Your debt and you: together for a long time? – Financial services

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Written by Frankie Barnett

Student debt. Chances are you’ve heard of it. The average law student in Canada graduates with nearly $72,0001 in student loans. In Ontario, the figure is even higher at $83,000.2

Such large numbers seem abstract to many people when they first apply for a loan. After so many zeros, no matter how many there are, you just have to sign and wait for the future to deal with it. You know, the version of yourself that’s accomplished and all. They are used to dealing with this stuff. And they probably have great hair.

ROME WAS NOT PAID IN A DAY

The most common advice you’ll find (and one you’ve probably heard thousands of times) is simple: just pay it back. Make small monthly payments over several years while cutting back on things like Starbucks groceries, single life, or Friday night cocktails. And while you may be scratching your head that four dollar coffees somehow add up to $70,000, it’s true that most seemingly insurmountable problems become manageable when we break them down into smaller steps. A used winter jacket here, a rain-sheltered Cancun vacation there, and your money really can add up faster than you think.

TIGHTEN STAYCATION PINS

However, depending on your income and lifestyle, you might not feel like you haven’t cut a lot yet. Take for example those who have children or are financially responsible for their parents. Maybe you have a lower-paying job that doesn’t allow you to take an exotic vacation to begin with.

If you find yourself in danger of missing a payment, more dramatic solutions exist, although they are not universal.

For example, it may be possible to negotiate interest rates on your student loans, although you will likely be limited by the type of loan you hold. If your debt is in the form of a line of credit, for example, you may be able to negotiate directly with your bank. Canada Student Loans also provide some interest rate flexibility: you have the option of using the default rate (a floating interest rate that varies over time) or locking in a fixed interest rate equal to the prime rate plus one. But once you’ve made your choice, you can’t go back as long as you hold the loan.

With Canada Student Loans, you can also lower your monthly paymentsby extending your repayment schedule to 174 months (that’s 14.5 years!). By the time you pay it off, your loan will be a teenager who will resent you as much as you do. Although the idea of ​​a payment plan that lasts longer than most Canadian marriages3 may not give you butterflies, an extension may be a good option if your budget is tight, because the last thing you (or your credit score) want to do is miss a payment.

It’s also worth noting that large sums of money – an inheritance or an annual bonus, for example – can make a huge dent when earmarked for loan repayment. Plus, your income tends to increase the longer you stay in the workforce, which means payments that might seem oppressive in our late 20s become less of a burden as we earn more in our 30s and 40s. .

YOUR DEBT AND YOU: THE SONG THAT NEVER ENDS?

Someone started lending it to you / you didn’t know what it was / now you keep paying it forever just because?

If the scale of your debt still feels more like waterfront property than something you might be responsible for, don’t worry, you’re not alone.
The issue of student debt is becoming a hot topic here in Canada and the United States – and rightly so, as more and more young people delay home ownership, starting a family and even people always elusive who do not suffer from debilitating financial problems. anxiety about their student debt.

Loan forgiveness is the solution you see most often on road signs and bumper stickers, but many experts agree that this option is not politically feasible, at least in the short term. Also, federal loan cancellation would not include private loan relief. Most law school graduates have a mix of the two. This does not mean that structural solutions to student debt do not exist or will not be found in the future. It’s a huge and complicated problem, but the good news is that people are talking about it. Stay tuned to this column to learn how student leaders and law associations across the country are contributing to this conversation.

For today, while living with debt may be a reality for many new graduates, you deserve to have a say in how it affects your life, both personally and professionally. Deciding how you want to manage your debt is the first step to stopping it from managing you.

WE CAN HELP

Student debt can seem overwhelming, but you can manage it with a plan. Get practical tips for paying off your loans, investing in your future, and building a budget that leaves room to live. Book a free 30-minute financial planning session now.

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Frankie Barnet lives in Montreal and is the author of An indoor girl.

Footnotes

1. Canadian lawyer: “The Debt Burden”, August 2018.

2. CBA National Magazine, “Escaping the Weight of Debt,” by Zach Shaver, October 2019.

3. “Divorce Rates in Canada” by Mark-John O’Nions, November 2018

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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