Students! Being Frugal Now Will Save You A Lot of Headache Later

In 2013, a CIBC survey indicated that 51% of Canadian students will at one point borrow money in order to pay off their tuition fees – which includes living expenses, books, beer money, etc. According to the Canadian Federation of Students, the average student debt in Canada is roughly $26,300. However, when debt-free graduate students were added to that equation, the average dropped to as it currently stands: $14,500.

While that doesn’t seem like an inordinately high number, when it can take students anywhere from a month to several years until they find a job in their ideal profession, it certainly adds a great deal of financial distress to their lives post-education.

Finding Work Post-Graduation Isn’t as Easy as You’d Think

CBC News spoke to one such average student, a 26-year-old named Brittany Verge who, in six years since she graduated, was only able to pay off $2,000 of her $25,000 worth of school debt. “My worry is that I’m going to be, you know, with college-age kids some day and still paying my loan,” Verge said.

Verge is one of many students who didn’t entirely understand the consequences of obtaining a loan so early in their lives, nor did she realize the struggles she’d be forced to go through post-graduation. By January 2014, Verge was part of 13.9% of Canadian post-grad students who are currently unemployed. Coincidentally, graduates in Ontario and the Atlantic provinces were the most likely to be without work.

Eventually, Verge was able to find work in her profession some five years after she graduated, becoming a reporter with a local newspaper in her adopted hometown of Liverpool, Nova Scotia.

She currently makes less than $28,000 before taxes.

Sadly, Verge’s story has become an all-too familiar scenario for Canadian post-grad students. 22-year-old Clarissa Dimaapi of Winnipeg revealed that without her loan, she wouldn’t have been able to even attend school. Following her graduation, she remains saddled with $15,000 worth of debt.

According to Jessica McCormick, national chairperson of the Canadian Federation of Students, we may soon find “more students in extreme situations” as more of them graduate in a “precarious” job market with significant amounts of debt.

From 2011 to 2012, the Canadian government provided $2.4 billion in Canada Student Loans to approximately 447,000 full-time students, with loans being typically repaid over a 9.5-year period. While approximately 30% of borrowers were able to fully pay off their loans within three years, the default rate on student loans has decreased, and is currently at an all-time low, according to the government.

Are You A Student with Debt? There’s Hope for You Yet

However, there is hope for students leaving university and college with thousands in debt due to student loans. One such success story follows Jacqueline Koos and her husband, who both graduated in 2009 with a collective $52,000 in student loans. After borrowing $11,000 for an auto loan, the couple owed a lump sum of $63,000. Miraculously, though, thanks to a vigorous diet of saving, being frugal, and only spending on necessities like food and rent, they were able to pay off their entire debt load in just five years.

As reported by The Globe & Mail, both Koos and her husband continued to “live like students” after they graduated; in addition to not buying cable, alcohol, or coffee for five years – talk about discipline – they also looked for other creative ways to save money, determined to pay off their debt as fast as possible. Once they both landed jobs, they each increased the monthly payments they were making towards their debt, and even set money aside for a mortgage, wedding, and even an emergency fund. “The emergency accounts were important to us because we had been stretched thin before with nothing to draw on,” Ms. Koos said.

Having an organized budget and knowing exactly how much you are able to put towards your debt are two significant factors in paying it off, says executive director of Consolidated Credit Counseling Services of Canada Jeffrey Schwartz. “It’s key for graduates to be organized and know their options when it comes to student debt,” he noted.

Laurie Campbell, CEO of Credit Canada Debt Solution, adds that it’s vital students get into the habit of setting money aside as early as possible. “Things can happen. You can lose your job. Your car breaks down…” she said. “You should be able to pay cash for them rather than having to dip into using that credit card and paying high interest.”

For example, Koos and her husband bought a used car on a whim, putting down a $3,000 down payment and taking out an auto loan of $11,000. Because they did not do their due diligence and find the best affordable auto loan provider, they ended up paying substantially more for the car than they originally expected.

Don’t let this happen to you, as not being able to pay your loan on time will result in a poor credit rating. According to Schwartz, if you’re looking to take out an auto loan, it’s critical that you understand all of the costs that go along with it, including the principal cost, taxes, interest rates, brokerage fees, etc.

If you’ve found yourself with poor credit, taking a loan is actually the first step to re-establishing your credit, as long as you pay your bills on time. Contact Auto Loan Solutions, Ontario’s largest supplier of car loans, today to learn about what type of loan you’re eligible for, even with bad credit. You can be pre-approved and on the road in your new car within 48 hours.

In addition to being frugal, there are other ways for students to cut down on their student loans, particularly thanks to several tax breaks available for students which most aren’t even aware of.

“The government offers some fantastic programs if you’re experiencing some hardship, and – truthfully – not enough Canadians are taking advantage of them,” explained Schwartz.

Tax Breaks for Students: They Exist!

If you’re earning money as a student, look into what taxes are being withheld. You may be eligible for a return. Other ways to earn tax breaks are if you claim your tuition fees, and textbooks, and claim an education tax credit for every month you’re a student. You can even claim the interest paid on your student loans thanks to the Canada Student Loans Act. Also, if you’re using transit to get around, you can claim the public transit tax credit.

Stories like the Koos’ show that paying off your student debt in a timely fashion post-graduation is indeed possible! While your 20’s are certainly a period of having fun and finding yourself, you can make your 30’s a much less stressful decade if you start saving earlier. This way, your credit will remain in good standing, you’ll be eligible for the best possible rates when applying for auto loans from providers like Auto Loan Solutions, and you’ll be mentally, and physically, free of debt!

What more can you ask for?