Please note that this information is based on The National Student Loans Service Centre (NSLSC) in Canada. We are not financial advisors and are not offering investment advice. Please do not follow any financial advice offered by blogs or social media, without careful research and consideration.
Graduating from college or university is a huge milestone. Congratulations! All of those years of hard-work, integrity, and dedication to your studies finally paid off; now you have a degree to your name and can finally start exploring a job in your chosen field.
While you might feel relief for finishing school, there’s probably something still weighing pretty heavy on your mind, something “outstanding”: your student loans. While it can be daunting to think about the amount of debt you have on graduation, the earlier you prepare a repayment plan, the quicker you will achieve true financial freedom.
Below are ways to start preparing for student loan repayments, so that you are ready for when payments are due, and are completely on top of your financial obligations.
Be Aware of the 6-Month Grace Period
For the first 6 months after you graduate, you are not obligated to start repaying your loan(s) just yet. However, you should be aware that interest on the principal amount of your loan may accumulate during this period.
If you choose, you can start making student loan payments during this 6-month period. You could also make payments in the amount of interest accrued prior to making your regular payments after the 6-month period ends. Of course, you can also choose to start making all payments after the 6-month grace period. The decision is all yours.
Understand How Much Student Loan you Owe
Before entering your studies, I’m sure you were well aware of how much your program cost, either by semester or annually. As time goes on, you may forget, or put aside the thought of how much debt is slowly adding up as you journey through your studies.
Make sure that you are fully aware of how much you will owe, so that there is no surprise when you login to your student loans account and need to start making payments. This way, you can be prepared for and understand how much you owe in total, and monthly.
Find Out When Payments for Student Loan Begins
Finding out when payments begin is very important. Missing a payment can affect your credit score negatively, on top of interest and any penalties that will accrue. Make sure that your contact information is up to date so that you receive important notifications like this. Never make any late payments, and if you find yourself doing so, because life happens, make sure to have a plan in place to pay it as soon as you can.
Set Up Pre-Authorized Payments for Student Loan
To make repayments easier, and to ensure they are done on time, setting up pre-authorized payments will help you stay organized and give you peace of mind each month that your payment was automatically withdrawn from your account. You won’t even have to worry about making a payment each month, as long as the funds are in your bank account.
Know Your Student Loan Repayment Options
Know that you can often customize your payment terms. This means you can decrease your monthly payment amount to better suit your needs. Just remember that the less you pay each month, the longer it generally takes to pay off your loan, and will increase the amount of interest you pay over the life of the loan.
There are also repayment assistance plans for those who qualify. If you qualify for the Repayment Assistance Plan (RAP), you are allowed to make lowered or zero payments for 6 months. Once the period has ended, you can apply again for another 6 month period. If you are eligible for RAP and have a disability, you are also eligible for the RAP for Borrowers with a Permanent Disability (RAP-PD). This means in addition to a reduced or no monthly payment, you are eligible for a further reduced amount.
Lastly, if you need to take medical or parental leave from your studies, including for mental health reasons, you can apply for Medical and Parental Leave, which freezes your interest incurred and payments owed for a 6-month period. You can apply again, up to a maximum of 18 consecutive months.
If You Haven’t Already, Start Putting Money Aside for Student Loan
It’s important to have money ready for making monthly payments. But if you don’t, we get it, life happens. Especially in 2022 where we’ve had a pandemic for the last two years and with inflation on the rise.
If you don’t already have money set aside for your student loans, try setting some aside now. Any amount counts, and will add up over time. Even putting away $10 a week will add up to $40 a month, and $520 a year. Set a savings plan in motion, and put money aside that makes sense to your budget.
Make Sure to Claim the Interest Paid on your Tax Return
Check your account with the National Student Loan Service Centre for a message about your official income tax receipt. This will show you the total amount of interest you have paid that tax year on your student loans. Make sure you enter this amount when you are completing your tax return forms. You may be able to get tax money back on this amount.