This & That: Students Edition
Posted by Gail | Filed under Students, This & That
I get a lot of letters from students and ex-students. Student debt is an enormous issue for a lot of people. It seems that when some people head off to the halls of higher learning, they don’t give a minute’s thought to what it will take to repay the debt they are racking up. Hmm. And since student debt can’t be discharged by bankruptcy for up to seven years from when you leave school (yup, it’s back down from 10), it’s a debt people just have to find a way to pay back, often to the detriment of their lifestyles.
A wrote: I watch your show regularly and think your advice is awesome – hence, my question today! I’m a graduate student, currently completing my PhD, and I’m trying to create a budget for this coming year. I’ve been looking over your articles and budget worksheet, but I’m finding that some of my expenses (and the nature of being a grad student) hard to fit into the general scheme. First, tuition. How do I go about factoring that into my budget? It’s a rather large expense (about the same as my rent, which is 22% of my monthly income.) My university lets me pay a monthly amount without interest, and the number of months I pay it over is up to me (I usually opt for 12.) Second, I get paid only once a month (at the end) and this can change slightly from semester to semester, depending on how my department has distributed my annual funding (this is non-negotiable.) I assume that I should work out a new budget at the beginning of every semester to account for this?
A, I have a whole set of stuff devoted to students. Start here and pick what’s useful. I think Managing Your Money for School will be of particularly interest.
S wrote: Love your show! I am a student in my last year of my undergraduate degree. I plan on working for a year or two before I do an MA and I currently have approx $50 000 in OSAP debt. I also have no savings and two parents that I will likely have to support with little help (my father works on and off and my mother cannot). I also would like to be married in 3-4 years and would ideally like the debt paid off by then. Basically, I am quite worried about paying off the student loan without hindering other aspects of my life. How do you suggest I begin?
S, You need to look into Ontario’s Loan Forgiveness Program that was developed to help students reduce their debt loads. Starting the 1993-94 to the 1997-98 academic years, students who received Canada and/or Ontario Student Loans through OSAP may be eligible to have a portion of their loans forgiven by the Province of Ontario. After your loan is consolidated and all income is verified, the ministry automatically calculates the amount of loan forgiveness you are eligible to receive based on the total number of terms in your study period(s). The loan forgiveness amount is subtracted from the total amount of Canada Student Loans and Ontario Student Loans that you were entitled to or borrowed. Loan Forgiveness is paid if your loan is in good standing and after you have consolidated your loan and all income information has been verified. The ministry forwards the loan forgiveness amount directly to your bank to pay down your loan. Starting in the 1998-99 academic year, the Loan Forgiveness Program has been replaced by the Ontario Student Opportunity Grant. Loan Forgiveness will continue to be provided for loans issued from the 1993-94 to 1997-98 academic years.
K wrote: I do not and have not had cable for quite some time but I have, when possible, been able to watch some episodes of your show. I have never seen a student right out of University and the advice you gave and I am hoping you can help me. I am 23 years old and have just completed my Honors Degree in Political Science at Lakehead University in Thunder Bay. I am currently working in Thunder Bay (not at a job in my field, although I have applied for millions) but I am completely overwhelmed. I have only been able to attend school due to loans from OSAP which I am currently indebted 47,000 roughly. I also have a 15,000 student line of credit that is maxed and I have been only paying interest on it for the past 3 years because that is all I can afford. I have also 1,200 credit card limit which is also maxed. I am intending to apply to law/grad school for September of 2010, which will obviously increase my debt load even more. During this time I am accruing interest on my loans etc and I really need some advice as to how to organize in order to feel less stressed about 1. going to school again and also so I can be making payments on principal rather than just interest. Any bits of advice you can offer would be amazing.
K, I’m not sure what you think I may be able to do for you. You’re 23 years old and $63,000 in debt. At an average interest rate of just 4% (less than the current student loan rate) it’s costing you $210 a month in interest. To have it paid off in 5 years, you’d have to be making payments of about $1260 a month. And now you’re planning to add additional debt by going back to school for a law degree. I’m all for getting a good education, honey, but I’m wondering just how much of your future income you’re prepared to commit to debt repayment when you’re done. And how long are you willing to put off things like buying a home and having a family? I’m a big believer in the fact that you can have it all… but with the proviso that “not at the same time.” I hope you are carefully considering the debt in light of the rest of your life.
Have you done a projection of what your final debt will be when you graduate from law school? Have you calculated how much that will cost from your cash flow when you go to work finally? And have you determined what kind of “law” you’ll practice, and what the income you’ll generate from your law degree will be?
Balancing student debt with future income is the key to ensuring you can have a life after school and not be so mired in debt that you can’t breathe when you finally graduate. You’re a smart girl. You must realize that there’s some serious thought that must go into this process. Get thinking!
S wrote: My brother in law is slowly but consistently paying off the debt he accumulated while in University. He is doing well, but with housing costs, food and a car, he will not be able to get out of debt in 3 years. It actually looks like it might be 5 1/2 years. My question is this: You mentioned that if people can’t be debt free in less than 3 years, keep a roof over their heads and feed themselves, it’s time to meet with a bankruptcy specialist… If he goes bankrupt, it will be on his credit report for 7 years… wouldn’t it be better for him just to take the 5 1/2 years and not have it affect his credit rating?
S, I also say that student debt isn’t “consumer” debt — to which the three year rule applies. If it takes him 5.5 years to get rid of his student loans, that’s fine… as long as he’s not on the minimum payment plan.
S wrote: I am 19 years old in my second year of college. So far I only owe about $500. My first year was all paid for thanks to savings between my parents and I, my first semester this year and books are also payed for but I am starting to realize I will not be making near enough to pay all my bills, second semester, books and still have a life. I am very scared to end up in dept after watching my parents work through theres. My question is if I took out a $5000 school loan, during the time I have it I have to pay $60 a month -I’m not sure what that part is for- how long would it take me to pay this back? Is it a good idea?
