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For many young Canadians who attended college or university, their time on campus remains one of the most memorable periods of their lives. While reminiscing about those days may bring back fond memories, the reality of student debt is far less appealing. According to a 2020-2021 survey, the average Canadian graduate carried nearly $15,000 in student loans, underscoring the significant cost of higher education. Whether you’re a current student, a recent graduate, or well into your career, the financial burden from those years of study can linger long after graduation.
Managing student debt can feel overwhelming, but don’t worry—it’s not an impossible challenge. By adopting smart financial strategies, you can take control of your debt and set yourself on a path toward financial freedom.
Here are some practical steps to tackle your student loans:
Get to Know Your Student Debt
Do you fully understand the details of your student loan? If not, you’re not alone. Many Canadians find student loan terms confusing—like going on a blind date without looking up your match beforehand. While it might seem harmless to be unaware of the specifics, ignorance can lead to financial pitfalls when repayment time comes. To gain clarity, focus on these key aspects of your loan:
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Loan principal: The total amount borrowed.
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Loan term: The length of time from when you take out the loan to when it’s fully repaid.
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Interest: The rate charged by lenders for borrowing money.
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Note: As of April 1, 2023, the Government of Canada permanently eliminated interest accumulation on Canada Student Loans. However, any interest accrued before this date still applies. Loans from private financial institutions continue to be subject to interest.
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Grace period: The time between graduation and the required start of loan repayments. Canada Student Loans offer a six-month grace period, during which no payments are required. Loans from private institutions vary in terms, and interest may still apply. Some credit unions, such as Affinity Credit Union, offer extended grace periods of up to two years.
Regardless of where your loan originates—government or private lender—it’s essential to contact your provider to fully understand your repayment obligations. Being informed ensures you know exactly what you owe and when payments begin, helping you avoid unwelcome surprises.
Set a Realistic Repayment Goal
As the saying goes, you can’t hit a target if you don’t aim for it. Setting clear financial goals is a great way to stay on track with loan repayments and work towards becoming debt-free. Start by assessing your income and expenses to determine a realistic repayment plan. Once you have a clear picture of your financial situation, establish a feasible repayment schedule and set monthly payments accordingly. Keeping a “money diary” or using a spreadsheet to track payments can help you stay motivated as you see your debt gradually decrease.
Start Paying Down the Principal Sooner
If you’re in a position to start making payments on your student loan before your grace period ends, it’s a smart move. Even though some loans offer a six-month grace period, interest may still accrue during this time, increasing your overall debt. Making early payments—no matter how small—reduces the principal amount and, in turn, the total interest you’ll pay over time. Whether it’s $50 or $500 per month, every little bit helps you get closer to being debt-free.
Boost Your Payments with Extra Income
With the cost of living on the rise, many people are taking on side hustles to earn extra income. Why not put that additional cash toward your student loan? Whether you drive for Uber, walk dogs in your neighborhood, or find another gig that fits your skills, a side hustle can help you pay down accrued interest or chip away at the principal faster. The sooner you reduce your balance, the quicker you’ll be debt-free.
We're Here to Help
Student debt can feel like a heavy burden, but you don't have to face them alone. With the right approach, you can take control of your finances and move toward a debt-free future. By understanding your loan, setting realistic goals, making early payments, and seeking financial support when needed, you can successfully eliminate your student debt and focus on your next financial milestones.
Our financial advisors can be excellent partners in helping you manage your student debt effectively. Contact us to learn more: 1-888-929-7511.
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