Student Debt Crisis in Canada

Over 1.7 million students in Canada have a student loan. On average, one debtor owes at least $26,075. All of these student debts in the country combined are at least $18 billion. Sources say that the average cost of post-secondary education in Canada is $6,400 annually. Multiply that with the length of the program, plus school and living expenses, fees can soar. Since quality education comes with a price, those who study in Canada—foreign or local—find that getting a student loan is the best solution to get a quality education.

Students in Canada can apply for a federal student loan. The Canada Student Loan Program helps them pay up to 60%, with or without interest. The Canadian federal and provincial government's student loans cover the tuition, textbooks, and living expenses of the student. Usually, the student loan in Canada is credited after graduation.

With the pandemic adding to the total costs of living, including tuition fees, the cost of education in Canada grew. At the same time, statistics show that from 2019 to 2020, the average student loan in the country rose by 3.5%. In the last ten years, the student debt in the country has increased by an average of $91 billion per year.

What is a Student Loan?

Simply put, the federal and or provincial government provides a student loan to help students pay for their college or university tuition fees and other expenses. Applying for a student loan won’t allow you to choose the amount of money you would use for. Instead, it will depend on your financial situation, dependents, and tuition costs.

Since students have limited earning potential, getting a student loan and paying for it requires work and perseverance. Aside from doing good in school, you should also work hard to pay off your debts.

The Effects of Student Loans on Students

With the increasing cost of living and tuition fees each year in Canada, students with loans face different consequences such as mental health problems, depression, and difficulty securing a job. Due to their loans, these students work hard not to save up but to pay off their dues. Moreover, as their debt increases due to interest, these students see a decline in their average value, making it more difficult to pay their debts on time.

Aside from accumulating interest, a person who is struggling to pay a student loan also suffers from a low credit score, which makes it even harder for them to access additional lines of credit that could’ve made their living experience better such as an auto loan, mortgage, or loans to pursue a higher degree. Thus, since they cannot apply for these loans or because they are tied to paying off their student loans, students often delay other important life events such as getting married, having children, buying a car, buying a house, and saving for their retirement.

To pay off their student loans, some even focus on the pay of their work, instead of applying for a job that is a better match with their careers. Some to some extent, even moved back to their parents to minimize their other expenses.

Paying your student loan is a long process. Usually, you are given a six-month grace period (interest-free) before you are required to start paying off your debts. It is best to pay your debt right away so that the amount you’re paying goes to the principal, not on the accumulating interest, which makes your debt higher. The six-month non-repayment period also starts after you reduce your school from full-time to part-time or leave school or take time off school.

Avoiding Drowning in Debt

Situations may hinder a student from paying off their debts entirely on time. To help students struggling with financial assistance, the Canadian federal government formed the Repayment Assistance Plan for students struggling to pay their student loans. With this plan, students can make loan payments in reasonable amounts that suit them best without compromising other aspects of their lives.

By April 2021, an announcement has been made saying that the Government of Canada has suspended the accumulation of interest on Canada Student Loans until the end of March 2023. This is an excellent relief from Canada’s student debt crisis since it removes a significant weight off students' shoulders. Instead of problematizing how to pay off the interest on their debt, they can focus on its principal amount.

Ways to Reduce Your Student Debt Burden

Aside from applying for a Repayment Assistance Plan, here are other practical ways you can lessen your student debt burden:

Save as much before you enter college. Having a savings fund for your tuition fee in advance will reduce how much you will have to borrow for your student loan.

Enroll at a less expensive college. You may consider enrolling in your first two years of college at a community college and living in your home to cut the costs and minimize your loan debt.

Work while in school. You can work part-time during your term and full-time during the summer to pay money for your school debt. Since remote work is becoming more prevalent globally, you have the freedom to work for other countries as well. Working remotely also helps cut costs as you can stay at home for work instead of spending money on transportation.

If you find yourself employed by a foreign company that gives your salary in USD, you may use RemitBee’s currency exchange services to make the most out of your money to pay off your student loans in no time. Our service is free, and we guarantee to give you the best exchange rates!

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