Budgeting for ongoing living expenses and for future debt repayment is just as important when you’re a student, as when you’re a graduate, says Leah Drewcock, a Licensed Insolvency Trustee and Vice President at MNP LTD.

Budgeting for ongoing living expenses and for future debt repayment is just as important when you’re a student, as when you’re a graduate, says Leah Drewcock, a Licensed Insolvency Trustee and Vice President at MNP LTD.

Life Happens: Budgeting for student debt repayment

By Leah Drewcock, LIT, CIRP

Whether you’re a new graduate or a first-year post-secondary student, student financing for some or all of your costs of living and tuition is likely on your mind.

It may seem too soon to worry about how you’ll repay student loans, but budgeting for ongoing living expenses and for future debt repayment is just as important when you’re a student, as when you’re a graduate.

Let’s look at how student debt repayment works:

After completion of your final school term you have six months before you must start making payments on student loans. However, interest starts accruing right away.

According to Statistics Canada, based on 2010 numbers, the average Canadian university graduate finishes school with more than $26,000 in student debt.

Using the Government of Canada’s loan repayment estimator, using a fixed interest rate of 3.95 per cent (you can choose fixed or floating), it would take 10 years to pay off this debt, paying $328.65 per month. The total interest paid over the life of the loan is $13,438.46. If you don’t wait for the six-month non-repayment period, you could pay it off in 9.5 years.

Budgeting for student life and future debt repayment:

Many students fund their living expenses, in addition to their tuition, with credit. Some will use federal or provincial government student loan, and some a student line of credit or credit card.

Ask Question 1. How long do the loan proceeds have to last to cover expenses?

Question 2. Will you get new funding every semester, or are you using a limited amount of credit accessed through a credit line or credit card?

Using the total loan divided by the number of months it must cover gives you a monthly amount to work with.

Question 3. When does repayment start?

Question 4. Will the credit be used solely for tuition or do you require the credit to cover living costs as well?

Question 5. What are your monthly expenses? Be honest – do you need that daily latte and weekend case of beer or will you eat Kraft Dinner and drink instant coffee? If you’re using credit to cover your living costs, you have to repay this, plus interest at some point. Do you want to pay interest on lattes and beer?

Question 6. Does your budget balance? If not, cut back on expenses.

Question 7. What is realistically left over to pay the debts?

Question 8. With no change in circumstances, how long will it take to pay off the debts?

Repaying your debts

Once you have your living expenses budget, it’s time to look at monthly payment obligations. Most debts include interest, and student loans are no different. Visit the Government Canada website for more information about Repaying a student loan – How to start. Depending on income, you may also qualify for student loan repayment assistance.

While there’s no set time to pay back credit card debt, as there is for loans, paying off credit cards avoids wasting money on interest.

What if you can’t afford the payments on the debt?

After reviewing your budget, you may find the money left over won’t cover minimum monthly payments, never mind pay off the debts. Now what?

Can you take on a part-time or second job? Can you defer payments through the repayment assistance plan discussed above? If not, it’s time to seek the help of a licensed, reputable professional.

Licensed Insolvency Trustees (LIT) are the only professionals licensed and monitored by the federal government to carry out bankruptcy and proposals. LITs can stop ongoing and pending legal and collection action for debt.

You’re not alone – LITs walk you through the steps of a bankruptcy or consumer proposal to see if it’s the right solution for you.

Will the student loan debt be included? Student loan debt won’t be extinguished after a bankruptcy or a consumer proposal is completed if it’s less than seven years from your last study date. In some hardship cases, that may be reduced to five years.

If you have not yet completed your studies, interest will generally not begin accumulating, and repayment may not be required until six months following completion of studies.

Based out of Prince George, Leah Drewcock is a Licensed Insolvency Trustee and Vice President at MNP LTD. To learn more about how MNP Debt can help, contact our local office at 250-596-8321 or toll-free at 310-DEBT (310-3328).

Just Posted

RCMP crest. (Black Press Media files)
Head-on collision Jan. 14 claims one life west of Fort St. James

Jenkins said alcohol, as well as road surface conditions, have been ruled out as factors

Nechako River, Vanderhoof, B.C. (Aman Parhar/Omineca Express)
Officials keeping close tabs on Nechako River after ice jam causes area flooding

District of Vanderhoof Mayor Gerry Thiessen, though, said water levels have gone down, for now

Vanderhoof home sees water from the Nechako move up into the yard, and within hours, water was seen up to the deck. Ken Young, Vanderhoof councillor posted this photo on social media.
Mayor concerned about ice jams in the Nechako river

“We have never lived with a frozen river at this magnitude during our time in council,” mayor said.

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

A 17-year-old snowmobiler used his backcountry survival sense in preparation to spend the night on the mountain near 100 Mile House Saturday, Jan. 16, 2021 after getting lost. (South Cariboo Search and Rescue Facebook photo)
Teen praised for backcountry survival skills after getting lost in B.C.’s Cariboo mountains

“This young man did everything right after things went wrong.”

Conservative Leader Erin O’Toole holds a press conference on Parliament Hill, in Ottawa on December 10, 2020. THE CANADIAN PRESS/Sean Kilpatrick
No place for ‘far right’ in Conservative Party, Erin O’Toole says

O’Toole condemned the Capitol attack as ‘horrifying’ and sought to distance himself and the Tories from Trumpism

A passer by walks in High Park, in Toronto, Thursday, Jan. 14, 2021. This workweek will kick off with what’s fabled to be the most depressing day of the year, during one of the darkest eras in recent history. THE CANADIAN PRESS/Chris Young
‘Blue Monday’ getting you down? Exercise may be the cure, say experts

Many jurisdictions are tightening restrictions to curb soaring COVID-19 case counts

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
COVID-19: Provinces work on revised plans as Pfizer-BioNTech shipments to slow down

Anita Anand said she understands and shares Canadians’ concerns about the drug company’s decision

Tourists take photographs outside the British Columbia Legislature in Victoria, B.C., on Friday August 26, 2011. A coalition of British Columbia tourism industry groups is urging the provincial government to not pursue plans to ban domestic travel to fight the spread of COVID-19. THE CANADIAN PRESS/Darryl Dyck
B.C. travel ban will harm struggling tourism sector, says industry coalition

B.C. government would have to show evidence a travel ban is necessary

(Phil McLachlan - Capital News)
‘Targeted’ shooting in Coquitlam leaves woman in hospital

The woman suffered non-life threatening injuries in what police believe to be a targeted shooting Saturday morning

JaHyung Lee, “Canada’s oldest senior” at 110 years old, received his first dose of the COVID-19 vaccine on Thursday, Jan. 14, 2021. He lives at Amenida Seniors Community in Newton. (Submitted photo: Amenida Seniors Community)
A unique-looking deer has been visiting a Nanoose Bay property with its mother. (Frieda Van der Ree photo)
A deer with 3 ears? Unique animal routinely visits B.C. property

Experts say interesting look may be result of an injury rather than an odd birth defect

Most Read