The brochures you read to help choose your post-secondary institution were filled with smiling faces and shiny photos of a beautiful campus. There was probably even a shot of successful graduates throwing their caps in the air as they stepped into their adult life. But, adult life isn’t problem free, is it?
A growing number of young adults are struggling with paying off debt due to large student loans. Graduating with tens of thousands of dollars of debt is quickly becoming the norm – and getting out of debt is difficult as there is a growing income gap between young and old workers. That’s according to The Bucks Stops Here: Trends in Income Inequality Between Generations, a new report from The Conference Board of Canada. The report finds that the average disposable income of Canadians between the ages of 50 and 54 is now 64 per cent higher than that of 25-to-29 year olds, up from 47 per cent in the mid-1980s.
However, Noah Morris, director of the Student Financial Assistance Branch with the Ontario Government, says the risk is worth the reward and there is plenty of help for students.
“Post-secondary education is the best investment a person can make in their future,” says Morris. “There are (government) programs available to help students fund their education, limit the amount of debt they take on, and help with repayment if they are taking a little longer to get a job or are having temporary financial difficulties.”
Morris points Ontario students to the OSAP website, and other Canadian students can refer to the national site for more information. Consolidated Credit Counseling Services of Canada has advice for young Canadians who are entering the repayment phase of student loans –
- Focus on saving – It’s tempting to take that spur of the moment trip down south or get a fancy new TV for your apartment, but living debt free is all about priorities. When you are dealing with debt, you need to be focused on how to save money to get yourself out of debt as quickly as possible. Saving starts small. Cut back on eating out, share Wi-Fi costs, take public transportation instead of buying a car. Every little bit helps when you are focused on saving money fast.
- Supplement your income – It’d be great if everyone graduated from university and immediately walked into a $60,000 a year job. But unfortunately, 2013 statistics from Statistics Canada show that the average new graduate with two years experience is earning $45,000 a year. As that’s an average figure, there are many who are earning much less and struggling to make ends meet. So, if your salary doesn’t allow you to pay down debt, it’s time to earn more. How? Take a part-time job on the side. Whether it’s working a few hours doing landscaping or at a clothing store, that extra money can work to reduce your debt.
- Basement, roommates or living at home – For many young people, the largest expense they have is rent. Decreasing that monthly expenditure may be the answer to the how to pay off debt question. Instead of getting a bachelor/bachelorette pad, consider moving into a slightly larger place with a roommate. You will probably find that splitting the larger rent actually ends up cheaper on a per-person basis. You’ll also be able to save money by splitting the utility and internet bills. Apply these savings to eliminating your debt and you’ll be on your way to debt freedom in no time.
- Seek help – If you’ve tried to service your debt but you just can’t make the required payments, don’t try to wish it away – you need to take action. Contact the National Student Loan Service Centre and ask about the various ways they can help. If your debts are still out of control, contact a credit counselling service to see what options are available for you.
If you want to learn more about making responsible financial decisions, check out Consolidated Credit’s free Personal Finance educational section. If you’re struggling with debt, call one of our trained counsellors today at 1-888-294-3130 for a free debt analysis.