S, congrats on thinking about repaying the loan before you take it out. If you go through the student loan system, the student loan would not have to be paid until you stop going to school full time. If you’re talking about a private student loan from a lender, then the $60 probably covers the monthly interest costs. Since I don’t know your interest rate, I can’t answer your question. But I can tell you how to do it.
1. Take your total amount owed, multiply by your interest rate and divide by 100. Then divide by 12 to give you a monthly amount. So if you owe $5,000 and your interest rate is 4% the calculation would look like this: 5,000×4÷100÷12=$16.66. That’s the monthly interest. Now to the principal.
2. Take the principal you owe and divide it by how many months you plan to pay the loan off in. So if you decide you want to have that $5000 paid off in 1 year, your calculation would look like this: 5,000 ÷ 12 = $416.66
3. Add the two together and you’ll have your monthly payment: $16.66 + $416.66 = $433.32
M wrote: Thanks to you, my husband and I put a lot of work into getting completely out of debt a few years ago, which is good because we’d be completely up the creek by this point if we hadn’t. But now we find ourselves in another difficult spot. Both freelancers, neither my husband nor I have had a steady contract in over six months due to a downturn in our industry (television) and to make things trickier, I’ve started Mat Leave. We’ve run through our emergency savings and have started tapping into our long term savings to make do month-to-month. However, there is a light; I have recently been accepted into a four-year Nursing Degree program. I am scheduled to start full-time classes while on Mat Leave. In four years, I’ll be eligible for a high paying, steady job, a pension, benefits and a career I know I will enjoy for the rest of my life. It will be significantly less risky than having two freelancers in the house. Here’s the problem: I am becoming obsessed with the idea that we can’t afford for me to go back to school. I trust that my husband will do whatever he can to bring in an income, but even still, all I can see is the huge debt load -credit card, line of credit, possible loss of house – we’re going to have to incur just to make it over these next four years. My husband thinks we can’t afford for me NOT to go back to school. He says it’s an investment in a more stable future for our family. Do I have a healthy fear? Or does my husband have better long term vision?
M, any debt you take on to complete your nursing degree is good debt, assuming you don’t take on so much that it puts a strangle-hold on your budget. You and T must, of course, be willing to tighten your belts and make up the extra money you may need in any way you can. Stop tapping your long-term savings. That’s the easy way out. Instead make the commitment to earn the money you need to keep things afloat. And stop obsessing about not being able to make your goal a reality. Instead, like T, see it as something you must do to move forward and then make whatever choices you must to create this new reality. You will be surprised at what you can accomplish once you are determined to have what you want. I know you’re strong enough to do this. You’re the couple who dug yourselves out of debt in record time… remember? Just stay focused, keep your eye on the small things, and remember that whatever you’re giving up right now in the way of extras will come back to you in spades once you’re done school.
May 5, 2010 at 6:50 am
I hated dealing with Student debt after I was out of school. It wasn’t paying it off that was hard. It was dealing with the OSAP people to get extra payments taken.
I’m hoping that if I have children we will be well off enough to put them through school.
regards,
Jason
May 5, 2010 at 7:08 am
Jason, it’s so much easier to make payments on your loan now. You can add it as a bill to your online banking, and make payments as frequently as you wish. That’s what I did – I didn’t change my repayment terms, instead I simply made the second monthly payment at my discretion. The minimum amount payment did of course come out on the 30th of the month, but extra payments were easy enough.
I don’t know about any other repayment method though with OSAP – I stuck with the repayment via online banking, and would then check my account with the NSLSC to verify payment was received.
May 5, 2010 at 7:39 am
Hi Gail,
Thanks for this post. I graduated two years ago with a degree in American Studies and, ready for this… $72,000 in debt! I am believe it or not a natural saver, yet when it came to getting my education i thought student loans were the only way to go. Luckily, i wised up shortly before graduating and got on a budget, cut my lifestyle down dramatically and moved back in with my parents. While this is not what i have envisioned for my life after graduating i have cut my debt down to $46,000 and have been consistently paying $1000 a month to pay down my loans.
Moral of the story and reality check here is that getting out of debt will mean for some graduates putting your dreams on old (i had planned to join the peace corps) and alot of sacrifice. i know though, that it will all be worth it when i can move forward with my life free of debt and able to follow my dreams while still being financially responsible.
May 5, 2010 at 8:10 am
Thanks to you, Gail, I now know quite a bit about everyday spending and saving, but the one thing I was missing is a complete formula for calculating how long it can take to get out of debt and what monthly payments you’ll have.
Now that I’ve found this formula, I’m sending it on to all my friends who are trying to get out of debt. Thank you!
May 5, 2010 at 8:17 am
We’ve been students before but now are no longer. We amassed very little debt, and one of us went through undergraduate and professional school on full-ride scholarships. After we got married, we promptly paid off the student loan. Granted, schools charge too much nowadays and cost of living has increased but most students actually think that the ‘loan’ is actually ‘money’ and they can live it up or not budget.
No. Wrong.
It’s debt. The faster it accumulates, the faster it sinks you as an anchor.
Find ways to reduce debt by changing habits. It’ll help you when you graduate and find that job. Once the money starts coming in, you’ll want to ramp up spending… but the discipline that you develop with ‘money’ management during school will help you avoid temptation.
