3 Important Habits That Can Help You Reduce Student DebtNov 30, 2016
Student debt can be stressful. It’s a real source of anxiety while millennials are in school, and it continues to pose financial difficulties for post-secondary grads — for years after they’ve left school. The good news is that there are options available to reduce student debt, and the stress that goes along with it. Financial Literacy Month presents a great opportunity to learn more, as the Financial Consumer Agency of Canada (FCAC) highlights the valuable resources available online and in your community.
There have been recent measures put in place, provincially and federally that can help with student loan debt. The Ontario government has tried to address the problem by offering tuition assistance to lower-income students. Additionally, the federal government now allows graduates to put off repaying their Canada Student Loan until they earn at least $25,000 a year. But student debt doesn’t only include government loans. Debt is often accumulated with personal loans, lines-of-credit, and even credit cards too.
The FCAC website has information that can help all age groups deal with debt. For students and post-secondary grads, it’s helpful to spend time reviewing the resources, tools and advice they offer on the topic of post-secondary education.
When you want to reduce the amount of debt you owe, it’s also helpful to develop some good financial habits. Here are three important habits you can put in place for the year ahead:
- Review your current debt repayment method.
What steps have you taken this past year to reduce your debt? Are you only able to make minimum payments? Have you missed a bill payment or two? Sometimes making better progress on paying down your debt is achieved with a different debt repayment strategy. Two of the more common methods are the debt avalanche and the debt snowball. The avalanche focuses on paying off your high-interest debts first to decrease the amount of interest you’re paying. The snowball focuses on paying off your smallest debt first, working your way up to the largest debt. Choose the method that best works for you.
On the other hand, if you’re experiencing any of these debt warning signs, even after you’ve put a new debt repayment plan in place, it’s time to seek help. A debt relief professional can review your situation and help you explore other options for debt relief. These OSB videos offer a good introductory explanation of how this process works.
- Reduce your reliance on credit cards.
Reducing student debt can be even more difficult with the potential of regularly adding to your debt through the use of a credit card. If you find yourself using credit cards as a borrowing tool rather than a payment tool, consider switching to a debit card. Or you can choose to leave your credit cards at home — it’s easier to fight the temptation to use them when you don’t have them. If you are dealing with a large amount of credit card debt, a consolidation loan is one of your options to help get debt under control. This type of loan will pay off multiple high-interest credit card debts. Leaving you with a single, more manageable loan to deal with, almost always with a lower interest rate than the credit cards.
- Review your finances — and especially your budget — regularly.
With the hustle of everyday life it can be easy to overlook checking your debt situation and personal finances. Try to set time aside each month to go through and review your financial situation. It helps you keep tabs on your spending and expenses, your savings goals and debt repayment efforts. It also alerts you to the need to adjust your monthly budget to accommodate a change in your financial situation.
Heavy student debt is affecting the financial health of many Canadians in their 20s and 30s. Young adults are staying at home longer, and delaying milestones like purchasing a home and starting a family. Reviewing your financial habits and learning more about debt options are two important steps you can take to not only reduce your debt load, but relieve some of the stress that goes along with it.
If you’d like to learn more about Financial Literacy Month or want to share your thoughts with others, check out #FLM2016 on Twitter.