The post secondary experience is one that can change a student’s life forever – forming new friendships, gaining valuable knowledge and, unfortunately sometimes, a whole lot of student debt.
Jeff O’Rourke from the Jeffery J. O’Rourke Professional Corporation is a certified general accountant (CGA). O’Rourke volunteers his time to give presentations at high schools about student debt and says bringing awareness to the issue is something he is very passionate about.
“Money is a tool that we use to accomplish our goals. We shouldn’t become a slave to money,” said O’Rourke.
The first thing O’Rourke recommended before even applying for a student loan is to begin researching and to develop a budget based on where that student anticipates they will be going to school.
“The Internet is a wonderful tool,” he said. “They should use it to do their research. If they want to go to the University of Toronto for a certain program, or U Vic or stay here and go to U of C – they should do their research first and see how much it costs.”
He said to factor in whether they will be living at home, a dorm or renting. They should also think about how much they can earn while they are going to school and how much their parents may have set aside to help them.
Communication with their parents is key, according to O’Rourke, but if their parents aren’t available, he recommended speaking to someone close to them or to seek out a professional to get some guidance.
Although a student could be approved for a large loan, O’Rourke said that doesn’t mean they should take it. He said it is essential for them to determine how much they need, rather than just taking what they are qualified for.
“In our society we tend to frontend load the young people with debt before they even get out there and it is so difficult to pay back. A $50,000 student loan you are not just going to pay that off in a year,” he said.
This could impact the student for a very long time and affect their future, including the ability to buy a home or other major purchases, according to O’Rourke. He said that the critical point for anyone that borrows is to realize ‘your actions today will have consequences into the future that you may not even know about’ until years later.
Ideally, O’Rourke said you should pay off the loan as fast as you can, but students should make sure they are at least making the monthly payments on time. If not, it is reported to the credit bureau and the information will stay there for five to seven years.
“It is going to affect your credit rating, which can then affect you later on for buying a house or a car,” he said.
O’Rourke said if the student does have any surplus cash when they have graduated, then they should put that towards any debt that has the highest interest rate and pay it off, whether that is a credit card, student loan or a car payment.
Making the minimum payments and paying of student debt can also be a good way to build up credit, according to O’Rourke.
“It shows you can maintain your debt payments and it is showing a good payment record. If you have no credit at all then you have no history.”
But just like when students are planning for school, making a plan for paying their loans off after graduating is also important, according to O’Rourke.
“The most important thing is that people have to have a plan, just like small business. Have a plan and don’t just say, ‘Hey, it is up in my head.’ Put it down on paper.”
