According to Statistics Canada, the average Canadian graduate finishes school owing approximately $26,000 in student debt, excluding additional personal loans or credit cards. That’s a hefty bill to manage, especially in an uncertain job market amid a global pandemic.
However challenging, it’s important to make your loan payments consistently, and on time, or look for payment relief options. Missing payments can negatively affect your credit score and your ability to get a job, rent an apartment, or get credit in the future.
Also, with student debt already taking an average of 10 years to pay off, delaying it further could impact bigger future decisions, like buying a house or having kids.
Get on the right side of your student debt by establishing good financial habits now. Here are 5 ways to manage your debt payments effectively.;
1. Make a plan that is realistic (with an end date)
Calculate your income from all sources, and a list of your living expenses – in other words – create a budget.
Once you’ve figured out what you can afford, develop a realistic debt repayment plan with a timeline. An end date will help you see light at the end of the tunnel and make it easier to stick to the plan.
Contact your loan provider to find out when you need to start making payments on your loan. There may be a grace period for repayment that you can use to build up your savings and get ahead of the curve. Also, make sure to confirm your repayment conditions to avoid any possible penalties for missed payments.
2. Focus your spending on needs vs. wants
Think more critically about the purchases you make and be more mindful of your spending.
Curb the urge to buy things online, particularly with credit. Taking on unnecessary consumer debt can put you far behind on debt repayment, which means more time carrying your principal debt and more money paid toward accrued interest.
3. Take advantage of opportunities to make large payments
If you can, it’s always a good idea to make larger or lump-sum payments toward your loan.
Expecting a tax return? Consider applying it directly to your student loan. Putting more toward your loan will decrease the principal and the amount of interest you have to pay over time. Getting a bump in your salary? Why not increase your loan payment amount? Increasing your payment can shorten the term of your loan considerably.
Learn how much you could save by changing your payment frequency or making extra payments using our loan payment calculator.
4. Cut your costs to increase your payments
Revisit your list of living expenses often and find creative ways to cut costs so you can allocate more money to paying down your principal.
Some effective ways to cut expenses are:
- Shopping around for the best home and auto insurance rates
- Finding the most competitive prices for your internet, cable, and cell phone
- Scaling back on dining out
- Reducing the number of streaming services you subscribe to
Explore more money-saving tips
5. Accounts and automatic payments
Meet your goal of becoming debt free by setting up a pre-authorized plan to pay bills and school loan payments conveniently and on schedule.
What is a pre-authorized contribution (PAC) plan?
You can also find new ways to become more financially resilient.
It’s never too early for professional advice
Whether it’s paying off debt, reaching specific financial goals, or feeling secure in your future, our experts are here to help - for free.
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