May 5, 2010 at 8:21 am
My husband and I were both lucky enough to not have student loan debt — my parents covered my education costs, and the my husband’s apprentice costs were also covered. We are now saving for our daughters’ future education, and while we want to build a fund that will ideally cover all their costs, it’s hard to know how much to set aside. Our current savings plan would mean that they would each have $35 000 upon graduation from high school. I don’t want excess money in RESP’s, but we could add more if that’s not going to be sufficient… any thoughts to an ‘ideal’ number? (That includes the $5000 that the government will kick in.)
Thanks!
May 5, 2010 at 8:30 am
Cas; if you put in too much to the RESPs (consdier doing a family RESP plan if you have more than one child so the “extra” money could be used for younger siblings – and that is a Family plan NOT a GROUP plan) – anyways, my point is that any funds leftover and not used can be moved to you or your spouses RRSP provided you both have contribution room.
May 5, 2010 at 8:30 am
I guess I’m quite fortunate to have worked througout all of high school and at that point had a passion for saving and investing. Needless to say I graduated from WLU with no debt and was able to immediately start saving for the future as soon as I found work. It all paid off because years later I got married and our entire wedding was paid in cash, again, because we were willing to sacrifice a lot in our early years to enjoy life today.
It surprises me to see so many kids with iphones, ipods, blackberry’s and all the latest gadgets at such young ages. All the toys with no job, no income, pretty much no responsibility. Yet, these same individuals are the ones crying later on saying it costs too much for school, I need a loan, yada yada. Education costs are only going to get more expensive. My son’s education will not be 100% funded by us, he’ll have to work and put aside some money and we’ll help him out. We definitely won’t let him go into debt for an education, but we will teach him about sacrificing for the future.
May 5, 2010 at 8:44 am
Joanne: That’s what we have, the family plan. We also have 5 years between our 2 daughters, which does benefit us in knowing how much our eldest will cost, and still have time to adjust accordingly for the youngest… I just worry that we will have no where near enough…
I hear of people at work whose children go out of province to university (which is a learning opportunity that I wouldn’t want to deprive my child of should she wish to go that route) and pay $25 000 PER YEAR! (ie: McGill), but I know of others who pay about $10 000 less per year who travel to the Maritime provinces for their education, or attend school locally at half of that, although where we live, it would be safer to live in res, due to the length of the commute… with such a difference in tuition fees, it makes it difficult to determine how much will be ‘enough’… I suppose that their choice in university will have to depend on how much we save, but it’s the ONE area that I wish I could say it doesn’t matter…
May 5, 2010 at 8:57 am
Cas; I know exactly what you mean. I have twin girls – so I do not have the ability to offset their entry into secondary education – I put in as much as I can but I *know* it will not be enough (given how costs are headed up even today and I can’t imagine what it will be in 10 years when they go to university/college) and that makes me sad since I did not have any student loans. However, we are teaching them that they need to save for their future and that includes school so hopefully they will be able to contribute as well (as did I even though a majority was paid for by my parents).
However, I am lucky to live in an area that sports 2 very good universities and a college and another 2 universities about 45min-1 hr away (not including a commute into Toronto) so they could live at home and go to school. I would like them to live in res though – I did and believe it to be a “right of passage” so to speak. But 10 years is a long way off and who knows – maybe I’ll find some extra money between now and then
May 5, 2010 at 9:00 am
@k – I live in Thunder Bay as well and next week May the 12th I am going to hear Gail speak at the Smart Women Smart Money conference at the Valhalla Inn…perhaps you can still get in on it…the manager for the BANK I work at is paying for myself and one of my colleagues to go…I am quite looking forward to it:)
May 5, 2010 at 9:27 am
One of the problems of school debt is that it’s easy to imagine getting your dream job right after school. But a good education does not guarantee you a good job in your field. If you’re really dedicated to working in your field it may take periods of volunteer work and of working lower paying entry-level jobs to get a foot in the door. It may also mean having to work at another low-paying job while you look around for something in your field. Regardless, it’s probably best to expect to be making a low-wage for a period of time after graduating. This seems to be the rule rather than the exception now.
May 5, 2010 at 9:59 am
I started university with savings and a few scholarships, worked a part time job from my third year onward and graduated with about $25,000 in student loans. I was not able to find a job in my field so I went back to school and got another degree (2 years) and ended up with a total of $30,000 in debt. Fortunately not too long after this I was able to find a job in my field (my first field, as it happened).
I was happily paying just the minimum payments on the loans until I got the first statement that shows how much of the loan you have paid off. The one loan was only about $4000, but with only paying the minimum I had only paid about $15 in principal! That shocked me enough to make me get moving!
I did work a part time job during most of my school years (except the first 2) and it is amazing what a difference this makes – even $400 – $500 a month can really help out in the long term. Of course I also worked every summer. I was very good at keeping my expenses very low and did not make frivolous purchases. When I moved to a new town for my main job I was lucky enough to find a part time job in my second field. That second job has been a lifesaver for me – it allowed me to save up 25 % for a down payment on a home, completely pay off my student loans in 3 years from when I graduated the second time, and now to travel a bit. I have never had consumer debt and keep myself on a very tight budget.
I think that the two best things to do while in school are: work a part time job, and keep living expenses low. I always had at least 2-3 roommates (except when I lived in rez, then I lived in a shared room with 1 other) so my rent payment was usually $200/month or lower. That helps with utilities as well, and we kept those to essentials. Since there were so many of us, and not huge spaces, we didn’t need a lot of “stuff”.
One thing I found was that kids whose parents paid for everything were more likely to spend money. I had to put myself through school and I found that I was more careful with my spending because of it. The non-spending habits I learned then have carried over to today.
