Tips To Help The Student In Your Life Graduate Without Mountains Of Debt

Post-secondary students have a variety of options to fund their education. Selecting the appropriate funding sources can make the difference between graduating with manageable debt or a mountain of debt that limits future opportunities. The following tips address common misconceptions about funding higher education for students and their families.

Repayable sources of funding

When it comes to borrowing for school , it is important to understand the difference between government student loans and private student lines of credit. Federal and provincial student loan programs are based on financial need and designed to make education accessible.

A student’s eligibility and loan amount are determined by factors such as family income, program costs, number of dependants and living expenses. Their credit score is not part of the qualification process, but if they have previously defaulted on a government student loan, that will be taken into consideration.

Government student loans come with benefits such as interest relief and no payment requirements while the students are in school, repayment assistance programs and the possibility of partial loan forgiveness, depending on their circumstances, once they have graduated from their program.

On the other hand, a student line of credit is a product they apply for through a bank or credit union and approval depends on their credit history or often the credit score of a co-signer such as a parent or spouse.

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The borrowing limit for a line of credit is usually higher, but so is students’ responsibility; they are required to pay interest immediately on any money they borrow, even while they are in school, and repayment assistance programs are generally not available. For some students, a line of credit can be a helpful supplement to government aid, but it should not become a substitute for the built-in protections and supports of the federal and provincial student loan system.

One approach for students requiring financial assistance is to start with federal and provincial student loans and a realistic student budget to determine how best to use the funds. Once that funding is used up, a student line of credit can serve as a backup for additional expenses that government loans may not fully cover, such as higher tuition, housing or professional program costs.

Too often students respond to a budget shortfall by applying for a credit card or skipping a cell phone bill to free up cash. But missed payments damage your credit quickly and credit card interest compounds the problem, making an already difficult financial situation worse.

Post-secondary life is demanding, so it’s important to manage money and credit wisely and borrow only what is truly needed. Students can extend their program if they need time to work part-time while in school. If they do decide to apply for a credit card , it’s important to treat it as a tool for building credit, not a short-term loan. They can look for a student card with a low limit and no or low annual fee, avoid cash advances and aim to pay the balance in full each month. To protect their credit score, they can set up autopay for at least the minimum payment and keep their usage well below the limit.

Non-repayable sources of funding

Along with repayable sources of funding, it is worth exploring the various types of non-repayable funding: Scholarships are usually merit-based, bursaries are typically need-based and awarded by schools and donors, federal and provincial government grants do not need to be paid back and smaller community or employer awards exist.

As students and their families consider how to fund several years of post-secondary schooling, these sources are worth prioritizing because they reduce the amount that needs to be borrowed. A lot of this “free” money goes unclaimed each year because students do not apply, so even if students are well into their studies, they should be sure to submit an application.

The best way to apply is to start by completing the official student-aid application for your province or territory because that is how students are automatically assessed for federal and provincial grants. Then layer on school awards and external scholarships, which can be found in searchable award databases.

Students should be sure to check the institution’s awards pages for deadlines and eligibility requirements and apply early and often. If there is a sudden need, there are often emergency or hardship grants administered internally at a college or university through the financial aid and awards office.

Students should also check niche sources such as community foundations, professional associations, Indigenous student funds, employer tuition assistance and athletic or program-specific awards because small sums of money add up.

Throughout this process, students should keep good records such as transcripts, names and up-to-date contact details for references and short, tailored essays, so that they can reuse material with each application. Treating non-repayable funding as a regular part of their funding plan will lower their borrowing needs and future stress.

If there is a registered education savings plan (RESP) for the student, both the RESP and applicable government grants can provide additional sources of non-repayable funding.

It is also wise for students to incorporate part-time employment into their schedule because this not only provides financial support, but also valuable experience that may lead to career opportunities upon graduation .

Saving money

Along with seeking funding for their studies, students should consider options to save money wherever possible. For example, buying used textbooks, looking for refurbished electronic devices, signing up for transit passes or participating in carpooling arrangements can help reduce transportation costs. If they can live at their family home rent-free or at a significantly reduced rate, that alone could save thousands of dollars each year.

Creating a meal and snack plan can save on groceries and reduce spending on meal deliveries and picking up take-out. If students are enrolled in an apprenticeship program , it’s important to resist the urge to splurge on new tools or equipment until they get their full certification.

Students who make balanced financial decisions during their schooling and seek support when needed, will experience less stress and set themselves up for a more stable financial future.

Mary Castillo is a Saskatoon-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt since 1996.