It’s well known by now that student debt is a serious problem. In fact, it’s been noted that Americans owe a collective $1.6 trillion US to both public and private lenders, and though lower, Canadian students owed $28 billion CAN in student loans in 2018 to all levels of government.
These numbers truly are staggering, and the reality is that a number of people are forced to seek debt relief as soon as they graduate. This leaves many young adults in a position where they have to choose between working towards paying their debt or making other large life decisions like buying a home or having children.
So what can be done? Unfortunately, until changes are made at the government-level, the most anyone can do is strategize accordingly and utilize the resources they have. But that doesn’t mean all hope is lost – here are some key strategies for dealing with student debt.
Seek Professional Advice
One of the best things you can do for yourself is seek professional financial advice. Often, when you’re in a stressful situation it can be difficult to see the big picture and to think rationally about what steps you need to take.
While you can turn to financial coaches and financial planners, consider seeking advice instead from a not-for-profit credit counselling agency like Credit Canada Debt Solutions. They provide free confidential consultations where they will assess your financial situation and discuss real solutions to your problems.
One solution they may recommend is to enrol you in a Debt Consolidation Program where you consolidate all of your debt into one monthly payment. A qualified Credit Counsellor will negotiate with your creditors on your behalf to reduce interest and in some cases even stop it all-together.
They’ll plan out a repayment plan that works for you, and even provide you with money management tools and advice to make the process easier. Having their support and guidance by your side is a truly effective way to achieve financial wellness, especially when you’re under so much stress.
Create a Monthly Budget
Creating and utilizing a budget is a key tool that you’ll need in order to pay off debt. There are a number of advantages to budgeting, like:
- Knowing how much you can spend on what each month
- Being able to track your spending
- Getting an idea of how much money you have coming in, and how much you truly have after spending on monthly bills like utilities or rent/mortgage
- Determining how much you can set aside to pay off your debt
- Putting aside money for savings
- Creating financial goals
It all starts by creating a list. First, determine your total household income (after taxes and before bills). Next, write out all of your necessary bills like rent/mortgage, heating, water, property taxes, etc. and calculate their total.
From there, minus the total of your bills from your household income – this will show you how much money you actually have to work with. It’s a common mistake that people make where they’ll simply use their income to determine how much money they have. But bills add up, so this is an important step in order to get a clear picture of your finances.
Next, take a look at other expenditures like food. How much money do you spend on groceries, and how much do you spend on eating out? What about entertainment and other activities like if you have a hobby? Keep spending on food separate from entertainment – because obviously, you need to eat.
Take a look at some free personal monthly budget spreadsheets to help you get organized. Everything gets calculated automatically and you’ll be able to see if you’re spending more each month than you can afford.
Determine Expenses You Can Reduce
Once you’ve utilized a budgeting tool to determine your expenses, take a look at see if there are some ways that you can reduce how much money you’re spending each month. For example, instead of eating out so much can you eat in more and cook your own meals?
Work with the numbers so that you end up with a manageable budget that has room for debt repayment as well as savings. Making these kinds of sacrifices is always difficult, but it will be well worth it in the long run.
And remember, if you’re ever struggling there’s always help available – turn to a non-profit credit counselling agency that can help you pay off your debts faster and give you the tools you need to realize your financial goals.