May 5, 2010 at 10:37 am
Personally as someone who worked and put themselves through university with only a small loan (and this isn’t totally ancient history, 1994 – 1998) I don’t think the loans should be forgiven. When I went and got my loans, it was the banks that offered the money, not the government.. and they are not in the business of forgiving debt. So I don’t understand why I was a taxpayer now I am paying to forgive the loans of those who can’t or won’t take a bus AND walk 30 minutes to a job they need to work to get through school. It actually really upsets me that people can take these loans and then get them forgiven.
May 5, 2010 at 10:40 am
@NB… My parents didn’t pay a dime and thats probably why I blew all that stupid money in college. No one was looking and I was away from home … yee haw!! Honestly had they invested a bit in my college I probably would have taken much more care of the finances knowing Mum and Pop were involved. Nothing worse than disappointing the parents!
May 5, 2010 at 10:42 am
PS I also hope all of those 90’s guidance counselors got fired for telling my generation that if you took out a student loan and didn’t get a job in your field you didn’t owe a dime! Who the heck started that horrible urban legend! Yikes!
May 5, 2010 at 10:58 am
Student loan forgiveness. What is that???! It took me nearly nine years, but finally this last February, I paid off my OSAP. Why should a student get any forgiveness on a loan? The pursuit of higher education is own’s choice, tax payers shouldn’t be burdened with someone else’s debt.
If you need to take 1-2 years off to pay off your first debt, save some money and then return for an additional degree, just do it. You CAN have it all, but take FULL responsibility for your debt.
May 5, 2010 at 11:17 am
if you take a LOAN you must PAY it back…end of story…it’s all about personal responsibility….
May 5, 2010 at 11:23 am
Loan forgiveness doesn’t exist for newer students — now the loan is capped at $7000 a year (for Ontario), but if you qualify for more the rest is given as a grant.
Personally, I prefer the government spend that money on lowering tuition for everybody rather than just those who qualify for student loans, but I believe the idea was to gear it more to income and be needs based.
As someone who didn’t qualify for government student loans (between my parents and my income it was deemed too high) I was stuck going with bank loans. The one advantage is that they required a minimum interest payment each month while I was in school, so I got used to having to pay something towards it and they are/were very unforgiving about late/missed payments.
I found that the people who only relied on government loans very wishy-washy about school (they often took a long time to complete it and changed majors often — I kind of believe it was because they would always get more money next year).
I found the people who had parents pay for everything didn’t have a realistic sense of what things cost as a lot of it was hidden from them.
The people that did a mix — worked part time, maybe had some money from parents and some credit seemed to end up with a better understanding of money and debt once they left school. This is generalizations of course and not everyone is like the above but that is just my 2cents. So for the parents worried they are not saving enough, maybe that is OK as long as your children learn early that this might be the case and if they want the education they are going to have to work for it too.
May 5, 2010 at 11:23 am
The reason we all should be interested in loan forgiveness is a principle of Canadian higher education called “externality,” which means that we all benefit when the people who have the talents/abilities to do the jobs our society needs aren’t excluded/deterred from entering those fields because they can’t afford the education. In Gail’s post, M is seriously thinking about not becoming a nurse because of the what it will cost, but our society needs nurses and if M would be a good one, her decision to forgo that career because of the education cost is a loss to us all. The same holds true for many professions and trades (Cas mentions her husband’s apprenticeship costs). The reality is that we need doctors and lawyers and nurses and teachers and accountants and plumbers and electricians and engineers etc and it’s not in our best interests that only those with the ability to pay up front can afford to imagine entering those fields.
May 5, 2010 at 11:27 am
Some great posts.
I would have loved to go away to college or university but I knew I couldn’t afford it. I went to the local college that has a great reputation but most locals didn’t want to stay at home.
I find that hasn’t changed.
The other think I find is that many students get a degree/diploma in something that interests them but they do not know if there are jobs in that field or what kind of money you are going to make. If you come out of university with a huge debt and the only job in your field doesn’t make very good money….is it worth it.
Like the student that wrote Gail talking about going back to school for her law degree. What kinds of jobs did she expect to get with a policital science degree?? What about the person who wrote in regarding taking American Studies?? Are there jobs in these fields??
I have stressed to my children that they need to take something in University that they like but that will also make them money when they graduate.
May 5, 2010 at 11:44 am
I gave a minute’s though to paying the debt back, too bad I didn’t look into the details!
I initially had a private student loan through one of the Big 5 banks. The interest rate was a very manageable 3.5%.
Not looking into the details, I took on OSAP debt the following year, figuring that the interest rate would be nearly the same- market rates, right? Besides, the government wouldn’t be trying to profit off of student loans, would they?
HA!
Try nearly 8%! More than double my private loan!
I was floored. Still am, although I’m now debt-free. We talk a good talk about expanding access to higher education, but instead of increasing scholarships, or freezing/lowering tuition, instead we’ve expanded access to expensive credit. Not credit card-expensive, but still expensive!
May 5, 2010 at 12:07 pm
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May 5, 2010 at 12:14 pm
@ Liz – good point but I fail to understand the link between the loan forgiveness, and the loan offering regarding your concept of ‘externality’.
I think offering student loans is a good thing and allows the person to go on and become a nurse; but forgiving the debt once they’ve started earning a wage does not help us in my opinion. Especially as some will be forgiven, and some won’t be (IE suckers like me).
May 5, 2010 at 12:32 pm
PS Angela – I have a degree in history and political science and make a great salary (and no further education, ie not a lawyer). It’s the student and not the studies that make the career. I can write well because of my training, but am paid well because of my work experiences and abilities. I’ve interviewed a lot of business school students who couldn’t write a concise letter with no spelling errors to save their lives. Personally I really do believe two things: do what you love and the money will follow… but also the universe helps those who help themselves first. So a philosophy major might grow up to make $8/hour at starbucks – or might grow up to be George Soros, Richard Gere, Bruce Lee, Elmore Leonard, or Albert Schweizer.
