Is Consolidation the Right Option for My Student Debt?Oct 18, 2017
If you’re thinking about debt consolidation for your student debt, you should know, there are advantages and disadvantages. But first, let’s talk numbers.
There’s no doubt about it, student debt is still an issue in Alberta. A recent BDO poll about the effects of student debt revealed that
- Alberta grads under 40 with student debt owe an average of $19,496.
- Two-thirds of Canadians between 21 and 39 with a degree or diploma graduated with debt.
- Six in 10 of those grads who graduated with debt are still paying that debt off.
- Seven out of 10 grads with student debt have sought relief of one kind or another.
If you’re juggling multiple debts along with your student loans, it’s tempting to consider debt consolidation to simplify your payments and perhaps save on interest. Here’s what you should know before you decide:
What are the advantages of debt consolidation?
You can find more information about debt consolidation here, but a quick review of the advantages include:
- Fewer monthly debt payments to track
- Lower interest rates
- Fixed date that the debt will be paid off
Is there a reason I shouldn’t explore student debt consolidation?
If your student debt is primarily government loans then debt consolidation may not be as effective. Government loans tend to have lower interest rates than bank consolidation loans.
If you’re struggling to repay your government student loan, the Repayment Assistance Plan (RAP) may be a better option for debt relief.
If you’re carrying different types of student debt from private lenders — like bank loans, a line-of-credit and credit card debt — then student debt consolidation is worth exploring.
How can you make your money go further to reduce debt?
In our poll, nearly one in five grads with student debt had taken on another job in addition to working full-time to pay off debt. Earning extra income can be a key strategy in being able to reduce your debt. But what if time constraints or family responsibilities make it impossible to take a second job?
Here are some simple tips to help you make the most of what you earn:
- Work from a monthly budget. This budget worksheet will help you track your income, spending and expenses.
- Look for ways to cut expenses. Nerdwallet has an interesting online calculator that shows you what you’d save by cutting specific expenses.
- Learn how setting SMART debt repayment goals can help you pay off your debt.
- Educate yourself. The Government of Canada has all kinds of resources to help you manage your money and finances, including more information on paying back student debt and debt consolidation. It’s worth your while to surf their website.
What kind of debt relief or assistance have you sought for your student debt? Join the conversation on Twitter using #StudentDebt and #DebtSolutions