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. 

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.

Why I did better in university than college

When I switched into the joint program for journalism at University of Toronto, I was heart-broken to discover that I’d have to spend three semesters in college.

I’m not even too sure why to be honest.

I guess I felt like it was a downgrade. Maybe a lot of people go from university to college, but that was never in my plans. My parents were so proud of me for making it into one of Canada’s most high-ranked and elite universities, would they look down on me for being in college? Would my degree equate to less because some of my time in post-secondary was acquired in a college?

And, why am I still paying university tuition if I’m doing college-level courses?

The first day I got to college, I was so unimpressed my eyebrows couldn’t sink any lower into the middle of my face if I had been photoshopped. The campus was a bit smaller than my high school. It was a huge square with a small outdoor space in the middle and monotonous paint colours that made me nauseous after a while.

But the teachers were surprisingly lively.

In our first semester, we learned news reporting, copy-editing, page design, and imaging. The classes were so unlike anything I’d ever taken in university. We learned so much about the theory of journalism, the elements of journalism and transnational issues in university that I thought it would take me getting into the workforce to do things like this.

Our assignments came quickly and piled up even faster and challenged my peers and I in a way we hadn’t been challenged before. We had class discussions just as we had in university, but we did work. A lot of work.

After receiving high 70s and high 80s in university on essays and written assignments and 90s for my participation, I expected to be even better in college. After all, college is so much easier than university isn’t it?

The truth is, it’s not.

It might even be more difficult. For journalism anyway, and a lot of other courses that require serious hands-on training.

The thing is, university is all about theory. We sit in lectures for an hour or two and listen (perhaps) to the history of our field. We learn about the famous people who paved the way for the men and women hoping to make it, and we write essays, reflections, midterms and exams.

But in college, we write. We learn. We read. We talk to each other. We debate. We discuss. We engage. We indulge in news every single day. We write draft after draft and it still isn’t good enough. Our teachers are hard on us. They cover our paper in red pen and tell us we should know how to spell these words by now, commas don’t go there, and didn’t your copy-editor teach you this already?

I did better in university than I did in college because I was pushed in college, whereas whatever I handed in was "good enough" in university, and "good enough" gets you good grades.

A lot of people take the easy way out because it’s, well, easy. But there is nothing to be gained from easy. If it doesn't challenge you, it doesn't change you. You don’t make it to the highest level in a video game by selecting the easiest level each time you play. You don’t improve at a sport by ensuring your opponents are less qualified than you. And you don’t make it anywhere, and I mean anywhere, by refusing to challenge yourself when necessary and even when not.

Sometimes we judge books by their covers. Sometimes we think we’re too good or too old to learn some of the simplest lessons that are relayed via Disney movies or Robert Munch books. But sometimes, if we just open our eyes we see the message that we missed the first, second and maybe even third time.

University may have taught me to open my eyes, but it was college that helped me to see.