Student Loan Debt Repayment Strategies
Whether you’re currently a student or were one in the past, you fully understand the stress that comes with it. Finishing all your hard work leading to graduation is a very rewarding feeling, but it can bring with it the anxieties of having to pay back your student loan debt.
Facing what feels like a mountain of debt can feel intimidating, but rest assured, there are a few ways to manage your finances to help pay your loans back quicker.
Know Your Debt
First things first, in order to work towards a quicker repayment plan, you need to understand your debt. You may have received student loans from both the provincial and federal government. So, which do you prioritize and try to pay down the fastest?
The best thing to do is thoroughly list all your student loans. Highlight each loan’s outstanding balances, interest rates, and specific terms. Once you’ve compiled all the information, you’ll understand which loan should be paid down the fastest.
Utilize a Solid Budget
It’s challenging to plan how to repay your student loan debt when you don’t know the financial situation you’re working with. Developing a detailed budget that accounts for all sources of income and expenses is essential when managing student loan repayment.
By gaining a clear understanding of your financial situation, you empower yourself to accurately assess how much you can afford to allocate towards your monthly loan payments. This might involve cutting back on non-essential expenses or finding ways of increasing your income.
Here are a few steps toward building a solid budget and managing your student loan debt more effectively:
1. Calculate your total income
2. List all expenses
3. Identify areas to cut back
4. Allocate a portion of your income to student loan payments
5. Track your progress and adjust where possible
Use Your Budget – Make Extra Payments
Making extra payments whenever possible can significantly reduce the amount of interest accrued over the life of the loan. Even small additional payments can significantly impact the total interest paid and the length of the repayment period.
Consider allocating windfalls, tax refunds, or bonuses toward your student loan principal to expedite repayment.
If you’ve already developed a solid budget to help you pay back your student loan debt more efficiently, and things are going smoother than you expected, you can adjust it down the road to allow for additional payments.
What About Bankruptcy or a Consumer Proposal?
If you’re considering filing a bankruptcy or consumer proposal due to student loan debt, here are a few things to consider:
- You might be eligible to apply for the Repayment Assistance Program, designed to help you pay back the total amount within your means.
- If you declare bankruptcy or file a consumer proposal seven or more years after you cease to be a full or part-time student, your student loan debts and other debts can be discharged.
- The court can shorten this period to five years if it’s determined that repaying the loan would cause undue financial hardship.
Repayment Assistance Program
If you’re eligible for the Repayment Assistance Plan (RAP), you could receive financial assistance from the federal government. Once you apply, your income and family size will be considered before you’re approved.
With the RAP, you may qualify to have a portion of your student loan payments reduced or eliminated for a specified period.
It’s important you take the reins of your financial situation and explore all available options and eligibility requirements for these assistance programs to determine the best course for managing your student loan repayments.
If you’re struggling to pay down your student loan debt, our debt solutions services are here for you.
If you’re looking for further insights our team will share with you proper money management techniques, budgeting strategies, and debt repayment options.
Ready? Let’s talk! Contact us today and start shedding the stress of your debt.