May 5, 2010 at 12:33 pm
It took me 17 months to pay off my student loan, with the help of family though! I’m still paying my family back. But talking about loan forgiveness, I was “forgiven” $3500 (I think it was about that) randomly the summer after I graduated. I did not ask for this, I just looked at my loan account one day and there it was, gone.
I like the idea of loan deferral more. Where you can suspend the payments for a certain amount of time until you get your finances and career in a better place to be able to make those regular monthly payments. It would be extremely hard for me to pay off my debt once I graduated if I had not moved back home with family. Having graduated almost 2 years ago I am still looking for the full-time career in my field!
May 5, 2010 at 12:40 pm
I’m a student, and I’m paying my own way after failing out of my first year due to illness. It really bothers me that some people view a university education as a right, not a privilege.
I started off in university. My first year on my own I went away to work for the summer so I could earn more money. That carried me through the first year, but after that I couldn’t afford university and rent, so I changed to college. I still can’t afford to go out to dinner and partying (which most of my friends in university do) so I stay in and entertain from home. Some people need to learn to make sacrifices.
Taking out student loans is a gamble, and more people need to recognize that. If you take out 50 000 in OSAP to get an engineering or business degree, you are more likely to be able to pay it back than someone who spends the same amount on an underwater basket weaving or women’s studies degree. If you can afford to get a junk degree because of wealth, so be it. If you can’t afford to maintain the degree you bought with borrowed money, why should hard-working people have to pay for it? That’s why I’m against forgiveness.
High school tells you over and over that if you’re worth your salt, you’ll go to university. College is dismissed as being for people who are of lesser intelligence. Really, it’s just a post-secondary option for those of us with less financial means. You can get into just about any field you want, then work until (shocking) you can actually afford that degree you want. Going to law school when you’re already up to your ears in debt? That’s a want, not a need.
May 5, 2010 at 1:22 pm
When I was in university I was surrounded by kids who just wanted to party. Rather than move out into their own apartment, get a job, and party while they “figured out what they wanted to do with their lives”, they took out loans and partied, then failed, or ended up at Starbucks.
Also, while I was in university, not a single person made any effort to help students get good jobs or even mention what they might do with their degrees. It was strictly a money grab.
It seems nowadays that to get any good job that pays worth a damn you need 600 degrees and diplomas. Whatever happened to the self-made person who started at the bottom and worked their way up? I’m sure it still happens, but I don’t hear much about it.
May 5, 2010 at 1:24 pm
And my psychology prof got his Ph.D. from wherever because the university he wanted to go to in California told him he couldn’t come because he wasn’t “independantly wealthy”.
May 5, 2010 at 1:47 pm
When I was finishing high school there was a lot of pressure to go to university. I had no idea what I had planned to do as a career (as most don’t at 17) but I went to University anyways, all payed for by student loans. After three semesters I dropped out with about 18 000 in debt and having still not decided what I wanted to do as a career.
I then started working a minimum wage job and started paying back the loan. After completely paying off this loan and saving some besides, I went to college and did a three year accounting program (which this time around I worked part time during and payed for completely on my own.) I now have a great job at an accounting firm, live on my own and own my own car with no debt involved. I learned a lot about money and debt from these experiences
1) It is useless to go to college or university without knowing what type of career you expect to have when you leave (and what types of job opportunities there are in that field)
2) There is nothing wrong with waiting to go back to school until you have decided this and have some money set aside.
3) College diplomas can take you a long way. University isn’t the only option
4) Working and being frugal while in post secondary is valuable in and of itself. It makes you appreciate your opportunity for education that much more. I personally don’t think that parents are helping their children as much as they think by paying for their entire education.
May 5, 2010 at 1:53 pm
@ Manda: I agree with you that loans shouldn’t be forgiven… it’s something that one has agree’d to take on, and they should have the responsibility of following through, a concept that doesn’t seem to be taught or encouraged nowadays…
I don’t think that one can compare a college diploma to a university degree though. I went to college to get the experience and foresight into my ‘future career’, because I just couldn’t see how a Bachelor’s in anything trained you for a specific future. Somedays I feel that I am ’stuck’ where I am though, because without a degree, there is no way for me to advance in my career, and my ‘college job’ does not provide a large enough income for me to support my family and attend university. Most days, I love my job, and this doesn’t matter, but the university degree can make a difference. Which is why I want to make sure that my children have enough money available so that their choices aren’t limited. And, I think that living away from home is a priority also (I got married at 21, never was on my own, and just about fell apart with feeling so overwhelmed of basic responsibilities like laundry, housework, cooking, and working as well…)
Oh well, we’re in pretty good shape financially (touch wood!), and we should be able to help out our children with a good chunk of their costs, and adjust our budgets accordingly without too much of a strain. Just wish I could see into the future! (And relive the past with more conscious choices!)
May 5, 2010 at 2:14 pm
I just wanted to mention that many colleges and universities have co-operative education programs, which are a great way to earn money and gain valuable experience while at school. It was one of the best decisions I made as a student. Basically you have to work 4 semesters (3 can be summers) and write reports at the end of each work term. Often there are many (good) jobs that are only available to co-op students and the pay is much better than minimum wage (6-7 years ago it was over $17/hr – it’s likely over $20/hr now). Getting relevant experience before you graduate is extremely valuable – these days you can no longer expect to get a job in your chosen field with just a degree. Due to the experience that I got through co-op jobs I got hired immediately after I graduated in a great job in a related field, that pays well and has great benefits and I’m still working there 6 years later.
