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Student loans: Responsible borrowing for painless repayment

For most, borrowing funds for higher education is a fact of life. A recent report released by the BMO Financial Group revealed that more than half of Canadian university and college students graduated with student loan debt, and the average debt load was $26,297.Unfortunately, many grads find that it isn’t as easy to pay off these loans as they may have thought when they took them on. The Canada Student Loans Program reports the average default rate across the country is about 14 percent. Although borrowing funds may be inevitable for some, defaulting doesn’t have to be. For some simple advice you can offer upcoming student borrowers or recent grads on responsible borrowing and repayment, keep reading.Smart tips for smart borrowers

Whether you work with high school students just beginning the student loan process or you’re preparing upcoming grads for student loan repayment, here are six smart tips you can offer:

  1. Debt anticipated salary: This simple equation is the ideal (but not always the norm). Students wishing to repay their student loans in the typical 10 year or less timeframe should aim to have a total student loan debt load less than or equal to their anticipated first year salary. To determine what amount is ideal to borrow, simply ballpark tuition over the course of the pursued degree, and then use a resource such as salary.com or glassdoor.com to determine anticipated salary information. A borrower whose monthly student loan payment is less than 15 percent of their gross monthly income will be in a better position financially. Print these rules of thumb for potential borrowers on water bottles and notepads to distribute at parent-teacher conferences or student loan informational sessions.
  2. Free money is … free money: Any time a student can get free mone, it’s a win! After all, student loans have to be paid back; grants and scholarships don’t. Websites such as www.studentawards.com can help match students to relevant grants and scholarships. Promote scholarship resources to students and parents alike. Print Web resource URLs on carabiners that can be handed out to students at an assembly. Further reinforce your message by mailing parents an outline of opportunities and important deadline reminders—imprint important contact information on a logo’d jumbo paper clip.
  3. Plan wisely: Many schools charge a flat tuition rate, regardless of the number of classes taken. Careful planning as to what classes students will take and when, and taking a full class load can help students finish a semester early—or at the very least minimize the chance that a four-year degree turns into a five-year one. Planning sessions between the guidance counselor and students can be very helpful and informative—plan one-on-ones with each student throughout the year. Remind them of their upcoming session and any prep work that’s required by placing a note on their locker with a Magnetic Memo Clip.
  4. Know thy loan terms: There are many different types of student loans out there and it’s important to read the fine print. Interest rates, fees and repayment schedules vary by lender. Some loans require payment six months after graduation, some nine months after. But some require payment from day one. Many lenders offer reduced rates after a certain amount of on-time payments as well. Students who are well informed on all the terms and conditions surrounding their student loans are better armed to make good repayment or refinancing decisions.
  5. Communication is key: It is of utmost importance that students communicate with their lender. Something as simple as an address change should be reported immediately—after all, just because a payment notice goes to an old address doesn’t mean a payment isn’t due. And even more crucial, if students are unable to pay, communication is essential. Lenders want to receive their money; they may be able to work with students to develop modified repayment terms, a deferral or under some circumstances, forbearance. It is imperative that students understand that defaulting on student loans carries serious penalties, including calling the loan balance due-in-full, garnishing wages and withholding tax refunds—not to mention seriously harming one’s credit and future ability to borrow. Provide upcoming grads with a student loan repayment survival kit and include helpful repayment reference materials, a scented pen and a stress reliever—toss it all in a sports backpack imprinted with the top five reasons not to default on your student loan.
  6. Loan forgiveness: There are a handful of programs that either forgive or pay off student loans for those meeting certain criteria. For instance, the Government of Canada may forgive up to $40,000 in student loans for eligible family doctors, and up to $20,000 for eligible nurse practitioners.

Remember, most students will inevitably incur student loan debt. But responsible borrowing and astute repayment can make the process relatively painless for all.

2013 BMO Student Survey: Canadian Students Relying Less on Family to Finance Higher Education.BMO Financial Group. 13 Aug. 2013. Web. Retrieved 20 Dec. 2013.

Statistical Review: Canada Student Loans Program 2009-2010.Employment and Social Development Canada. N.p., 23 March 2013. Web. Retrieved 20 Dec. 2013.

Shin, Laura. “Taking Out Student Loans? Do It Right With These 8 Tips.” Forbes. Forbes Magazine, 19 Sept. 2013. Web. Retrieved 09 Dec. 2013.

Smart Borrowing Tips for Graduate Loans.” Peterson’s. N.p., 30 Jan. 2013. Web. Retrieved 09 Dec. 2013.

“Default Consequences.” American Student Assistance. N.p., n.d. Web. Retrieved 08 Dec. 2013.

Canada Student Loan Forgiveness for Family Doctors and Nurses. CanLearn. N. p., 26 July. 2013. Web. Retrieved 20 Dec. 2013.

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Cheryl Sina

Cheryl is a Corporate Giving Specialist and has been with 4imprint 20 years. Cheryl writes about and celebrates the special, world-changing work of the nonprofit organizations selected to receive grants from 4imprint’s one by one® Charitable Giving Program.

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