By Jasmin Brown, BDO Debt Solutions

BDO Debt Solutions

How to deal with student loan debt

Sep 21, 2020 | 10:53 AM

Barring any last-minute announcements from the federal and provincial governments, the six-month student loan deferral period offered by the federal government (and many provincial governments) will end on September 30^th. That means thousands and thousands of Canadians across the country will resume making their student loan payments, whether they can afford to or not.

It is not unusual for graduates to be paying off student debt well into their 30s and even 40s. Student debt is not only adding to Canadians’ debt loads, it is negatively affecting their ability to save for the short- and long-term.

Whether you are newly graduated or you have been paying down your student loans for years, here are a few tips and resources to consider as you resume making your student loan payments.

How do I manage my student loan debt on my own?

If you are new to making student loan payments, it is a good idea to start by including your student loan payments as a line item in your monthly budget. Keeping tabs on what has been paid and what is still owing can help you gauge the effect of your student loan debt on your overall financial plan. If you don’t have a budget, a budget worksheet or budget planning tool can help you create one.

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Do you want to pay your student loans off early? Do what you can to streamline your spending, especially on discretionary purchases. If you have the time and opportunity to acquire an additional source of income, like part-time or freelance work, even better. Putting extra funds directly toward the principal amount of your loans will shorten the period of your loan and decrease the amount of interest you pay. Paying off a large debt load is not easy, but it is possible to do it on your own.

What if I can’t afford to make my student loan payments?

The government of Canada’s Repayment Assistance Plan (RAP) may be an option. Through RAP, you can get your monthly student loan payments reduced — sometimes down to zero — for a limited period of time.

To qualify, you must reside in Canada, have graduated or left school at least six months ago and have kept your loans up to date (meaning no missed payments).

The Revision of Terms Plan allows you to lengthen the amount of time it takes to pay off your loan’s principal and interest by up to almost 15 years. Your monthly payments will be lower but you will pay additional interest.

Can I include my student loans in a consumer proposal or bankruptcy?

A consumer proposal or bankruptcy may be an option for paying off or eliminating student loans, but not until you have been out of school for seven years. There may be other avenues available to you, such as finding a solution for resolving your other unsecured debts in order to free up funds to make your student loan payments. The best course of action is to talk to a Licensed Insolvency Trustee (LIT), who can review your situation, including your total income, assets and debt owing, and help you decide how to proceed.

Stress over repaying student loans can make it more difficult to focus on building a financially secure future. It is common to have questions about how to deal with your student debt. Take steps now to get answers to those questions and act on what you learn. Finally, there are debt solutions for dealing with unmanageable student debt, and a Licensed Insolvency Trustee can help you find the option that will work best for you.

Join us on Twitter and Facebook, or visit the BDO Debt Solutions website for tips, tools and advice that will help you leave your debt behind.

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