17 Apr Tips for Handling Student Loan Debt
The dreaded student loan debt – it can become a problem for some students if not properly handled. Here are a few tips and things to keep in mind to avoid a heavy debt-burden once you graduate.
Understand The Different Student Debt Types
The first step in dealing with student loan debt is to understand what ‘type’ of student loan debt it is.
The first type is called a ‘Student Line of Credit’, this loan is provided by the chartered banks, and it almost always includes having a co-signer on the loan- usually the student’s parents. The reason for this is that these loans are not protected in any way should the student file Bankruptcy or a Consumer Proposal with a Licensed Insolvency Trustee (“LIT” or Trustee). The few times a co-signer is not required would be situations when they could solely rely on the Debtor for repayment, e.g. medical students.
The second type of student loan is the more standard OSAP or National student Loans provided. These do not have a co-signer, as they survive both a Bankruptcy proceeding and a Consumer Proposal proceeding, which are filed with a Trustee. That is, they still have to be repaid after the process is over, subject to two exceptions:
- The student loan is more than 7 years old at the time of filing Bankruptcy or Proposal;
- The student loan is more than 5 years old from the time a Bankrupt applies to the Court to have the debt included in their Discharge from Bankruptcy, subject to Court approval.
How To Handle Student Debt
Now that the two types of student loan debt are understood, let’s look at the some tips to handling the debt.
- Tip 1: Try and avoid having any student debt. This can be accomplished if you are fortunate enough to have a post-secondary institution where you live. For example, in London, Ontario we have Western University and Fanshawe College, so that students can live at home and earn money to assist in their expenses. Students living in any major urban area have this same advantage.
- Tip 2: Make yourself aware of funding available from government. Ontario is now providing student grants for those in need, application can be made on-line, and there is a calculator program to determine how much of a grant you are entitled to, based on your family income.
- Tip 3: Make yourself aware of grants provided by your school and other associations (e.g. rotary, other local groups, parents’ employer, etc.). Many schools have grant programs that are not well known, that may be available for specific programs, or levels in that course.
- Tip 4: Not everyone has the option of Tip 1, as their course or program may be out of town, etc. In those cases you should ensure that any student assistance that required is only used for the cost of education, not for going out, buying clothes, etc.
- Tip 5: Most courses (there are exceptions: professional programs, etc.) do not require all your free time when you are not in class. That gives you plenty of opportunity for a part-time job. This is not as onerous as it sounds, as there are a lot of good jobs at college campuses that can be fun and/or a good way to meet people.
If you implement any of the above student debt tips, you can help to ease your financial burden upon graduating. For more information about handling student debt, talk to the professionals at McLennan & Company Ltd.