How to repay your student loans and how to do it fast

The Canadian Federation of Students estimates that average student debt is more than $28,0001. According to the Canadian Student Loan Program, most students take 10 years to pay off their loans.

Debt of that magnitude can seem overwhelming, especially if it takes you awhile to find a job in your field. A good payback strategy (one that is reasonable for you and your income) is really important so you can get your feet back firmly on the ground and start saving for your future.

Here’s what you need to do to repay your student loan

Step 1: Figure out what you owe

  • Government loans
  • Student lines of credit
  • Credit cards
  • Money owed to family
  • Etc.

Step 2: Rank them from highest priority to lowest

Look at how much interest each one is charging, how much is owed, and how long you have to repay the loan. Prioritize paying back your loans in order of highest interest rate to lowest interest rate. That way you minimize the amount of interest you are charged overall. And make sure you’re never late with your payments because this will affect your credit rating.

Step 3: Use the Personal Loan Calculator

Use the calculator to play around with different repayment scenarios to find out what is an affordable amount for you. The faster you can repay your loans, the less you will have to pay overall in terms of interest.

Step 4: Make a budget

Making a budget is a lot easier than it sounds. And once you know how much you should be paying towards your loans each month, you can start figuring out how much you have left over to pay for rent, groceries, etc.

Tips to pay down your loans faster

Don’t wait to start paying

If you can start paying right after graduation (or even before) do it! A government loan and a student line of credit both don’t require any payments on the principle while you are in school. But that doesn’t mean you shouldn’t start paying earlier.

With a government loan, you are given a six-month grace period after you graduate, finish your studies, or stop being a full-time student. Interest, however, does accumulate during this period. After this grace period, the government will send you a repayment schedule detailing how much you need to pay them each month.

With a TD Student Line of Credit you make interest-only payments while in school and for 24 months after you leave school. But interest rates on a student line of credit are usually lower than a government loan because they are based on the prime rate, which fluctuates. Then, once you have been out for school for 2 years, your line of credit will be converted to a student loan, with comfortable monthly payments.

All of this is to say that if you start paying down your government loan or student line of credit during your grace period—you will greatly lower the total amount you have to pay over the life of your loan(s).

Make extra payments (even if it’s just a little)

Both government loans and a student line of credit can be repaid without penalty. That means that you are allowed to pay more than the required minimum each month. Pay extra on your high interest loans so you can pay off those loans first. Get a cheque for your birthday? A bonus from work? Didn’t spend a lot one month? Whenever these kinds of situations happen, top up your payments! Just remember that if you are going to pay extra one month—you will need to include a letter to the lender telling them what the money is for (so they don’t automatically apply it to your next month’s payment).

Take a roommate (even if it’s your parents)

A roommate can dramatically lower your household costs. It might not seem glamorous to live with someone, or to move back in with your parents - but it’s the easiest way to save more money.


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1 From the Canadian Federation of Students 2013 factsheet

2 From the Canada Student Loans Program Annual Report 2012-2013



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