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Financial planning tips

September 19, 2016

Smart ways to manage student loans

As tuition costs rise, so does student debt. But it’s possible to borrow wisely and repay responsibly.

Average university tuition fees in Canada are continuing to rise faster than inflation, hitting $6,191 for 2015-2016, according to Statistics Canada. That’s 3.2% higher than the previous year; over the same period, the Consumer Price Index rose just 1.3%. As a result, many students now view debt as a necessary part of going to school.

There is some good news for students, however: You can choose reasonable borrowing options and find ways to handle your debt responsibly.

Borrow the minimum

First, be sure to minimize how much you need to borrow by looking for scholarships and bursaries from sources such as:

  • Your high school and college or university (not all of these are given out automatically – some require an application.)
  • Your or your parents' workplace
  • Community organizations

As well, remember to take advantage of tax credits. The Canada Revenue Agency offers full-time students tax relief by allowing you to claim for your tuition, as well as up to $400 per month while you are in school, $65 per month for textbooks and a tax credit for the interest payable on your student loan. Note that the federal government has indicated it will make changes to financial assistance for students, including replacing student tax credits with an increase in other forms of help, starting in the 2017 tax year.

Compare government grants and loans

Jake Sheehan, an insurance advisor with Life Design Systems, says that provincial government loans are often a better option for students than federal loans, as the provincial loans typically offer a delay before interest starts accumulating and a longer repayment period.

The federal government provides both grants, which do not need to be paid back, and loans, which do. Interest accumulates for part-time students throughout their time at school. After graduation, you can ask to increase or decrease your loan payments if you are either having difficulty making the payments or you want to pay off the loan sooner. (Find out more at

Research bank loans and lines of credit carefully

"The economic turmoil of the past few years has made people more aware of how much they are borrowing and what that money is being used for," says Sheehan. It's especially important to do lots of research before taking out a loan, because different banks are better for different programs.

He also notes that most banks will offer a student line of credit with preferential interest rates and repayment plans. These are based on the prime lending rate, so when the prime is down, interest rates will be more attractive. Conversely, if the prime rate rises, the interest portion of the monthly repayment amount will rise as well.

Plan a loan repayment strategy

Emma-Lee Linton, a student at Queen's University, took out a government loan to help cover her school costs. Linton minimized the amount she had to borrow by applying for grants and bursaries, and by saving money during the summer. "Sometimes it's daunting to think about how much I have to pay back," she says. "But I stick to a budget and separate my money from borrowed money so that I don't overspend."

Debt repayment is one of the most important parts of a financial plan when a graduate starts working, says Sheehan. "It's best to sit down with a financial planning professional to set up a repayment strategy that is efficient, manageable and integrated into your future financial goals," he adds. 

It’s never too early to get an idea of your overall financial health. Try taking our financial check-up.

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