How to Reduce Your Student Debt
If you are just graduating school chances are you have a student loan to pay back. The average cost of a student’s tuition in Ontario was $5,160 in 2006-2007 and it has only got higher within recent years. Most students are graduating school with around $20,000 dollars of debt. And they are wondering how they can pay back their debt as fast as possible. We are going to list some helpful tips on how to reduce your student debt and be debt free faster.
- Know your debt. This is one of the most important rules out there. Know how much you owe and the interest rate on your loan. The sooner you find out, the sooner you can make monthly payment, and be debt free. If don’t know your loan amount, contact your loan provider and they will able to tell you.
- Know your grace period. Most student loans come with a “grace period” this is the time frame between finishing school and starting to make payments. The Ontario student assistance program (OSAP) gives you a 6 month grace period. In this 6 month period you are expected to find, work and start saving. During this 6 month period interest builds up on your loan and once you are closer to loan repayment time you will get a letter in the mail asking if you want to pay the interest or have it added on to your loan. We suggest during this grace period you save up as much as you can and then put that amount down on your loan. This will reduce your interest rates and dent your loan.
- Know your finances: Knowing how much you will make once you are finished school is one of the most important factors in your loan repayment. Your monthly loan payment amount is based on your expected income once you have found a job in the field you took your studies in. Know what other bills you also have to pay like rent and vehicle payments because this can help you budget and see if you will have any money left over for yourself. Once you figure out your finances it will be easier to repay your loan. Make sure you know how much money goes out and comes in.
- Pay off the most Expensive Loans First: If you have more than one student loan, pay off the loan that has the higher interest rate. This will help reduce the stress load on yourself and save you money in the long run. These types of loans are often referred to as “private loans”. These types of loans come from the bank and have higher interest rates, essentially costing you more in the end.
- Extra Money: If you have extra money try and put that down on your loan. This will help in paying off your loan sooner and take away from your principal.
Here at McDougall we understand that new grads need help financing. Contact a McDougall representative to answer any further questions.