Managing debt and maintaining a good credit rating are 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 differ from year to year, which can make it hard to keep track. In addition, while government loans typically do not accumulate interest or require any principal repayment while you are still a student, bank loans and other types of consumer debt generally do. You will need to stay on top of any required payments and work them into your budget.
The Budget and Debt Overview (last tab 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.
Once you have figured out your total debt, and total debt per type, inform yourself 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 can feel daunting, but you should know that 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. For U.S. students, because repayment information on U.S loans varies, you are advised to consult your specific servicer. For more details on the repayment process, please visit the Federal Student Aid website.
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 and responsibilities and empower yourself to make informed decisions. Learn from these common regrets regarding government loans, shared by students with our Financial Aid Counsellors. Please note that the points below are for your consideration only and do not constitute professional advice pertaining to your individual situation.
Regarding 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.
- You may be charged 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.
- Complete your extra paperwork for existing loans (e.g. continuation of interest-free status) - if not completed, this may lead to “technical” default, obliged repayment, or interest charges that cannot be cancelled.
Not maintaining a full course load
- Unless you are deemed full-time (depending on the government jurisdiction, examples include a recognized disability or having young dependents), a part-time course load will create a loss of government aid, an over-payment situation and/or obliged repayment of prior loans. The threshold for a full-time course load varies by jurisdiction, so you should verify the required course load to be recognized as a full-time student with your respective student assistance program.
- Timely program completion will reduce your overall loans/debt and ensure the longest possible delay before hitting the 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, so they should be a higher priority for repayment.
- Extinguishing your government loans first means you are forgoing repayment plans offered by the government. The repayment plans offered by the government are generally more favourable than your options for other borrowing products.
Consolidating government loan debt with consumer debt/student line of credit
- You will lose the tax credit for income tax (15% 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 the repayment of a 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
- Limited or no savings and reduced or no funds from government aid upon return to school due to 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 to collection, which could impact any future purchasing requiring credit checks, such as a car or home purchase
- You can negotiate!