We all know that funding an education is expensive.  The costs of tuition, books, a laptop, residence and food are significant.  Luckily, student loans are available in Canada to assist students to fund their education.  Unfortunately, student loans over a three or four-year program can leave a new graduate with a significant level of debt to repay.

Student loans provide a six-month non-repayment period once you complete your studies, although interest may be charged during this period.   There are many repayment options you can explore at https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay.html to find the repayment plan best for you.  Review and adjust your budget to ensure you can afford the monthly student loan repayment and make sure you are paying on time every month.

Creating Your Budget

If budgeting is new for you, start by keeping track of every dollar you spend for a couple of months, then create your budget with the following steps:

  • Write down all sources of income and how often you will receive them:

Wages – weekly, bi-weekly, bi-monthly or monthly
Trillium benefits – monthly
GST cheques – quarterly

  • Make a list of your expenses broken out by fixed monthly costs for student loan payment, rent, cell phone bills, insurance, etc. and fluctuating monthly costs for food, gas for your vehicle, clothing, etc.
  • Allocate your fixed expenses to specific income sources (i.e. rent from a first bi-weekly paycheque, student loan payment from a second bi-weekly paycheque, etc.) You will want to ensure your fixed expenses are paid on time each month to build your credit rating.
  • Write down an estimate of how much you plan to spend on your remaining monthly expenses. Be sure to consider annual expenses that you must budget for monthly (car sticker, gifts) so the funds are available when the amount becomes due.  Credit should not be used to fund expenses that you have not budgeted.
  • If your monthly income exceeds your total expenses, consider how much you want to put aside for savings for future financial goals, if you want to pay off your student loan quicker or if you will allow yourself to increase some discretionary expenses.
  • If your expenses exceed your income, re-evaluate if you can decrease any expenses or need to increase your income (part-time employment, small jobs, etc.). Consider the difference between your “needs” that are necessities and your “wants” and adjust your plans to spend.
  • Keep track of your expenses every month and compare to your budgeted amounts and make changes as necessary.

If you are struggling or unable to make your student loan payments, the Repayment Assistance Plan may provide you relief.  Eligibility for the plan is dependent on your income and can be researched at https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay/assistance/rap.html.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)