Tackle the pay off with these 5 tips
The average Canadian student will graduate post-secondary studies with around $27,000 of debt, according to the Canadian University Survey Consortium. This figure may come as no surprise to many young Canadians, as the survey also states more students are paying for their education independently and relying less on their parents.
At the same time, tuition fees are on the rise — averaging $6,191 for a full-time undergraduate student in 2015/2016, a 3.2 per cent increase from the year before, according to Statistics Canada.
While the Canada Student Loan program says most graduates take about 10 years to pay off these loans, with some dedication and a few tricks up your sleeve, you may be able to beat the average graduate and pay yours down even faster.
Here are five tips to pay off your student loans in record time:
- Build a budget: First and foremost, it’s important to get organized and tighten those purse strings. Keep track of your income and expenses, including your loan payments. You can use a loan calculator (you can try the BMO loan calculator) to set a repayment goal and establish a monthly payment amount. To make things easier, set up automatic payments with your bank.
Tip: Consider a savings account that gives you perks. View your options at BMO Student Banking.
- Try to pay as much as you can each month: By increasing your monthly payments, you’ll decrease the amount of interest paid over time. Canlearn.ca shares this example: Let’s say you have a student loan of $25,000, an interest rate of 5.5 per cent, and a repayment period of 9.5 years. Over that time, you’ll have paid $7,556 in interest alone. If you increase your monthly payment by just $50, you can cut that number to $5,976.
- Work a side job: The more you bring in, the more you can pay off. Take advantage of any overtime your current job offers, or pick up a second job on the weekends. Whatever you land may not be your dream job, but you’ll thank yourself when you’re debt free sooner. Consider a part-time gig in hospitality, some freelance web writing, tutoring (so you can put that degree to use), or working for a retailer that needs extra help around the holidays.
- Pay larger chunks whenever possible: Minimum payments are a must, but they often just chip away at high interest rates without touching the principal. If you ever come into a large sum of money from a work bonus, gift or investment, use it to pay down your debt. Remember: The lower the amount of your loans, the less you’ll be paying towards interest and the sooner you’ll be able to pay down the principal — and start saving for the future.
- Consider getting a roommate: Although you may want to embark on a new chapter of your life independently, living with a roommate (or even at home with your parents) is a great way to reduce your costs and pay back loans faster. You’ll be able to contribute more to your student loan — and eventually get a place on your own without any outstanding debt to worry about.
You may find managing your student debt overwhelming. But with some careful planning and strategy, you’ll be back to zero in no time and ready to start the next phase of your life. Paying off your student loans sooner could save you thousands of dollars in interest over the years – money that can be put towards new financial goals.