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Student Loans 101

Is college or university part of your long-term plan? Saving as soon as you can is a good idea, because the 2012 average cost of full-time tuition fees in Canada range from $2,500 to $8,000 per year, with Ontario posting the highest average. Going to school is expensive but can be more manageable with some planning. Here are some things to consider:

It pays to do your homework
The more scholarships you win, the less pressure you’ll feel, so embrace your inner nerd. Having said that, not all awards are based on academics alone.  Many include community involvement, athletic performance, career aspirations and other factors in their criteria. In some cases, your family’s ethnic heritage or professional affiliations may also be considered.

Be thorough when it comes to seeking out financial aid:
  • Seek out awards that may be available through service clubs, churches and even your parents’ employers;
  • Visit your high school’s guidance counsellor or the student aid office at the university or college you’d like to attend and ask about the awards, scholarships and bursaries available to you;
  • Browse helpful websites such as www.studentawards.com;
  • If your family started a Registered Education Savings Plan (RESP) for you, find out how much it will contribute to your school savings when you redeem it.

And then there are student loans
Some families don’t want to consider student loans, but for others it’s the only way to pay for school. The reality is that nearly 60% of Canadian post-secondary students graduate with some form of debt, and the average grad owes in the tens of thousands. If it’s any comfort, you won’t be alone.

Is all debt bad?
Debt is a fact of life for many students. But there is good debt (debt you racked up to pay for school) and bad debt (maxed out credit cards and unpaid cell phone bills). By borrowing money and establishing a good history of repayment, you’re also establishing a credit record. Done right, your credit record will support your future purchases and activities. Student debt doesn’t mean you won’t be able to borrow for a home or car after graduation.

Loan or line of credit?
When it comes to borrowing money, the interest rate makes a huge difference, so shop around and look at all of your options.  Consider a YNCU Student Line of Credit that gives you immediate access to funds whenever you need them.  Interest rates are as low as prime +1%.  After qualifying for up to $8,000, you can draw what you need to pay for purchases or get cash with your debit card.  There's no payment of principal while you're in school and for up to 6 months after. Your only obligation is to pay the monthly interested owed on your current balance.  Even if you qualify for a government loan, you may want to approach your parents or credit union instead. If you can borrow money at a lower rate of interest, you’ll save money in the end. 

The best part? Your parents don’t necessarily need to have a giant chequing account in order to help you. If they have a good credit rating and are willing to guarantee your borrowing, for instance, they can still help you save money in interest by co-signing with you. Likewise, they may be willing to borrow the funds against something like a secured line of credit or home equity loan and let you repay them directly.

Planning to repay
No matter where you borrow from—whether it’s family, the credit union or the government—you need to think carefully before you sign on the dotted line. Borrow only what you need and give serious consideration to how much you can reasonably afford to repay, and by when. 
For government loans, there is no interest charged while you are studying and a six-month grace period after you leave school. That’s fine if you graduate and get a job in your field right away, but if you have trouble finding employment or decide to take a break and go backpacking around the world midway through your studies, your loan payments will still have to be made. 

It figures
Sit down and work out the numbers. You’ll feel better when you know what kind of expenses you’ll be looking at.

For a helpful student loan repayment calculator and other student loan resources, visit https://www.canada.ca/en/employment-social-development/services/student-financial-aid.html. Or visit one of our branches, where we would be happy to speak with you about all your options.
 

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