Managing debt and maintaining a good credit rating is essential. By keeping track of your debt, reading up on common debt regrets and seeking advice from our Financial Aid Counsellors, you will ensure that you are able to pay off your debt as quickly and easily as possible.
Keeping track of your debt
As a student, you may have several types of debt (government, bank, etc.) and the amounts of each may be different from year to year. Given all of this, it can sometimes be hard to keep track. In addition, while government loans typically do not require any interest or principal repayment while you are still a student, bank loans and other types of consumer debt sometimes do. You will need to stay on top of these payments and work them into your budget.
The Student Debt Plan (Tab 4 of the Frugal Scholar Toolkit) will help you compile an up to date list of all your borrowings for each year of study and keep track of the terms and conditions of certain types of debt.
- Input the government and student loans you have taken out or plan to take out in each year of study
- Input any credit card debt and bank loans you may have
- Use the Calculation Boxes to include a more detailed list of your bank loans, lines of credit and outstanding credit card balances as of today's date, including the terms surrounding them
Once you have figured out your total debt, and total debt per type, get informed about the repayment terms of your government and student loans. For example, you will need to know when they will start accruing interest, the minimum monthly payment amount and what happens if you cannot find work right away. Not sure where to find this information or how to decipher it? Talk to one of our Financial Aid Counsellors to get the repayment advice you need.
Debt repayment information & advice
Accumulating debt is always daunting, but you should know that, in this case, you have borrowed money to make an important investment in yourself and your future. Once you enter the workforce you'll quickly begin to see the financial returns on that investment. That being said, a little knowledge could help you save a lot of money.
Our Financial Aid Counsellors can help you gain that valuable knowledge by walking you through:
- how to manage different sources of debt (which loan you should tackle first)
- the process of repaying your government loans
- debt reduction or loan payment deferral programs
Quebec and out-of-province students should contact us to book a personalized debt management appointment. U.S. students, because repayment information on U.S loans varies, you are encouraged to consult with your specific servicer. For more details on the repayment process, please visit studentloans.gov.
TIP: If you are the holder of a McGill loan, be sure to check out this handy Student Loan Calculator on the Student Accounts website.
Common debt regrets
Know your rights & responsibilities and be empowered to make informed decisions. Learn from these common regrets regarding government loans, as discussed by students with Financial Aid Counsellors. The points below are for your consideration only and do not constitute professional advice pertaining to your individual situation.
Not applying for government aid on time
- You may be surprised by the outcome of your assessment, so you need to know early to be able to plan your finances accordingly
- Late payment charges on fees, interest on other bills because government money is delayed and/or you have to resort to credit cards or other forms of higher interest-bearing debt
- Some jurisdictions will prorate your assessment if you do not apply at the beginning of the period. E.g., Ontario’s OSAP will reduce your aid for every day beyond 45 days from the start of term
- You may not be considered for maximum funding (e.g. OSAP) up front, which could also lead to loss of part of loan forgiveness e.g. assessed for $7,500 loan instead of $9,000 - the $1,500 difference could have been forgiven
- Complete your extra paperwork for existing loans (e.g. continuation of interest-free status) - if not completed, this may lead to “technical” default or obliged repayment
Not maintaining a full course load
- Unless you can be deemed full time (depending on the government jurisdiction, examples include a recognized disability or having young dependents), a part-time course load will create loss of government aid, an over-payment situation and/or obliged repayment of prior loans
- Timely program completion will reduce your overall loans/debt and ensure the longest possible delay before hitting time limitation
Paying off government loans before paying credit card debt/line of credit
- Credit card balances are debt too and they carry higher interest rates
- Extinguishing your government loans first, means you are forgoing repayment plans offered by the government
Consolidating government loan debt with consumer debt/student line of credit
- You will lose the tax credit for income tax (17% credit for interest paid)
- You will lose the opportunity to defer government loans if you return to school
- You will lose access to government repayment assistance programs (RAPs) which can be more flexible than repayment of bank loan
- Regardless of your enrolment status, interest starts ticking immediately upon use of bank loans and student lines of credit
- Remember, the banks will promote their own services and may not consider your financial wellness from a holistic point of view
Taking time out of school to work/save and repay more than the minimum on government loans/repay all of government loans
- No savings and NO funds from government aid upon return to school because of income earned
- Prior loans cannot be deferred and will go into repayment
Not filing income tax
- No income tax return/GST rebate
- If the government can’t verify your income, your entire government aid assessment could be in jeopardy. Furthermore, certain provinces will not convert the predetermined portion of loans into grants. Visit our page Prepare your taxes for more info!
Defaulting on government loans
- Not communicating with servicers/NSLSC/bank
- Not understanding there are choices/flexibility in repayment plans
- Poor credit rating/file sent on collection, which could impact any future purchasing requiring credit checks, such as a car or home purchase
- You can negotiate!