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Financial Friday #101: Student Loans Offer Big Rewards but Bite Hard!

Friday, March 4, 2022   /   by Mario Daniel Sconza

Financial Friday #101: Student Loans Offer Big Rewards but Bite Hard!

Education is a lifelong investment with immeasurable benefits to your overall wellbeing. Unfortunately, it can come with a mountain of debt that can seriously impact your life for many years after graduation. The cost/benefit of your studies is very different from person-to-person and while that decision is up to you, make sure you fully understand the financial implications of a student loan and incorporate that into your decision-making process.


 


To get you started, here are 10 fast facts that student loan holders or any students/parents now considering one need to know.


 


1. You have to start paying back your loan within six months of completing your studies and the maximum term of the loan is 174 months (14.5 years).


 


2. The default option is variable interest at the bank prime rate (currently 2.70%), or you can change to a fixed interest rate at prime + 2% (be careful — you cannot change back to variable!).


 


3. The average Canadian student loan for a 2-year college is $15,300 and $28,000 for a 4-year degree.


 


4. Paying off the average Canadian student loan of $28,000 (4-year degree) at current interest rates (fixed rate option) would require a payment of $635 monthly for 5 years.


 


5. If you declare bankruptcy within 7 years of graduation, your student loans are not forgiven.


 


6. The loans terms are quite flexible — you can choose fixed or variable interest, select the term length (maximum 174 months), choose payment frequency, and make lump-sum payments at any time.


 


7. Missing payments for nine consecutive months will result in your loans being sent to the CRA for collection and your credit rating will be heavily impacted.


 


8. You receive an annual tax credit (deduction) for your loan interest.


 


9. Due to the pandemic, student loans will not accumulate interest for the period from April 2021 to March 2023, although you must continue to make regular payments during this time.


 


10. Student debt forgiveness is a political topic, but aside from the Repayment Assistance Plan and a few other highly restricted options, there are currently no loan forgiveness programs for Canada Student Loans.


 


There are plenty more details to look into if you are considering a student loan, would like to pay back your existing student loan more quickly, or struggle to make your loan payments.


 


Resources


 


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Thinking of bugging out to a cheaper locale? Check out this interactive map and see how your current location stacks up to the rest of the country.


 


How not to invest like Warren Buffett


He has a pretty good track record and billions of dollars to prove it, but is Mr. Buffett really the investor we should all be striving to emulate?


 


BOC hikes rates — more increases on the way?


Economist Sherry Cooper gives a concise summary of the recent hike in interest rates and why she believes the BOC is just getting started.


 


Gasoline prices hit the stratosphere!


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How much should I have in my RRSP?


As much as possible would be the obvious answer, but if you prefer facts over wishful thinking, then make sure to check this article out and get some idea of a number to aim for.


 
eXp Realty of Canada
Mario Daniel Sconza
4711 Yonge St 10th Floor
Toronto, ON M2N6K8
416-230-3476

Information is provided exclusively for consumers’ personal use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®.
Information is provided exclusively for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®. Copyright 2022 Last Updated May 16, 2022
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