Tag Archives: student loans

Navigating the Student Loan Dilemma: Unlocking Financial Independence with RESPs

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By Andrew Lo, President & CEO of Embark Student Corp.

(Sponsored Post)

The pursuit of higher education is a cornerstone of personal and professional growth for many young Canadians. However, this pursuit often comes at a hefty price, with student loans being a significant barrier to financial independence. The burden of student debt can haunt graduates for years, affecting their ability to save, invest, and achieve financial stability. But there’s good news: opening a Registered Educations Savings Plan (RESP) can lighten the burden of student loans and help you help your children start their adult life debt-free by encouraging regular and early savings, offering valuable government grants, and harnessing the power of compound interest.

The Student Loan Conundrum

Canada is home to a world-class education system, but the cost of pursuing post-secondary education can be daunting. Tuition fees, books, accommodation, and other expenses can quickly add up, leaving many students with no choice but to turn to the most common method of affording post-secondary:  student loans.

What some students don’t fully understand when they use student loans is that they come with interest rates that accrue after graduation. For many young Canadians, this means they start their careers with substantial debt, and few resources to help them repay their loans.

In a recent poll of Canadian students, 79% admitted that the amount of debt taken on to afford post-secondary can be debilitating. This burden of student debt can have a profound impact on a young graduate’s financial journey, with 57% of students surveyed agreeing that graduating with student debt will make it harder for them to become financially independent from their parents.

Unfortunately, the constant struggle to make loan payments often hampers their ability to save and invest in their futures. Despite this, student loans are still the most normalized way of paying for education in Canada.

There’s a better way pay for post-secondary education

One effective way to combat the student loan conundrum is to start saving for education expenses early. It can be hard to think about university and college when a child is a few years old but by beginning to save as soon as possible, families can significantly reduce their need for student loans. You’re probably thinking, “accumulating savings to cover educational costs while managing the rising cost-of-living is no easy feat.” This is where a Registered Education Savings Plan [RESP] comes into play.

RESPs are powerful tools that Canadians can take advantage of to fit the post-secondary bill. They can be opened by the parents or guardians of a child, other family members, or friends, to save over a total period of 35 years. By contributing regularly to an RESP, families can build substantial savings to cover tuition and related expenses. Starting early allows for smaller, manageable contributions over time, reducing the financial stress associated with higher education. The most valuable part of this savings tool is that it opens your savings up to a world of government grants that you can qualify for.

Unlocking “Free Money” with Grants

One of the most compelling features of RESPs is the opportunity to acquire “free money” in the form of grants. The Canadian government provides a generous grant called the Canada Education Savings Grant (CESG) as a reward for saving, allowing you to collect up to $7200.

This grant matches 20% of your contributions on the first $2,500 saved annually. Over the years, if you contribute $2500 annually to an RESP, this works out to an additional 20% being added to your first $36,000 saved without even considering investment gains. By maximizing these grant opportunities, families can alleviate the financial strain of higher education and better prepare for the future. Continue Reading…

What you need to know when applying for an International Student Loan

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By Emily Roberts

(Sponsored Content)

Loans allow students to pursue their dreams even in the midst of financial challenges. While the benefits of student loans are clearly evident, students should approach loans with caution. Otherwise, you can end up sinking in huge debt that can affect your career goals. This article highlights some of the key factors you should keep in mind when applying for a student loan to ensure you get the best deal.

Fixed and variable Interest Rates

Lenders dealing with international student loans normally have two options when it comes to interest rates: the fixed and the variable rates. MPower Financing for instance, offer loans on fixed interest rates. MPower Financing is a US based lender offering student loans without a cosigner, collateral or credit history.

For fixed interest rates, as the name suggests, you will pay a fixed interest amount with no fluctuations regardless of the direction the economy takes. Thus, the key benefit of this option is that you won’t bear the burden when the market rates increase. Also, it can be a good option if you are a person who loves budgeting in advance. For the variable rates, the interest can change over time; it can either increase or decrease. The key benefit is that you get to save some money should the interest rates go down. Remember the key differences when making your decision.

Comparison can save you money

When you look up international loans for students or DACA student loans on the search engines, you will get countless results. This is because there are many lenders targeting international students. Continue Reading…

Student Debt remains even after Bankruptcy: Study

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By Mike Brown

Special to the Financial Independence Hub

Student loan debt in the United States is a rapidly developing issue for consumers. More than 44 million Americans owe around US$1.5 trillion in student loan debt; that figure means student loan debt only trails credit card debt when it comes to the highest forms of outstanding debt.

However, student loan debt is one form of debt that is virtually impossible to discharge in bankruptcy whereas debts from things like credit cards or automobiles can be discharged much more easily.

To look at bankruptcy figures in regards to student debt, we used exclusive anonymized data provided by Upsolve, a non-profit that assists low-income individuals file for Chapter 7 bankruptcy free of charge. This data was then analyzed to discover what percentage of bankruptcy filers carry student loan debt and what percent of their total debt is comprised of student loan debt.

How many Bankruptcy filers also carry Student Loan debt?

