The costs of post-secondary education are steadily increasing
and many students are graduating with heavy debt loads. If you have student
loans to repay, financial planning is essential. Following some simple,
financial basics will make your loan payments much easier to manage.
| • | Take advantage of the grace period.
Most student loans have a grace period of 6 months or more before the first
payment is due. Use this time to find a job, arrange for a place to live and
build up a small savings fund to handle emergencies.
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| • | Start dealing with your debt. There’s
no getting around it – you’re responsible for paying back the amount you
borrowed within the agreed amount of time. The most common loan repayment
schedule is a series of fixed, equal payments spread over a specific period
of time. But some lenders offer a range of repayment options, so talk to
your lender to see if you can arrange a payment schedule that suits your
budget.
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| • | Pay expensive debt first. The interest
rates on credit cards are much higher than on student loans, so paying off
your credit cards should be your first priority. You may have to adjust your
spending habits to help manage both your credit card and your loan payments.
You may also be able to pay off your high-interest credit card debts by
taking out a lower-interest consolidation loan. If your schedule allows, you
could even consider taking on a second, part-time job to help reduce debt
faster.
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| • | If you’re running into financial
difficulties, do everything in your power to avoid missing a payment or
defaulting on your loan. Missed payments will affect your credit rating and
make it more difficult for you to get a loan or mortgage in the future. To
get through the crisis, talk to your lender about deferring your payments
temporarily or adjusting your repayment schedule to suit your current
financial situation.
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| • | Take advantage of tax breaks. You can
deduct tuition costs and interest on student loans from your income tax –
make sure that you maximize your tax benefits.
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Establish a budget. Start by identifying your fixed expenses, like rent,
food, heat and hydro. Then look at your spending patterns to find areas
where you can cut down on expenses.
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| • | Cut hidden expenses. That morning
Starbucks coffee run or daily lunch out will soon eat into your budget,
making loan payments difficult. Control your spending by keeping an eye on
the little expenses – they can cost you thousands of dollars every year:
| o | Pack your own lunches
and snacks instead of eating out every day.
| | o | Eliminate unnecessary
expenses, like magazine subscriptions and specialty cable channels.
| | o | Shop around to get the
best deal before you make a purchase.
| | o | Break costly habits,
like smoking and gambling.
| | o | If something breaks,
don’t throw it away – it’s often less expensive to repair it than to replace
it.
| | o | Buy used instead of new
– you can get great ‘finds’ at estate sales and consignment shops.
| | o | Monitor your ATM
withdrawals. Take out a specific amount of cash each week and make it last.
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| • | Keep
good financial records. A loan is a serious commitment and it’s
important to maintain accurate records. Keep a file folder for relevant
paperwork, such as correspondence from your lender and loan documents. You
can also purchase a variety of accounting software packages that will help
you record your loan payments and track your budget.
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