May 5, 2010 at 3:09 pm
I went to college (used interchangably with University in the US) for a degree in Architecture (minimum of 5 years). I came out with a about 26,000 in student loans. The reality for me because I went in state was tuition was cheap it was the cost of living that cost so much. When I started it was $2100 per year and when I finished it was #3300 per year (1999-2004). I worked full time all summer at paid internships in my chosen profession and then 8 hours a week for slightly more than minimum wage plus lunch during the school year. I never took all of the loans I was offered and with the exception of one loan they were all subsidized (I accrued no interest while in college). I am a big believer that you should never pay for your kids college completely as they typically (not always) lack an understanding of what their education is really worth. Another option is to do community college for the first couple of years while you figure out what you want to do in life ($13 a unit is cheap). I am also a big fan of vocational programs. There on plenty of contractors on my job site who make significantly more money than I do. One thing to keep in mind is in the states you can’t even wipe out your student loans with bankruptcy they are essentially forever.
May 5, 2010 at 3:14 pm
When I went to University and later college – I never even considered the consequences of my student loans – it was the only way I was going to get educated. My husband was able to pay for his undergraduate degree without any loans but his chiropractic degree (which is not subsidized) he had to get student loans. By the time we both finished school we were $70000 in debt and had no idea how we would pay it – we knew we would just not how. The first couple of years the payments were interest deferred. Then a really bad thing happened – my mom passed away at 49 years old – the positive side of this tragedy was she had life insurance and we were able to clear our student loan debt. A few years ago we figured out that if we had to continue making payments we would have probably cleared the debt about 5 years after she passed (but it is hard to say – having the debt cleared allowed us to buy our own chiropractic office – without the debt cleared the bank probably wouldn’t have loaned us the money).
I am glad I wasn’t wise to the expense of an education when I was younger – I probably wouldn’t have gotten one because the debt incurred is quite daunting. Sometimes its okay to be ignorant (okay not really.)
May 5, 2010 at 4:37 pm
@cas,
Who says that you need to stop the education process in your 20s?
What I’m saying is that if you can’t afford to go to university, you should go to college first. That way you can get experience in your chosen field, get a better-paying job than if you were to work straight out of high school, and then figure out what you want to do for university. Then you’re in a better position to pay for university, and you know your degree will be useful to you.
Many companies do have allowances for their employees going back to school if it’s in a related field that will help to further their career, as well. In addition, you can do a degree completion program these days, since many colleges have partnerships with universities. If you feel it’s holding you back, not having a degree, then you can do another 2 years of school and get your full degree.
All of the mature students I have met have been much more serious about their studies. They’re more likely to pass and excel than the young ‘uns fresh out of high school. I just think that people tend to treat a university education as a free pass to a well-paid job as opposed to a possible boost into one. It isn’t, especially if you’re doing something real-world useless.
May 5, 2010 at 4:40 pm
I hear what you’re saying Manda but I would hate to have many young people think that university is a waste of time though.
I went to university straight out of high school and found it to be a great, wonderful experience where I made friends, socialized, learned, debated and had fun, while learning to live independently. Though it may not have set me up for a great career had I not been lucky/planned ahead/worked hard for it, university is a great springboard. And I will say that ALL of the people that dropped out my first year who promised to return later… never did. So there is something to be said for going there and sticking it out. But there’s no one right path for everyone.
May 5, 2010 at 5:46 pm
I was in school 1993 – 1996 (worked my tail off to earn money while in school and do max credit hours every semester so I could grad 1 semester early). I had to do loans, scholarships, and work for everything while in school. I had worked while in high school but all that cash went to living expenses even as a teen…and I had NO gadgets. A fact of life for a very low income family…of which I grew up in.
BC at the time offered to forgive or waive a portion of your student loans however I never qualified. The kicker is that because I worked a mimimun wage pay job while home during summer and other vacations I was penalized! If I had volunteered for 1 month during the summer they would have given me “free” student loan money. They also didn’t publicize that very well…I didn’t know until after the summer was over. It wouldn’t have made a difference though…I needed the cash to be able to go back to school…added to the SL money.
My Hubby and I are going to do all we can to assist higher ed for our young family…at least in part. Good life lessons, yes but also very hard to dig out and move on with other parts of life.
I also agree with Geoff (?) who said SL money shouldn’t be forgiven. It is a loan and if you don’t know by 18 or older to be honourable with debt load and repayment…when and how do you learn to make wise/better choices?
My two cents worth…sorry it’s so long.
May 5, 2010 at 6:01 pm
I agree with all of the above comments about University being over-rated. Not for every chosen field, mind you, but there are so many fields of study where you have the option of either, and frankly, college is probably the best place to start for most of them. When I decided I wanted to go into journalism, I found out there was a joint program between my local college and one of the local universities. You could start with either program (college or university) and go on to the other afterward. I decided to start with the college program for financial reasons, and about half my class had started with the university program. They were all floored by how much we were “actually learning” at college, so I knew I made the right choice.
My second year of college, there was a shift in staff at the local paper I worked at and when we were looking for new hires, the bosses immediately put the college-experienced resumes on the top of the pile and moved the university-only resumes at the bottom. They hadn’t learned anything practical.
I never continued to the university program, and am now almost completely student-line-of-credit free after only a year, working at a great job in my field that I never would have gotten if I didn’t have the hands-on college training.
May 5, 2010 at 6:08 pm
I should also add that I went to University because my line of study wasn’t available in a local college…but dorms or home I still would have paid monthly living costs.
Well worth it! I knew what I wanted to do, gave it my all, and never regretted it for a minute…even though it took 9 years to completely pay off.
May 5, 2010 at 7:16 pm
Why should students have their loans forgiven so that taxpayers can pick up the tab? I suggest she waits to do her masters or hope that the company she works for will help pay the expense. She got herself into 50k of student debt and she should get herself out of it. There were other options after all she could have gone to a local school, worked before going to school. The fact of the matter is that paying off debt will affect your lifestyle and people should know they need to pay it off themselves and not look for others to pay it off for them.
