Managing your Student Debt

Studet debt has become a common practice for most students in Canada and around the globe. I can speak personally to the perras and rewards of debt loading your post secondary education. The Globe and Mail recently published an article on how to manage student debt and here are the highlights.

The debt that comes with higher education is often referred to as "good debt" because it's an investment in your future on which you can expect to earn a high return when compared to "bad debt" that depreciates over time, the kind of debt that goes toward depreciating assets like cars and discretionary items such as tropical vacations. Still, even "good debt" is a burden and one that needs to be carefully managed.

In an interview with the Globe and Mail, Kavita Joshi, director of student banking with RBC noted that "It's only with a budget that you have a true sense of where your money is going, Proper saving habits can lead to working fewer hours, thereby freeing up more time for studying and enjoying the university or college experience."

Ms. Joshi offers three key tips to help students stretch their dollars and better manage their money:

1. Prepare a budget.

Ms. Joshi finds that the majority of students want to budget, but don't know how to get started. "A budget will help you live within your means and avoid unnecessary debt," she says. The federal government has created a helpfulonline budget planner for students on its CanLearn website. Whether using an online budgeting program or an Excel spreadsheet, students need to track their sources of income and their expenses to understand where they're spending and whether there are any budget shortfalls. "These budgets have to be created early so that students always have a handle on their finances," Ms. Joshi says. "It's about making informed financial choices." RBC offers budgeting tools and information for students on itsBetter Student Life website, including a calculator that shows you how much money you need to get through the school year, based on your spending.

2. Take control.

Once you have identified all of your expenses and know how much you're actually spending, you'll be able to make adjustments and have a basis for spending decisions. If your budget shows that money is tight, you can decide whether to cut back on expenses or get more hours at a part-time job. For students looking to trim costs, dining out, shopping and entertainment are the areas most likely to be addressed, according to the RBC survey.

3. Know your financial options.

It's important to explore all the financial options available to fund your education, including grants, scholarships and student loans. A good place to start looking is the federal government'swebsite for students, which offers information on everything from financing your education to managing your loans and budgeting while in school. Get familiar with your obligations for various forms of debt.

For example, the repayment schedule for government student loans begins only after graduation and you may be able to negotiate terms based on your personal situation, while bank loans and lines of credit need to be serviced throughout the borrowing period. "You will want to repay debt as fast as possible," Ms. Joshi says. "Understand what debt is your highest interest rate and make higher monthly repayments to pay it down quickly."

For more information on student debt and resources to help manage your debt and finance please visit the following links: