How I paid off a $22k student loan in six months

In 2016, the average student debt in Canada reached an average of $25,000.

When I graduated last June, finding out that I owed the National Student Loan Centre (NSLC) a whopping $22,000, I was oddly relieved to be just under the average payback amount.

But I was still horrified.

And that only grew when I learned that my payback time estimate was a whole nine years away. That really put things into perspective for me. I instantly thought of the hold it would put on reaching important milestones in my life—home ownership, marriage, children, travel, peace of mind and much, much more.

I spent hours on end thinking of how I could eliminate this massive financial burden from my life until I finally came up with a master plan that would have me debt free just one year after graduating. But once I got the ball rolling, I cut that time in half and was paid in full just six months after shimmying across the stage (literally, I danced off the stage at Convocation Hall the day I graduated).

Here’s how I did it.

Stayed at home

I stayed home for school, despite high school teachers insisting the best education was one obtained by leaving home. By staying in my city, I saved thousands per semester on residence, tuition (if you’re an international student), and everyday costs like laundry, food, gas and parking.

I stayed home on weekends. Sure, I went out once in a while. But I was sure to know in advance whether there was a cover charge, and if I could get in free by a certain time I was in there like swimwear.

And despite wanting to own a home like most people out there, I stayed at home after graduating. Most millennials can’t wait to leave the nest. But moving out before student loans are cleared can have a devastating impact on your finances and make it extra hard to get ahead. Unfortunately, some people have no choice. Depending on where your family lives, what your relationship with them is, or a long list of other factors, living at home is just not an option.

If you have the option of living at home, take advantage of it for as long as you possibly can. With rent and mortgages across Canada increasing at a record pace, put the money that you would’ve been paying towards your rent or your mortgage to your loan. 

Withdrew money from my savings account

While in school, I was earning an (almost) full-time paycheque every two weeks. About two and a half years before finishing school, I set up automatic savings deposits of $100, and that money grew quickly.  In addition, I deposited my tax returns directly into my tax-free savings account (TFSA). Once I graduated, I withdrew nearly everything to make the biggest dent in my debt possible. And it worked!

If you can get ahead while you’re in school and start saving, putting that money toward your student loan when you finish school is a great way to get a head start on repayment. It’s a strange feeling emptying your savings account to put towards a loan that will likely still not be paid in full, but you end up saving a ton of money on interest by using money that wouldn’t earn you half as much in interest anyway.

Worked two jobs

I scored a well-paying job in my field as a freelance digital content editor a few weeks before graduation. And remember that job I had throughout school and did 32 hours a week at? I kept that one too.

This meant that many of my workdays kept me out of the house from seven in the morning to midnight. I was often tired, cranky and just exhausted. But in my eyes, grinding it out for a few months was worth the financial freedom it ultimately brought.

In total, I was funneling (my term for making massive monthly payments) about $2,000 per month to the NSLC. For most people, this is their monthly net income.  I knew that if I did this for just a few months, I would be able to free up that extra cash to replenish the savings that I cleared out to pay down my loan in the first place.

Stuck with my old car

I have a love-hate relationship with my 2006 Honda Civic, Benji. I love that he’s paid in full. I love that when I turn him on, he starts and gets me from point A to point B safely.

But Benji takes really long to heat up. He doesn’t have seat heaters. And there’s no place for me to charge my phone while I drive.

These things pale in comparison to what it might cost me to have these luxuries.

If you have a car that does it’s primary job of getting you from place to place, stick with it. And until you absolutely must get a new car, stick with what you’ve got. Monthly payments and the administrative fees of getting a car on the road can add up quickly, taking away from money you could be putting towards paying off your loan.

Low-interest balance transfer

When one of my credit card companies that I hadn’t used in a while called me up and offered me a special promotion, I instantly turned it down. But after crunching some numbers, I saw a golden opportunity.

MBNA Mastercard offered me a 0.99 per cent balance transfer rate of up to $7,500, while the NSLC was charging me a 5.2 per cent floating interest rate on just under the same amount.

I called them back a few days later to let them know I was interested and redirected the money that I would’ve been paying five times more for. Then, I paid off the credit card just as aggressively as I had been paying off the NSLC.

Cancelled a bucket list vacation

I got impulsive just after graduation and decided my partner and I were going to Trinidad for carnival. I found a great deal on flights and a day after booking, did some number crunching. Needless to say, we were not going to Trinidad for carnival.

This was a deeply personal sacrifice for me. It had been number one on my bucket list since the age of 14. But Trinidad would always be there. Was that what I wanted for my debt?

The point is, traveling is nice, but everything comes at a cost, beyond the cost of the vacation itself.

In sum, it took a lot out of me. But six months of long days, fatigue and changing my lifestyle entirely to relieve such a large amount of student debt so soon after graduating was entirely worth it. And if it’s not for you, that’s okay!

Part of making a debt repayment plan is knowing yourself, really understanding your finances, your discipline, what you’re capable of and what you’re not. So have a conversation with yourself, be open and honest. Then, you decide your action plan and pursue it.

Will the government's new tactics really help students in debt?

Today, the federal government rolled out it’s plan to help make student loan repayment more manageable for post-secondary graduates in Canada. Those who don’t earn at least $25,000 annually don’t have to start making payments.

While the move is bringing a sigh of relief to hundreds of thousands of Canadians, for most people planning to take advantage of this opportunity, it will just keep them in debt for longer.

The thing is, graduates know this. But the trade-off of making smaller monthly payments for being in debt longer is a choice many are forced to make. For those living on their own, those who have yet to secure full-time jobs and those who have dependents, the benefit that this will bring is that it offers more flexibility in repayment. It alleviates the stress of having to manage rent, groceries, insurance, other fixed and miscellaneous expenses and student debt simultaneously. It gives them more room to breathe in a society where millennials are suffocated by debt.

With average student loan debt in Canada in excess of $25,000 for university graduates, and provinces like Ontario and Saskatchewan paying some of the highest tuition in the country, the government’s solution fails to address the root issue of soaring tuition costs, crippling student debt and meager job opportunities for students entering their respective fields.

The average cost of one year of university tuition in Ontario ranges anywhere from $5,000 to $10,980.

But these highly sought after degrees land graduates in a job market where for the most part, they are still only deemed qualified for low-paying, entry-level jobs, sometimes outside of their field.

So why are these degrees so expensive in the first place?

Perhaps it’s because university degrees are reported to earn students an extra $1-million over the course of their career, in what's called the "million-dollar promise". But in order to see this potential increased cash flow, we have to start getting ahead some way, somehow. Instead, student debt is causing a generational backup.

Seniors well past the age of retirement still fill jobs that their predecessors are eager to take over, putting our job market at a virtual standstill. Those lucky enough to break in to it only get there through enduring a survival of the fittest type of competition.

And the idea that 65 is the age of retirement? Say goodbye to that. According to the Broadbent Institute, the average senior is overwhelmingly financially unprepared for their golden years. The three main causes of this are the cost of living, mortgage debt and less than desirable earnings.

How is it possible that in a country reported to be carrying $28.3 billion in outstanding student loans in 2012, has not found a way to ease the burden of going to school? Other than creating a seemingly more glorified Repayment Assistance Program, of course.

If the government has money to make partial interest payments on behalf of students, if the government has money to come up with more and more grants each year, why on earth can’t the government redirect that funding to the principle loans, or regulate the cost of post-secondary schooling?

Don’t be fooled by smoke and mirrors. Pay off your debt as fast as your situation allows you to, despite the "help" offered by the government. Because this was just another day of business for the government.

But for the rest of us, this is our life. This is our money. And this is our future. 

Life after graduation: How I've settled into semi-adult life

On my vision board, I’ve got this picture of a birthday cake that says two numbers; 25 and 27.

According to the picture, 25 is when you’re at your happiest, and 27 is when you’re at your healthiest.

When I graduated university a few months ago, I didn’t know what to expect. How long would it take me to find a job? How much would I make at that job? Would I have to keep my current job to make ends meet? How much free time would I have? What would I do with that free time? How in the heck am I going to pay off these student loans? And most importantly, am I really going to be my happiest at 25?

This Thanksgiving, I did that really typical thing where you count all your blessings and think about all the things you’re grateful for. And much to my surprise, a lot of the worries and concerns that I had at the beginning of the year had disappeared without me even noticing their absence.

In January, tensions were high. I had to do a three-month unpaid internship while working full-time and taking a math course I found extremely difficult that was required in order to graduate. I had forked over some serious cash for a tutor who I would see whenever I had a second off work or school. I really wasn’t sure whether I’d make it to convocation in June.

There were several days I came home teary-eyed and defeated by 16-hour days. My parents, friends and even a few strangers heard all about it.

You get anxiety. Especially as a woman. Your biological clock is ticking. People are getting pregnant, engaged, married or all three everytime you blink. House prices are skyrocketing. All you want is a crystal ball that tells you you'll have it all in just a few years. But when that uncertainty looms in the air, it's hard to breathe sometimes.

Luckily, by the end of that internship, and certainly by the time I got that magical letter in the mail letting me know that finally, after six years, I’d satisfied the graduation sensei and was granted permission to graduate, things had worked themselves out.

First, I was able to land a job in my field just before graduation. It’s great pay, and I love the job I do. I take pride in it, I enjoy my coworkers, and I leave there everyday a tad bit more knowledgeable than I was when I arrived.

In terms of my student loan, living at home has allowed me to make significant dents in my payback amount, which was a whopping $22,000 just four months ago, and it currently sits at just under $10,000. According to my math, which like I said, isn't very good, that's $12,000 in repayment in just four months. Not bad.

Sure, it kills me to know that this money could be in the bank, but the cost of school was worth every penny. And strangely, I enjoy the challenge of trying to meet my deadline of full repayment by July 2017.

As I get closer and closer to the age of 25, I realize that maybe that’s the age Women’s Health magazine predicts us to be our happiest because while we are adults, we are still kids in a way.

My eye doctor gave me a “student discount” the other day despite me telling him I had finally graduated. Whenever I need something from my parents, I remind them that I’m in “repayment mode”, which prompts some sympathy and a hand with whatever task I’m facing.

But like I said, we’re also adults. I’ve set up RRSPs. My boyfriend and I have made a five-year plan that will hopefully result in home ownership, marriage, and some adorable, healthy kids.

I’ve heard people say that debt is just a part of life. I’ve heard people say that you can’t get everything you want. But I don’t want to be in debt. And I do want it all. To get that, I haven’t been able to completely part with those 16-hour days, and I’m limited to about one day off every two weeks. I’ve got a very boring social life, but people understand. If people truly love you and understand your goals and your mission, they understand.

One thing I’ve realized about life is that the things you want truly are yours for the taking. There’s obstacles. Tons. There’s competition. There’s lots and lots of “no’s”. But commitment, persistence and hard work can get you to the places that you want to be.

I wasn’t sure what to expect after graduation, and I’m not sure what to expect when I turn 25 in a few months, but I wouldn’t trade anything about my busy, tiresome, whirlwind days for anything that I could’ve imagined. And I truly believe that the best is yet to come.

Five things you should know about paying back student loans

It hadn’t even been a week after my graduation before the National Student Loans Centre (NSLC) kindly let me know it was time to pay up.

The Monday after my graduation, a brown envelope arrived for me in the mail with red letters that said: IMPORTANT. As much as I hate to admit that for the next x amount of years, I’ll be forking out some serious cash, the NSLC is right; repaying your student loans, and any loan for that matter, is important. 

Not paying an outstanding loan can be detrimental. Besides paying unnecessary interest, being in debt stops you from achieving true financial freedom. No matter how much money you have saved, if what you owe is more than you have banked, you’re still in the red. Here are a few things to keep in mind when that dreaded time comes.

Interest still accrues during the six-month grace period

I was so relieved to be offered a six-month grace period where monthly payments were not necessary. The relief quickly turned sour when I realized that despite payments being suspended, interest was still accruing. Contact the NSLC to find out how much your interest during the grace period is, and consider staying on top of it by paying a lump sum.

The grace period actually begins when you complete full-time studies

Prior to graduating, I noticed my loan was already in “grace period” status. When I called the NSLC to ask why, they informed me that the grace period actually begins when you are no longer enrolled in full-time studies. 

During the last two semesters, I, like many students, had a conflict with my work and internship schedules and course availability, and therefore enrolled in part-time schooling.

Knowing that your grace period starts when your full-time studies are over is something to keep in mind when registering for courses. Depending on your situation, it might be better to enroll in that third course to delay repayment, or you might opt for getting a head start on the payments. Even if you can’t afford to make the full monthly payments, gathering enough to stay on top of the interest (about $1.90 a day for a $22,000 loan), can make a difference in your total repayment amount.

Don’t believe the hype; the Repayment Assistance Plan (RAP) just keeps you in debt for longer

A lot of graduates, while looking for full-time jobs in their field, take advantage of the NSLC’s RAP program. It calculates your monthly income and expenses and allows you to make much smaller payments. While the idea might sound like it provides relief, it ends up costing you more in the long run.

The longer you take to pay off your student loans, the longer you’re in debt, and more importantly, the more you’re spending on interest. It might sound great to make $60 monthly payments instead of $160 payments, but it’s costing you exponentially to maintain the debt, and repaying it is inevitable so you might as well get it done.

Go with floating, not fixed

Repayment gets a little tricky when words like “floating” and “fixed” come into play. But to make it simple, always go with whatever is going to cost you the least money. In this case, the floating interest rate is the way to go. If you’re ever unsure, call an NSLC representative to ask for clarification or speak to a financial advisor at your local bank branch that you trust to ask for a second opinion.

Make as many lump sum payments as possible

My plan was to pay off my loan as aggressively as possible, and considering I was living at home, I was able to do this. I took thousands of dollars out of my savings and paid down my loan. It left me with almost nothing to count on in the event of an emergency but that money would’ve sat there and collected dust (and maybe a few cents in interest monthly) anyway.

Within three months, I have paid off almost $11,000 of my student loan. By living at home, juggling two jobs, putting a majority of my income towards my loan and doubling the pre-authorized payment from the NSLC, I’m more than halfway to being debt-free.

And you can get there too. 

Student loans suck. But in reality, they help hundreds of thousands of students afford the opportunity to go on to post-secondary and multiply their earning potential throughout their lifetime. While student loans may seem like a burden, try to look at debt as something that builds character, discipline and financial responsibility.

Remember when you got your acceptance letter? Remember when your school let you know you would be graduating? 

Now imagine the feeling you’ll get when the NSLC sends you a letter letting you know your loans are paid in full.

So You're Young and in Debt, Now What?

There comes a point in everyone’s life where whatever money we have is just not enough.

Particularly when we hit post-secondary education, marriage, home-ownership, parenthood, grandparenthood, and the list goes on and on and on.

But being young, we’re at an advantage. Except of course when it comes time to pay the exponentially growing cost of tuition.  Believe me when I tell you that school debt is just the least of your worries.

In fact, school debit is considered “good debt”, according to money guru Gail Vaz-Oxlade. With such low annual interest, we’ve got other things to worry about. Like those evil credit cards that carried the cost of our textbooks, ridiculous hourly rates for parking, and maybe an outfit…or three.

Here’s a little anecdote. When I turned 18, my mother suggested I start building credit for myself. When I applied for a credit card, the bank asked me if I was going on to post-secondary education. When I informed them I was beginning university that September, they gave me $5000.00.

Do you see anything wrong with that story?

Nothing?

The problem is that I said, “the bank gave me $5000.00”, instead of “the bank lent me $5000.00”.

And that, precisely, is the problem with young people and debt. The reality is that too many young people view credit as part of their income; money that was given to them. We forget that while we might have all this money available to us today, we’re going to be paying that back tomorrow, and the day after, and the day after, and the day after that.

If you’re young and in debt, here are a few pointers on how to not let debt consume you.

Start saving as soon as possible.

Its important to get into the habit of putting money away, even if you are currently in the process of paying off debt. Some people’s logic is to pay off debt first, then start saving. This sounds like a great idea, but we are all prone to unexpected expenses, and without an emergency fund, we end up using credit for emergencies! That often lands us right back where we started.

If you can put away just $25 or $50 every paycheck you’d be surprised what you would have in just a few months. While saving for the first time can be very hard, you get accustomed to living on a few bucks less each time. Chances are, this money would have been spent on frivolous things like McDonalds or drinks at a party.

Tip: Have a set amount of money automatically deducted on your payday and put into a separate account so you won’t have to depend on your self-discipline.

      Come up with a realistic repayment plan.

Going online and doing some number crunching helps to map out what your repayment future will and should look like.  With a credit card cost calculator, you type in the total amount owed on each credit card, along with the annual interest rate, and the calculator will tell you how long it will take you to pay off using your minimum payment, and then it will tell you how long it will take to pay off using a different monthly payment.

If you have an idea of how long you want to give yourself to pay it off, you have the option of entering how many months you intend to pay your debt off in. It will give you a monthly figure, and if you can work that into your budget, you’ll be debt free in as short as you will allow yourself to be.

Tip: For a good credit card calculator, try: http://www.debtcanada.ca/budget-calculators/credit-card-payment-calculator

 Don’t worry.

Debt can be a pretty scary thing, but letting it intimidate you and stop you from living your life is pointless. Instead, be proactive about your debt. Challenge yourself to get it paid off in one year or two years, or however long you need.

If there’s anyone who knows the sacrifices that must be made in order to pay off debt, it’s me. Remember that $5000.00 that the bank gave me? I’m still paying it off 4 years later.

The first two years were the hardest because I was so down and out about being in debt that I ended up drowning myself in my own misery. But after doing a lot of research on money-saving, I felt a little more empowered to take a different approach to my debt.

Perhaps the highlight of my financial life so far was when it came time to renew my credit card earlier this month. I kindly declined the bank’s offer to reactivate my Visa for another four years.

It was a hard decision to make, especially when the voices in my head kept asking questions like, “But how are you going to pay for parking?” and “How are you going to buy stuff online?”

But I made it anyway.

Tip: Never miss a minimum payment on a credit card! No matter how much debt you have, if you can prove you are responsible enough to make your monthly minimum payment on time, your credit rating will not be jeopardized by the money you owe. All the bank wants to know is that they are still making money off of your minimum payments.

The stress that can come from not being in good financial standing can do a lot of wear and tear on our bodies, our minds, and our overall wellness. But being in good financial standing doesn’t mean not being in debt.

It means doing something about it.