May 5, 2010 at 10:36 pm
I finished school, after four years at U of T and one year post graduate, with 40 thousand in debt. I had a 6 month ‘grace period’ from OSAP, which I was accumulating interest on the entire 6 months. When the 6 months were up I could add 1400 dollars on top of my loan or pay off the interest. Essential I would be paying interest on interest. I called OSAP and discussed payment options, bi weekly payments vs monthly etc, it made a huge difference upping my payment by just 20 dollars more a month than was stated and cutting the payment into two payments a month. I threw money at my loan as some months I was paying more interest than actually paying off the principal which was depressing to be honest. If I got extra pay cheques or money back from income returns I would put it on the loan. Why? Because I didn’t want to take 9 + years to pay off the loan. I have Gail to thank for this, by sticking to a budget and making paying down debt (even ‘good’ debt) a priority I was able to pay off school in 3 years on a decent salary while paying rent in Toronto. Now i’m focusing on maximizing a TFSA (through ING) and putting money into an RRSP.
What I find with many people who get OSAP is that they aren’t informed that interest accrues from the moment they are done school. They also think of it as ‘free money’ that they don’t have to think about until it comes time to pay it back. I have friends who have less debt than I did but who are no where near paying it off as they just don’t feel the need to. I’m so thankful I’m student loan free and am now planning an extra savings account for my masters which i’d like to do in a few years.
May 6, 2010 at 8:31 am
I would just like to clarify that I am not against university at all. When I was finishing high school, no one even mentioined the option of college and everyone frowned upon taking time off before starting post-secondary. But getting a trade or a college diploma can be very valuable.
The accouting program I did at college is actually very similar to the program at university here. The majority of the courses even use the same text books. As a bonus, the college has much lower tuition and much smaller class sizes. Also when I decide to go back and get an accounting designation, almost all of my credits will be transferrable.
I would also like to add that I am not against parents helping their kids out with schooling. In my opinion, though, they should shoulder some of the responsibility of paying for it. I have seen too many people spend years in school at their parents expense and coming out no farther ahead.
A good friend of mine spent 5 years doing her masters in geography, all paid for by her parents (with free rent, food and shopping money) After she finished she decided it wasn’t what she wanted to do and did a weekend course and is now a real estate agent.
Another girl I know started and dropped out of four different programs, spending over six years, all paid for by her parents and now she is a bartender.
There are countless other stories like those. So I would recommend that if you are paying for their school, that there needs to be some sort of commitment on their end.
May 6, 2010 at 10:28 am
@Geoff,
So you’re saying that university is a way to learn to live independently? THE way?
It’s an awfully expensive lesson, and if you’re going to university for that, you might as well go to college.
My university tuition: $7500/year
My college tuition: $3400/year
For half the cost, you can learn the same life skills and still come out with an education.
Now, I’m not saying college is for everyone. You can’t get into nursing in college anymore, and post-grad programs require a degree. However, if you’re going to school for the arts on borrowed money just for the sake of getting post-secondary education, you might as well just go to college and be able to pay for most of it yourself. We’re at a point now where a university arts grad’s only real option is to go to teachers’ college. Since we now have an excess of teachers (just ask any of my friends who are trying to break into the business), there’s really no need for them in jobs in their field. So what do they do now? They work at Starbucks. They work at call centers. I worked at a call center for a few months, and nearly everyone there had a degree. Great preparation for life, don’t you think?
I started off in engineering at university. It’s an expensive program, and you get almost no lab time… it’s all theoretical. One or two labs a week, tops. Now I’m taking engineering technology in college, getting 5 labs a week, and learning much more on a practical level. I have another friend who did the same, and is now doing his degree completion at a university. No time lost there.
I’m not saying that everyone HAS to go to college or they’re being stupid. I am saying that your average 17 year old (because that’s how old I was when I went, thanks to OAC being removed) is not going to have the financial ability to support themselves or make well-informed decisions about student loans – something that has been reinforced through the comments here and through my friends’ experiences. Person after person tells the same story – “I got OSAP, got my B.A., got into the real world and couldn’t find a job that I wasn’t overqualified for, I’m working minimum wage and I had to move back in with mom and dad so I could pay off my loans.”
Personally, I think that you’re better off delaying that degree, working in a skilled field for a few years after going to college, and living on your own. Doesn’t that teach more life skills? Like, for instance, sacrificing because you can’t always have what you want when you want it?
May 6, 2010 at 1:46 pm
I have two kids in post-secondary, one in college and the other university. Other than about $2,000 difference in tuition fees, the costs for each are the same. As we live in a small rural community, they both had to move away from home to attend school. They each contribute, we contribute and OSAP “contributes”. Between tuition, books, rent, groceries, and other miscellaneous living expenses, the estimated cost is approximately $15,000 per year, each. Neither one currently has a vehicle, as monthly insurance costs are just too much and they can’t afford the day to day cost of owning one. This is just a rough idea for those wondering what the current cost is.
May 6, 2010 at 5:04 pm
@ Manda re:
“@Geoff,
So you’re saying that university is a way to learn to live independently? THE way?”
To answer both questions: Yes, university is A way to learn to live independently. No, it is not THE only way – I did not say or even imply that.
What I did was relate my personal experience through university and how I found it was my path to independence. For balance, I even concluded with ‘But there’s no one right path for everyone.’
I think, however, you’re seriously underestimating the value of a university degree. Where I work (not starbucks) the vast majority have university degrees such as this or your examples. The problem with anecdotal evidence such as this or your examples is that it can be used to support any position, so let’s look at some stats.
