In Québec, many young people go $10,000 into debt on average to finance their studies. When they enter the workforce, they have to pay off their loans, and this isn’t necessarily easy with the increase in the cost of living and the reduction in buying power. However, it’s important to pay off these loans as quickly as possible, because this lets you increase your credit rating. Here are a few tips to know how to pay off your debts fast once you’ve finished your studies.
Start paying off your debts as soon as possible
Students only start paying off their loans 6 months after the end of their studies. But the interest, which until then had been borne by the State, accrues to the former student as soon as their full-time studies have finished. If you’ve landed a job before the end of this 6-month period, you can start paying the interest as soon as you receive your first paycheque: this lets you reduce the total amount of your interest and pay off your loan faster.
Consider your student loan repayment when you borrow
Because the interest rate for student loans is advantageous, you’re naturally tempted to pay off your other loans first. However, you should be careful, because student debt, like other loans, must be repaid. You should also take it into account when taking out a new loan, such as a car loan, to be able to maintain the repayments.
Claim the tax credit for the interest paid on your student loan
Each year, your financial institution provides you with a statement showing the total amount of the repayments made, as well as the interest that this represents. Attach this statement to your tax return to deduct the interest from your taxes or carry it forward to future years: savings that you can use to speed up the repayment of your student debt.
Take advantage of debt forgiveness
Students who received scholarships each year of their studies and finished their studies within the deadlines stipulated by their educational program can take advantage of debt forgiveness of 15% of their total loan. If this is the case for you, contact the financial aid office at your educational institution or Student Financial Assistance, which can assist you in your efforts.
The radical method: maintain a student lifestyle while paying off the loan
The most effective way to pay off your student debt fast is to maintain a student lifestyle once you start working. In other words, you should severely limit your non-essential expenses and, if possible, keep living with your parents for a few months. If paying off your student loan is your number-one priority, you can even get a second job. Of course, this means sacrifices, but with this technique, former students can pay off a five-figure debt in only a year.
For many young people, paying off their student loan is a real grind: they put several years — even a decade — into paying it off. By being reasonable once you start working, it’s usually possible to pay off your debt fast, which brings you real relief and helps improve your credit rating. However, in case of difficulties, you shouldn’t hesitate to negotiate a repayment deferral with the lender, or even turn to the National Student Loans Service Centre for assistance.