Most student loans have fairly good interest rates, so it wouldn’t make sense to take out a loan at a potentially higher interest rate to pay off a student loan. Plus, interest on student loans is tax deductible, while the interest on traditional loans is not. But if a graduate has other forms of high-interest debts, like credit cards and payday loans, they may consider a debt consolidation loan to pay it all off in one fell swoop at an overall better interest rate.
Anyone considering consolidating their student loan debt into a new, debt consolidation loan should know that it does not make the debt go away-you will still owe the money, but just to a different lender, at a different interest rate, and with different repayment terms.
What Are the Disadvantages of Refinancing Student Loans?
While refinancing does help simplify loan payments and can even result in a lowered interest rate, there are some disadvantages to this practice.
First, your loans won’t be owed to the government anymore. This may mean missing out on student loan forgiveness programs, tax benefits, and other key incentives offered by the government. However, this can be balanced out if the terms of the loan are favourable enough.
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Another issue is that the interest rate for a refinanced student loan may actually be higher than the interest on the original loan. For example, if the loan is a variable rate loan, the interest rate could grow over time to be several times that of the original loan.
Why You Should Seek Help with Student Loan Debt Relief
Some people may be embarrassed about needing the financial help, not know that student loan forgiveness and repayment assistance might be an option, or they may not like taking what they feel is a handout. However, it’s important to know that it isn’t wrong to need help.
If you’re struggling with student loan debt, it’s important to look into student debt relief options in Canada and accept help-from government programs, from friends and family, or from non-profits like Credit Canada that provide judgement-free support and advice for Canadians in debt.
How to Manage Student Loan Debt while in School
One way to avoid student loan debt is to practice some money management as a student. With some smart money management, you could minimize or even avoid debt rather than having to hope for the government to launch plans for student loan forgiveness in Canada.
1. Pick a Field of Study with Low Tuition Costs and High Employability
Want to have an easy time paying back your debt so you don’t have to rely on student loan forgiveness or debt relief options? Consider picking a field of study that has a relatively low tuition cost but a high degree of employability.
For example, a nursing degree is often less costly than a dentistry or pharmacy degree-but has similar prospects for employability.
Of course, it’s important to make sure that the field of study you pick is still relevant to your interests. There’s more to life than just making money!
2. Pick a Campus That’s Close to Home
Lodging can be an enormous expense for college and university students. So, instead of living on campus, it can be more affordable to commute from home. A parking pass and the cost of gas are often way less expensive than an overpriced dorm.
Alternatively, consider looking for apartments that are off-campus but still close by. While rooms near school may still be costly, they’re often less expensive than a dorm. Plus, you don’t have to deal with dorm managers!