In Table 1 of the StatsCan page, 48.4% of college graduates earn at or below the median income. For university grads, that number is 33.9%
At the other end of the scale, this means that 51.6% of college grads earn above the median. 66% of university grads earn over the median.
Breaking it down just a bit more, 31.7% of university grads earn 2X the median income, vs 14.1% of college grads (so it’s not an even distribution).
None of this is meant to say that one approach is better than another or that university is a guaranteed shot at wealth. One university graduate may be in the low end, one college grad is in the high end. Nor am I saying income is the only worthwhile pursuit at all, just that it allows for a benchmarking process.
In the end, as with most things in life, it comes down to the individual (the fault lies not in the stars, but ourselves…)
Source:
http://www.statcan.gc.ca/pub/81-004-x/2009002/article/10897-eng.htm#b
May 6, 2010 at 6:15 pm
Manda:
“Doesn’t that teach more life skills? Like, for instance, sacrificing because you can’t always have what you want when you want it?”
WOW! Sacrificing was a big part of my degrees! DO NOT assume that you do not or can not learn about sacrifices during school. Personal time and $? BIG sacrifices there! Delays in what I could purchase and while paying back my student loan, more delays in what I could purchase and save up.
I am not a brat just because I went to university.
May 6, 2010 at 8:36 pm
I must agree with Geoff and Marie…I learned a lot about life, sacrifices and priorities while at University. It is not all about a party lifestyle for all students and not all take for granted the opportunity. Also…not all studies are available at community colleges…or I would have been willing to do that instead.
Living away from home and parents was a fantastic experience as well…it does afford a chance to grow up and maybe be even more ready for real rent and expenses in a way living at home might not.
And for the record I earn much less than my husband who only completed half of a college degree so there is some truth to the level/type of education not necessarily being a benchmark for higher earning. I chose having happiness in a career of choice over a high paying but possibly dull/dreary (for me) career. I was fully aware going in and chose it regardless. For me, satisfaction and joy was worth it and thankfully my husband is proud and supportive of me and my career…I am an equal contributor in more ways than the size of paycheque…
The abililty to have flexibly hours saves us a ton in daycare and other expenses…not all high paying careers offer that.
May 7, 2010 at 10:24 pm
You’re all taking what I’m saying the wrong way. Clearly those degrees aren’t preparing you for you know, actually READING what other people say before jumping on the hate bandwagon.
I’m not saying that university is useless, I’m not saying that everyone who goes to university is self-entitled and a party animal. I went there too, remember? Geez.
I’m saying that if it’s a choice between going $50 000 into debt that you can’t repay or taking a hit and not going to law school when you can’t afford it, you should have to make the right decision or deal with the consequences. That’s why I don’t believe in this debt forgiveness baloney.
I’m not saying that university is worthless. It is very useful for a lot of people. However, there are degrees that are of less worth than what you’re paying for them. If you’re paying $20 000 that you can’t afford to work slightly above minimum wage for a call center (like so many arts grads are these days) then it is worthless. If you’re going $50 000 into debt to get a degree that will get you into a job that you enjoy and are happy with (no matter what the income level) then you’re golden!
Also, @Geoff, income is not an indicator. Didn’t your mother ever tell you that money isn’t everything? Keep in mind that there are a lot of programs like early childhood education in college, which prepare you for a job that may only give you part time wages or minimum wage. However, it is affordable, practical training for a job that you enjoy.
May 7, 2010 at 11:58 pm
I’ll be honest Manda, I copied your quote and commented on that statement.
I reread your post. I stand by my reply.
Your comparison of university vs college courses in engineering shows that you have a different view of the purpose of each institution than most academics.
I don’t feel I misread. I never included a hateful statement either. I did make assertive statements.
Unfortunate.
May 8, 2010 at 7:37 am
@ Tracy:
I think I will continue my plan, and adjust when my eldest begins post-secondary ed… @ $35000 in savings, she should have the first 2 years mostly covered, which gives us some time to adjust… she is also aware that she is to contribute money as she begins working so that will up the amount, and that when she graduates and gets a “real job”, she will contribute to her sister’s education should we be falling short of being able to offer her the same opportunities… I think that these expectations are fair — I want to help them out all that they can, but they also know that they have expectations as well.
Thank you — most helpful comment yet
May 8, 2010 at 10:48 am
Don’t forget that students realistically need to make a decision on where they’re going (college or university) in grade 9, at least in Ontario. The courses in high school under the new legislature has divisions of “university”, “college”, “open” (i.e. the arts/gym/language classes) and “work”, and the school work you do (and even the lessons that you get) varies based on the designated “after high-school” path that you decide on.
I’m not sure about other high schools, but I know that in mine, “smart kids” didn’t do anything less than the university level classes. I looked at the work that the “college” stream was doing, and it was clearly easier: the tests were easier, there weren’t as many assignments, etc, and I wanted something more challenging. Besides, the students in the same stream would tend to end up in the same classes, and you knew who was going to pull their weight when it came to group projects. You didn’t want to go down a level and end up DOING the group projects.
Anyways, that’s just something to keep in mind for the parents of younger kids – make sure you try and help your kid figure out what direction they’re going before hand – it’s going to be more difficult to switch mid-way through the 4 years at high school.
May 8, 2010 at 4:06 pm
@ Emma:
It was the same for us older folks when we were in school
– if you wanted to go to university, you took “Advanced”, college, “general”, and they said for trades or ‘other’, you took “Basic” — the government just likes to spend money on new wording, and imply that they’ve ‘improved’ the education system
May 8, 2010 at 11:05 pm
Cas – good for you – it sounds like you have a plan and I wish you all the best
Thanks for the positive feedback ….
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