Having graduated from Toronto Metropolitan University (formerly Ryerson University), I had my fair share of Ontario Student Assistance Program (OSAP) student loans. I was able to pay off my loans within six months of graduation by earning scholarships and working various part-time jobs. I successfully applied for 10 scholarships during my four-year studies, totalling more than $10,000. This helped to reduce my student loan debt by half. To pay off the balance, I worked part-time as a research assistant and teaching assistant on campus, while having summer jobs as a server. When I started my first full-time job, living at home helped me to focus on saving and investing my hard-earned money.
Taking an aggressive approach to debt repayment does require discipline, but it gave me a clean slate at the start of my career and enabled me to focus on building my wealth. I encourage you to take advantage of applying for scholarships and bursaries because it’s free money that you could be leaving on the table.
Should you invest in the stock market if you still have student loans?
Since interest rates on student loans are still relatively low, you may be considering contributing a portion of your earnings towards the stock market as it may give you decent returns. Keep in mind that no one can predict how the stock market will perform for any given year. Read more about investing vs. paying down student debt.
Should I wait to pay off my student loan?
Although it can be incredibly satisfying to hack away at your student loan, consider this: student loans are a low-cost form of debt. If you don’t currently make a sizeable income, or you find you have more urgent priorities like simply paying your rent, you will need to determine how to juggle your obligations. Whether it may be saving up for a down payment for your first home or investing money in the stock market or maybe starting your own side hustle, it all depends on your comfort level and personal goals.
That said, first and foremost, it’s always wise to have an emergency fund. The typical advice is to have three to six months’ worth of expenses in a savings account you can easily access. Being a new grad, it can be challenging to balance all your expenses. So you can start by making smaller contributions and gradually increasing your savings amount. If you have other forms of debt, like credit card debt, you may want to focus on paying off the debts with the highest interest rates while making the minimum payments for student loans. This way you can reduce your interest payments and reduce the amount of time to get out of debt.
What if I can’t afford to pay off my student loans?
If you’re having a hard time repaying your federal student loan, you can apply for the Repayment Assistance Plan for the Canada Student Loan. Once you’ve been accepted, the government will revise your payments (sometimes to as low as $0, depending on your income) and pay the interest for you in the meantime. (Note: you have to re-apply every six months.) For help with repaying the provincial student loan, you need to contact your school’s student aid office. If you have a loan or line of credit with your financial institution, you can find out your options by contacting your local branch.
Keep in mind that you will want to stay on track with your payments because this will affect your credit score. Potential lenders use this information to determine your creditworthiness. If you fall behind on your loan repayments, this will negatively affect your credit score, which could make it harder to get a mortgage or car loan down the road. Instead, you could look at reducing your monthly payments or extending your repayment timeline to make your payments more affordable.
Stay the course
If you are an aggressive saver, take the fast lane—like I did—and pay it off as quickly as possible. Alternatively, you can take a medium-effort approach and pay it off within several years, while looking to distribute your money towards having a rainy-day emergency fund, investing in the stock market or saving for a down payment on your first home. Rest assured, there’s nothing wrong with taking a slow and steady approach to paying off your student loans. Whichever path you choose, be sure to celebrate when you’ve paid it off, as it will be a huge achievement.
Sandy Yong
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