There are three things in life you can consider inevitable student loans, taxes and death. Sadly, even student loans are now part of the list in Canada, where tuition is markedly lower and higher education is more affordable in comparison to the US. One major advantage that Canadians have over US students is the well-organized federal system. Having said that, make sure you apply for and make use of federal loans to cover your tuition before running to the bank or another private lender. Government loans come with a lower interest rate, and interest does not accumulate with some of them. With bank loans, there may be hidden fees, even if you think you understand the fine print on the agreement.
Many people find it difficult to understand how much they owe. You do this by looking at the interest rate which is compounded annually or monthly, whether the rate is compound or simple, what is the term of the loan, and finally, the total cost. If you do not make enough money to make the payments, you can ask if it is possible to extend the term. It will enable you to make smaller payments following your graduation, when your salary is lower. You will make more with time, allowing you to make bigger payments. Natually, if you opt for an extended payment plan, you will pay more in interest, but a portion of it will be tax-deducible. Unless you are an expert in the field, you may have to resort to the services of a specialist to help you with the numbers.
As another option, you can choose an income-based repayment plan. Thus, your monthly payments will decrease to a certain portion of your income.
If none of these options works for you, you may resort to forbearance or loan deferral. For a set period of time you will not have to make payments, as established by you and your lender. In this period, you are free to pay off other, more urgent debts or just deal with being unemployed (live on unemployment benefits). The latter is a common problem for recent graduates.
If you have excessive student debt to deal with, it may be a good idea to postpone making major purchases or having children. Before you consider applying for a loan, you may shop around for a loan, either online or some place else.
There are some programs that entail fixed repayment terms for example 20 years after which the outstanding debt is forgiven. You may think that is too generous. The lender has figured out that if you have been paying him for 20 years, you must have given his institution at least five times what you borrowed, so he can waive the rest.
There are special options for people who work in the public sector. If you are a civil servant, teacher, or hold a public sector job and sign up for a special repayment plan, your debt is waived after a certain term, depending on the plan.Financial blog, discussing debt and economic problems all North Americans face.
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