#FLM2017: 10 Ways to Pay Down Your Student DebtNov 07, 2017
For Canadian graduates under 40, student debt regrets are real.
A recent BDO poll found that 77 per cent in this age group who graduated with debt wish they had handled their student debt differently.
If you’ve graduated recently and are feeling the financial pinch of student debt, take a look at this list of strategies that will help you reduce your student debt load. You might find some of them easy to implement — and you’ll improve your financial health for the long-run.
- Set your budget to reflect more-than-minimum debt payments
With Financial Literacy Month (FLM) in full swing, check out the Financial Consumer Agency of Canada’s resources for all things finances. They offer a budgeting tool that you can use. Or, consider a money management app like Mint or YNAB.
Next, make sure your budget allows room for you to make more-than-minimum payments on your student loan or credit card debt — it can shave years off of your debt repayment.
- Make it your second job
Repayments should be scheduled and respected. Treat them like a second job that you have to show up for. Don’t make your payment an option that you can opt out of if you want to spend the money some other way.
- Stop charging
Put away the credit cards, which carry very high interest rates, and definitely avoid payday loans, which could land you much further in debt.
- Save to spend
Say good-bye to impulse purchases (easier to do if you follow #2).
Budget for non-essentials. If something isn’t in the budget, don’t buy it until you’ve earned it — in cash.
- Make your emergency fund non-negotiable
Many Canadians don’t save enough (or anything) for emergencies. If you are trying to lower your debt and avoid future debt, an emergency fund is critical. Otherwise, when an unexpected cost arises, you’ll have no choice but to use credit, with interest charges.
Want to know more about setting up an emergency fund? Check out these tips from the FCAC.
- Get creative
With so few well-paying jobs out of school, a lot of in-debt graduates are adjusting their professional plan. Working outside your field, working more than one job, and getting creative about income opportunities is becoming the norm, not the exception.
For some, a second job is more than a source of income. It’s an outlet their professional job or chosen field wouldn’t offer, which is an additional benefit.
This BDO blog discusses how a second job or side gig can help you pay off debt quicker.
- Make it a choice
Living lean isn’t always easy. There will be times when you’re disappointed about missing out, or have to decline a purchase.
But embracing minimalism or frugal living can have great benefits, and making it a choice is the first important step toward success. Your finances will thank you. Adopt the lifestyle to get the rewards.
Learn how Halifax blogger Jordann Brown has made frugality a part of her everyday life on her website My Alternate Life.
- Be realistic
According to our poll, a lot of graduates believe they’ll have their debt paid off within five years. The federal Student Loan program disagrees, citing an average of 10 years for repayment.
Aiming to pay off your loans as soon as possible is a great attitude. But don’t set yourself up for failure, otherwise it could become an excuse to throw in the towel, or even make debt worse.
Part of a successful budget is having well thought out timelines.
- Take help if you need it
If you have a bank loan or line of credit, speak with your lender about options, including consolidation. Or sit down with a Licensed Insolvency Trustee (LIT) for other debt options.
- Read about others’ successes and strategies
Sometimes getting someone else’s perspective, or reading about their student debt experience provides the inspiration you need to keep moving forward.
Personal finance blogger Krystal Yee writes about the ins-and-outs of her university debt repayment on her website, Give Me Back My Five Bucks.
Money after Graduation is blogger Bridget Casey’s journal of debt repayment success.
This list of “Personal Finance Books for Millennials by Millennials” put together by personal finance writer Jessica Moorhouse will have you thinking beyond just paying back student debt.
Freeing yourself from your student debt doesn’t have to be a life-long job. Applying some of the above strategies can help.