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For a financially sound student life
Financing your studies while covering your day-to-day expenses and other
financial responsibilities can be quite a challenge.
Although it is not unusual to graduate with a few accumulated debts, there are many ways to pay for an education without overextending yourself. The key is to understand the various options available in order to make informed decisions based on your current situation and the income you expect to earn in the future.
Student loans and bursaries
Students who are granted a bursary are undoubtedly in an ideal situation since the amount received does not have to be reimbursed.
Those who obtain a government student loan will, however, have to start repaying it in accordance with a pre-established schedule, six months after graduating or leaving school. While interest on government loans is income tax deductible, it is, nonetheless, very wise to begin repaying the loan as soon as possible to quickly erase that debt.
The Government of Canada offers a repayment assistance program for student loans, which allows students to establish a repayment plan based on the amount they can afford. Visit canlearn.ca under Home > Student Loans & Grants > Repayment > Repayment Assistance for more information.
If the government loan or bursary is not sufficient to cover all expenses, it may be a good idea to look into obtaining a line of credit.
Student line of credit*
A student line of credit is a form of loan granted to cover certain education-related expenses. As long as students are in school full-time, there is no obligation to repay the capital on the loan; only the interests charged on the principal used.
This type of financing has many advantages, including the fact that it typically carries a lower interest rate than the one charged on personal loans or credit cards. Students may also use the line of credit to pay bills or purchases, or even transfer amounts from one account to another, simply by using a debit card, ATMs, electronic banking solutions or mobile banking solutions.
Credit cards often get a bad reputation, but there are many ways to use them responsibly and avoid incurring excessive debt.
First of all, it is crucial to closely monitor all credit card expenses. If the amounts charged to the card exceed the student’s income, and that the borrowed sum isn’t repaid in full each month on the due date, interest will accumulate, on top of the minimum monthly payment required. It’s also important to know that failing to make the minimum payment will negatively impact your credit rating.
Nevertheless, a properly managed credit card can be of tremendous support, especially in the event of urgent expenses that can’t wait until the next paycheque. Some cards also offer the benefit of purchase insurance. It’s important to take the time to assess every option (annual fees, reward programs, etc.) in order to select the card best suited to your needs!
The wide variety of financing solutions offered to students requires you to compare the pros and cons carefully. Of course, projected earnings come into play in this equation, but it is crucial to first understand every one of the options available in order to make an enlightened decision and get a financially sound start to your professional life!
For more information about financing solutions for students, visit nbc.ca/students or make an appointment with a National Bank advisor!
*Financing subject to credit approval by your financial institution.
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