Dec 12, 2024
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Life is unpredictable, and financial obligations, such as student loans, can prevent us from acting quickly and decisively to adjust to changing economic circumstances.
According to the Government of Canada, the total amount of student loans owed sat at $23.5 billion in 2022. In April 2023, the accumulation of interest on Canada Student Loans was eliminated. This is certainly helpful in terms of paying off your debt faster, but it still does not totally eliminate the burden of repayment.
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In August 2023, Embark Student Corp. reported that 79% of Canadian students believe that the amount of debt they’ve taken on can be debilitating — and this was after the interest elimination.
That being said, no matter what stage of student loan repayment you’re at, it’s never too late to optimize your repayment plan and reduce your debt quicker.
Here are four strategies to help you optimize your student loan repayment plan.
1. Tackle non-government student loan debt first
Canada student loans are a relatively low-cost form of debt. If you have other types of student loan debt, such as a line of credit or a personal loan, those debts will most likely have higher interest rates. That means it's best to focus your debt repayment efforts there first to minimize the total interest paid.
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2. Apply for student loan forgiveness
Some provinces offer student loan forgiveness programs, where they will forgive a certain amount of your debt. These programs are usually centred around specific professions (for example, nurses) and require you to work in certain conditions (like being in a rural area) to qualify. These programs are usually provincially run, so try searching for “your province + student loan forgiveness” to find a program available locally.
3. Consider debt repayment assistance
If you can’t afford to pay back your student loan, apply for repayment assistance. Repayment assistance will recalculate your minimum debt payment as a percentage of your income, or if you don’t earn enough, payments may be suspended altogether.
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4. Apply for a debt consolidation loan
If you’ve taken out bank student loans as opposed to Canada student loans, you may find your loan interest rates relatively high.
If that’s the case, a debt consolidation loan could help absorb all of your student debts into one loan with a single, lower interest rate.
If you take this route, it’s best to fully explore the options available to you to get the best rate. Loans Canada — a lending platform — is a great tool for doing this. They specialize in matching Canadians with poor credit scores or thin credit histories with suitable lenders, so regardless of your circumstances, you can find a rate that works for you.
5. Stick to a budget
This tip may seem obvious, but it doesn’t take long for the concept of budgeting to slip away as you rack up expenses.
Having a set budget with space for essentials, your loan payment, and yes, even non-essentials, can help keep you on the fast track to getting your loans paid off.
By having your monthly financial plan set out in front of you, you are more likely to stay on top of the money you owe instead of tapping your credit card into oblivion. You can even use a budgeting app to streamline the process and have your budget just a click away at all times.
Sources
1. Government of Canada: Canada Student Financial Assistance Program annual report 2021 to 2022
2. National Student Loans Service Centre: What’s New
3. Canada News Wire: 79 per cent of Canadian students believe the amount of debt taken on for education can be debilitating, new poll finds (Aug 29, 2023)
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Em Norton is a Staff Writer for Money.ca. Em holds a B.A. in Professional Writing from York University and has been writing professionally since 2019. Em's work has previously been published by Room Magazine, IN Magazine, Our Canada and more.
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