost of education, especially with the rising cost of food, cell phone contracts, and other expenses in a sub-optimal job market for young people. This is why it’s important to educate yourself on effective ways of paying down debt, and then take the necessary steps to address it. Here are a some strategies that will help pay off debt.
Manitobans can make smart use of rebates
While young adults across the country come to grips with student loan debt, help is available to those in Manitoba. With the Manitoba Tuition Income Tax Rebate, those who stay to work in Manitoba after graduation can get a tax refund of up to 60 per cent of their tuition over five years, no matter where they went to school. Getting these funds back is good, but using them to help pay off existing debts is even better.
Debt relief professionals often prescribe using an “avalanche” method for paying off debt. It’s especially useful for young people who may be using credit cards to pay for expenses while student loan debt ties their hands. This would involve using your rebate money to pay off the debt with the highest interest first, reducing your overall interest charges more quickly. After that, delegate some of the money to a monthly debt repayment on your student loan. Using an online calculator, you can figure out what amount works best for your budget.
Start savings funds to avoid credit card debt
If you’re saddled with student loan debt, it’s important to develop good financial habits to help pay your debt. Putting away income for travel and entertainment into a savings account is a good way to avoid interest charges, rather than paying for trips on credit cards that set you back even further. If you do put daily spending on a credit card, it’s good to get in the habit of paying it off each and every month.
If your budget allows, consider putting some money into an emergency fund as well. With student loan debt, it can be easy to hit a wall when an injury or job loss sets your finances back. Planning ahead for unexpected emergencies is a concrete way to avoid stress down the road.
Ultimately, if you have student loan debt, be as pro-active as possible about paying it off as part of a budgeting and debt repayment strategy. Young Canadians may be feeling optimistic about growing their net worth and reducing their debt in the upcoming year, but carrying out a plan and making that a reality is critical. By exploring the tools at your disposal and developing good financial habits, it can be done.
Carrying student loan debt and needing help? Join the conversation on social media by using the hashtag #BDODebtRelief.