TLDR
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The sooner you pay off student debt, the sooner you can start saving for major life experiences
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Figure out how much you owe and come up with a plan and a budget to pay it off
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Paying off debt can seem overwhelming, but using services like credit counselling can help make it manageable
Congratulations! You worked hard, you pulled all-nighters, you gave it your all, and now you’ve finally graduated – with a degree and a mountain of student debt.
You’re not alone. According to Stats Canada, roughly half of students are graduating with debt, and 64 per cent still have debt after three years.
Although it might seem daunting, there are many ways to pay down that debt and get your finances pointed in the right direction. Here are some tips and tools to consider:
Where to start
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Figure out how much you actually owe: Do you have a government loan? A student line of credit? Credit card debt? Do you owe money to family?
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List all your debts and the amount of interest you’re paying on each: You want to prioritize paying back your loans in order of the highest interest rate to the lowest. You might want to use a loan calculator to play around with different repayment scenarios.
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Remember, the Canadian government eliminated interest on Canada Student Loans and Canada Apprentice Loans in April of 2023. This saves graduates an average of $520 each year.
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Make a budget: A monthly cash flow calculator can help you get a clear picture of your expenses and calculate how much you can comfortably commit to debt repayment each month.
Ways to pay off student debt
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Start paying now: With both a government loan and a student line of credit, you’re not required to make payments on the principal while you’re in school. But that doesn’t mean you can’t start anytime. Starting to pay down your loan as soon as possible will go a long way to reducing your overall debt.
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Pay more than the minimum: If possible, try and pay more than just the minimum each month, especially on those high-interest loans.
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Once you start receiving a paycheque, you can automatically get money transferred to your debt repayment. Even if it’s a minimal amount, it’s a great first step to get started.
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Find ways to save: A great way to save money is to live with a roommate, or even your parents. Even if it’s only for a year or two, this is an easy way to get your hands on extra cash, which you can put toward debt repayment.
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Look into tax rebates: There are tax rebates available to students. Common deductions and credits include interest paid on student loans and tuition and textbook amounts.
For further guidance, you can also speak with a financial advisor at RBC, who can take you through the options available to you.
Yes, paying off your student debt can seem overwhelming, even impossible, but with planning and determination—it is possible!
Resources:
Struggling with student debt? Here’s how to pay off student loans faster – MoneySense
How to lower your student debt — and cut through misconceptions around it (thestar.com)
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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