“You’re waiting for a train. A train that will take you far away. You know where you hope this train will take you, but you don’t know for sure. Yet it doesn’t matter, because we’ll be together.”
This quote from the movie Inception could apply to students and debt.
The train in this case refers to the education, or institution, students are enrolled in. There is a promise of having a career at the end of the ‘journey’ yet there is uncertainty. And what will be there at the end for many students is the debt they accumulate over that period.
According to Manuela Dragota, district vice president of CIBC for Durham region, there are several contributing factors for debt, including rising tuition costs and living expenses, improper or lack of budgeting, as well as the challenges of securing or finding summer employment.
While two-thirds of Canadian students work through the summer, the majority of them aren’t making enough money to pay post-secondary costs for the upcoming year, a CIBC poll in August 2014 showed.
“I think the creation of a budget is key. I don’t think most students actually sit down and formally put together a budget for themselves,” Dragota said.
Planning ahead is not something that happens with students as often as people in other stages of life. But doing so can help students maximize their resources while attending school and taking loans, she said.
Often students aren’t aware of the support that’s available to them.
“They are not reaching out to their financial institutions or their banks to talk to a financial advisor and get some advice around how they can map up an appropriate budget,” Dragota said. Students can speak to financial advisors free of charge in many banks.
There are also many other resources available to students to manage debt and finances. Online budget calculators are also available to help get a clear picture of finances and help individuals work through their expenses.
“Services such as CreditSmart can help students stick to their budget. This application also can send reminders to the student on their spending, can allocate and organize what they’re spending their money on,” she said. The app notifies users by phone, e-mail or online messages when they start exceeding or getting close to their customized budget. Tracking expenses could be easy this way. Sticking to the plan is key before things start to accumulate too quickly, she added.
The earlier students start planning, the better, even as early as high school, she said.
“My message to students would be, before you get off to college or university, please sit down and find out what’s available to support you financially,” Dragota said. But it’s never too late.
Still, students filing for bankruptcy is not uncommon.
“A lot of people think it (budgeting) should be common sense but it’s not, it’s actually a learned behaviour and we find that a lot of students haven’t learned that when they get out on their own,” said Constance Wyatt, a certified credit councillor at K3C Credit Counselling in Oshawa.
Eating out often, going out drinking every weekend and buying coffee every day, as well as cell phone contracts and many other recreational activities can add up, she said.
There are options available for students to do damage control. They can apply for interest relief after graduation so they don’t have to start paying loans immediately, adding there’s no interest being accumulated either during that time.
“You can actually continually apply, and you can get up to 30 months worth of interest relief in six month increments and a lot of students don’t know that,” she said.
Debt is reality for a lot of students but both experts say it doesn’t have to become impossible to manage because of the many options available.