How to get through college with less debt

Postsecondary education is often viewed as an important way to get ahead in the world. Higher learning can lead to better job prospects and improve versatility in the job market, but it can also lead to high debt.

According to the Canadian University Survey Consortium, in 2015, about half of Canadian students report debt related to financing their education, mostly from government student loans (40 per cent). The average debt among students (any debt) is $26,819.

Part of the battle is deciding how much loan money you really need. Although you might not control the amount of money that lands in your account once you've applied, you choose how much of it you use. There are many different ways you can work to reduce your debt level while you're still in school.students-cc-tuition

1. Use loans wisely.
Start by determining how much money you will need to get by. University of Ottawa's website advises students to make a realistic budget by assessing any sources of income. Its financial aid page says "setting goals will help you stay focused on controlling your spending and give you a sense of security and optimism about the future."       

When you do apply for loans, Alice Pelkman, manager of financial aid at the University of Guelph, suggests applying for government loans first, because they offer interest relief for graduates who can prove financial need, and they're interest free while you're in school.

"If you qualify for government aid, take it, because it's always your cheapest form of aid," she says.

Loan money is there to help you get an education, not to fund an overly extravagant lifestyle. Being resourceful to keep your debt level low could save you trouble down the road.

2. Remember: time is money.
Every year you're in school, you're paying for tuition, textbooks, housing and other fees. You're also likely out of the workforce, so all your living expenses add up instead of being offset by income.

"Sometimes students want to drop courses, take lighter course loads," says Pelkman. However, every year you're in school is costing you, she says. That's another year of housing, books, tuition, dining hall plans and more.

Instead, Pelkman recommends finishing your degree in a timely fashion to avoid excess debt.

3. Make a plan to repay.
You should understand how your payments will be calculated and how many years you will be paying back your loan.

"Any type of debt must be handled properly," says Patricia White, executive director of Credit Counselling Canada in Toronto. "That means repaying your debt as agreed, whether in instalments for a loan or paying credit card bills in full and on time. Not paying as agreed will negatively impact your credit rating."

White says it's critical that Canadians with student loans create a realistic debt repayment plan. Once you're done with school, you won't be able to take another gap year - you'll need to get into the workforce so you can earn money to repay what you owe. Factor loan repayments into your post-grad budget.

4. Manage other debt wisely.
Just because you qualified for a student loan doesn't mean you're ready to take on another credit card or extend your credit line.

"Be cautious about obtaining additional credit when you already have a student loan," White says. "Credit is really using future income and your ability to repay may be impacted by many factors down the road. Save for purchases and put aside money for emergencies."

According to the Canadian University Survey Consortium study, about 92 per cent of graduating students have at least one credit card. Of those, 23 per cent do not pay their balance each month, with an average unpaid debt of $2,224.

If you're finding that your student loan is not enough to cover your expenses, you have two choices.

First, if the loan should cover all your necessities, and it's not, take a look at your budget. Determine if you could be swiping your pre-paid dining hall card more often and eating out less, or maybe spending less on clothes or entertainment.

Otherwise, it's time to find a part-time job to supplement your loan each semester.

5. Get resourceful.
Don't just throw up your hands in defeat and accept a debt burden.

"Look for supplemental sources of income, such as part-time work during your school year," says White. "Opt for a cooperative education program to obtain excellent work experience and income between semesters. This may mean that you borrow less, which will be better in the long run."         

A student loan may be the most obvious answer if you're in a financial bind, but it's not necessarily the right one.

"Any type of financial assistance is useful," White says, but "bursaries and scholarships have their own particular criteria, and students should explore all the resources available to them. Often, employers of either parents or students will also provide financial support for post-secondary education."

See related: 5 credit card no-nos for students; Growing up: Your teen's first credit card

Updated November 10, 2016

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