According to the anonymized bankruptcy data provided by Upsolve and analyzed by LendEDU, 32% of all bankruptcy filers also carried some amount of student loan debt.

Further, for these filers with student loan debt, the vast majority of their liabilities totaled is solely from those student loans. On average, student loan debt takes up 49% of this group’s debt. Even including all consumers, those with and without student debt, student loan debt still takes up 21% of all Upsolve user debt.

Filing for Chapter 7 bankruptcy will liquidate a consumer’s total assets and utilize the subsequent funds to pay off as much outstanding debt as possible. According to the data, essentially one-third of consumers who do declare bankruptcy also have student loan debt, and Chapter 7 will not allow for the offloading of this student debt.

Additionally, due to student debt being almost 50% of all debts incurred by that individual, the person can successfully declare Chapter 7 bankruptcy and still have close to 50% of their debts remaining.

Rather than a restart on one’s financial life, which is the point of bankruptcy, only half of their debt discharges and they are still left having to pay off the other half. Since the data shows that student loan debt is such a huge component of the financial situation for nearly one-third of bankruptcy filers, there appears to be a nonsensical policy in place at the moment in regards to student loan debt being impossible to discharge in bankruptcy.

Where we stand with Student Loan Debt & Bankruptcy

Currently within the U.S., whether it be private or federal student loans, student loan debt cannot be discharged in bankruptcy unless the borrower can prove “undue hardship” in the court of law.

Proving undue hardship for student loans is notoriously challenging, and the current standard in which to prove “undue hardship” is to pass the “Brunner test.” This test requires the student loan borrowers to exhibit that they cannot meet a minimal standard of living (e.g., homelessness) if forced to continue to repay their student loans.

A “certainty of hopelessness” must also be proven, in which case the circumstances that constitute “undue hardship” will persist if the consumer is forced to pay off the outstanding student loan debts. Further, the borrower must prove that a good-faith effort has been put forth to repay his or her student loans and all other options have been exhausted to repay their loans. Continue Reading…

How to graduate debt-free from College

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By Steve Barker

(Sponsored Content)

Many high school students are faced with the prospect of going into tens of thousands of dollars in debt or foregoing higher education. Today’s young people are having to look at a college education as an investment and to weigh the value of that investment against potential returns.

There are ways to stay out of debt and still earn a college degree: it just requires a little planning and patience.

Advantages of Going to College

The cost of tuition is steadily rising without the accompanying rise in income. Although there are many paths to success, a college degree does greatly increase job options, teach valuable skills, and create lifelong networks of friends and colleagues. Here are some reasons why college is still worth the cost.

  •       Increased pay: Even though incomes aren’t rising with tuition costs, college graduates still tend to make more than their non-schooled friends. College grads earn an average of 56 per cent more than high school graduates.
  •       Higher rate of employment: The job market is extremely competitive. Anything that gives you an edge should be considered. Some studies show that only 3.8 per cent of college grads are unemployed compared to 12.2 per cent of individuals with only a high school diploma.
  •       Networking opportunities: You are likely to make a lot of valuable connections while attending school. You are introduced to people with new ideas who have the potential to inspire, encourage, and challenge you. Your professors and peers may become vital connections as you enter the workforce.

Staying Out of Debt

There is more than one way to earn a diploma. Taking out student loan debt is not the only way to finance your education. Continue Reading…

Graduating from College? Your financial future starts now

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By Jackie Waters

Special to the Financial Independence Hub

Graduating from college is a huge milestone. You’re now ready to start your career, and you’re excited about getting a house or apartment, a car, a new work wardrobe, and more. But all of those things cost money. And don’t forget repaying student loan debt, insurance premiums, utility bills, food costs, and a long list of other expenses. Since you’re facing these new expenses, it’s essential to create a solid financial plan.

Make a budget and manage your debt

Experts recommend starting your monthly budget by thinking of the “50-30-20” rule. After receiving your first paycheck, you’ll know your net income, which is how much you receive after paying taxes and insurance premiums. From your net income, put 50 per cent towards needs such as rent, utilities, and food; another 30 per cent towards non-necessities or “wants;” and the final 20 per cent towards debt repayment and savings. However, if your student loan debt is substantial, flip the percentages so that 30 per cent goes towards debt repayment and savings, and 20 per cent goes towards wants.

Student loans are usually broken up into several loans with varying interest rates. The best way to tack them is to pay off the loans with the highest interest rates first. Pay the minimum towards the balances with the lowest interest rates, and make larger-than-the-minimum payments on the loans with the highest interest rates. “The biggest mistake you can make is paying the minimum into each loan and waiting until you make more money when you’re older to deal with them,” warns Time.

Look to the future

Life is full of unexpected surprises, so an emergency fund is crucial. If your car needed a major repair, if your laptop needed replacing, if you lost your job – what would you do? If you have an emergency fund, you’ll be able to pull from there instead of from your monthly budget. People often face going into debt because they have no way to cover unexpected expenses. To prevent this from happening to you, plan for the unexpected by putting a small amount of each paycheck into a savings account.

Continue Reading…