Going to a post-secondary school is a new adventure. It’s a time of discovery. You may discover your passions, your career and even yourself. However, this discovery comes at a price, and every year tuition prices continue to rise. As a result, students are forced to take on immense student debts to cover their tuition costs.
How Students Cover Tuition
University is expensive, and most students and their families can not cover those costs out of pocket. As a result, students often use a combination of strategies to piece together enough money to cover their schooling.
They may have saved a lump sum, or their parents may have a college fund. They may even have been rewarded with a scholarship of some kind. However, the vast majority of students must borrow money. But, the question is, who do they borrow from? Here are some of their options:
Government Grants
Most students will first apply for a government grant or loan. These are the most convenient in many different ways. If the student is in good standing the government does not require you to start repaying your student loans until six months after you graduate.
This gives the student a little time to find a job or to figure out how to start repaying. If you do graduate in good standing the government of Canada may even forgive a portion of your loan.
The downside of a government loan or grant is if you are in financial difficulty, most student loans are not eligible to be wiped away through an insolvency for 5 – 7 years.
Big Bank Student Loans
You can also attain a student loan through a bank or other lending institution. The parameters of the loan may differ by the institution but in general, you can expect to defer payments until you graduate.
However, student loans from big banks may have higher interest rates that, unlike government loans, are not fixed. Also once repayment starts, your monthly payments will likely be higher than a government loan.
Personal Loans
Some students also turn to personal loans to help with school. They may use them for tuition, living expenses and other costs. However, the downside is that a personal loan does not include all of the features that come with a student loan. Personal loans also have some of the highest penalties.
Payday Loans
There has been a growing trend among students to use payday loan services. Students often have no savings, and their money is dispensed on specific dates. As a result, an ill-timed expense can throw them into panic mode.
So, students turn to payday loans to fill the gap. While they intend to pay these loans back once they receive their loan money, sometimes things go array.
Payday loans earn interest extremely fast, at a rate of 400%. They also have several hidden fees that pile up. So often, getting one of these loans, even if only for a short while, is not worth it.
Line of Credit and Credit Cards
Lastly, students turn to their personal lines of credit and credit cards to make ends meet. It may seem harmless to place small purchases here and there on your credit card or line of credit, but these purchases add up quickly. Also, with credit you must make payments monthly, adding to the student’s expenses.
How to Manage Your Student Debts
The level of borrowing necessary to get a higher education throws countless students into financial difficulty at the start of their lives. As a result, many young people across Canada have delayed many life milestones like getting married, having kids and traveling.
So what can young people do when they graduate with overwhelming debt?
Get Professional Debt Help
If the financial burden of your student debts are too great and are adversely affecting your life, it is time to seek help. In Canada, you can speak to a debt help professional called a Licenced Insolvency Trustee (LIT).
LITs are financial experts who can help you eliminate most or all of your debts. Furthermore, they are the only ones in Canada with the authority to administer insolvency proceedings.
In order for you to gain a fresh start, they may suggest that you file one of the following insolvencies:
Consumer Proposal
A Consumer Proposal is a legally binding insolvency proceeding that can eliminate up to 80% of your debts. This insolvency is quite popular since it has less of an impact on your credit score and allows you to keep your assets.
During a Consumer Proposal, your LIT negotiates with your creditors on your behalf to offer a significantly reduced amount that you are able to repay.
Once an agreement is reached, it becomes legally binding triggering an immediate stay of proceedings. This means that creditors must cease contacting you and all legal actions against you, including wage garnishment stopped.
Consumer proposals freeze your interest rates so that your debts stop growing, and they consolidate them into one convenient reduced monthly payment.
In order to qualify for a Consumer Proposal, you must owe less than $250,000 and you must be able to repay at least a portion of your debts.
Bankruptcy
On the other hand, a bankruptcy can eliminate all of your qualifying debts, without making any payments. Instead, some of your assets may be liquidized to repay your creditors. However, this does not mean that you lose everything as most basic assets are exempt from seizure.
Your LIT files on your behalf and is governed by the rules and laws of the Bankruptcy and Insolvency Act. Your bankruptcy will also give you an immediate stay of proceedings from your creditors.
Most first-time bankruptcies are discharged in just nine months, giving you quick and substantial debt relief.
Getting a higher education is supposed to be a stepping stone to a better life but sometimes debt can hold you back. If it has become a problem for you, get a fresh financial start so you can get on with your life! To discuss your debt relief options give us a call today!
