Congratulations Graduate! That will be $20,000 please

I attended University of Ottawa and graduated with a Bachelor of Health Science and a Masters of Arts.

I’ll be the first person to say that I loved Ottawa, loved my experience at the University of Ottawa and absolutely appreciated the real opportunity I had to attend post-secondary education. I had to take out Ontario Student Assistance Program (OSAP) to attend, but I would definitely do it again.

The privilege of attending and graduating from university is not lost on me. Far too many brilliant individuals are barred from attending for family reasons, health conditions and most of all lack of financial resources. I also have the opinion that far too many students in post-secondary education do not realize that it is a privilege to be there and if you bore of spending your parents money sleeping through your classes, there is a line-up of people who wish they could be in your shoes.
Rant over.

I always had the goal of going to university and it was especially important for me since I was the first person in my immediate family to attend and graduate from a university.

This goal taught me countless and priceless lessons about myself and life, but resulted in a $20,275 student debt.

This cost included a first year $4,000 scholarship and a $18,000 graduate scholarship. Arguably, without these I could have been looking at between $24,000 and $38,000 to obtain my current degrees.

After graduating, OSAP gives you a 6 month-payment grace period. During this period I thought it was a completely free 6 month period; but interest does accumulate during this time.

Apparently this was not the free time to blow all my money having fun in the Caribbean.
Hindsight is 20/20.

In my seventh month I managed to get a job in my field, albeit at a non profit organization with a low wage.
I quickly learned that the $1575 I made a month was barely enough to live keep up with my creeping consumerism and credit card debt.

Understanding the importance of not defaulting on student loans, I discovered the Repayment Assistance Plan (RAP)

This can be a very helpful temporary solution for folks who are having difficulty making their loan payments. In this program, the government will pay your interest in the interim while you make geared to income payments.

My issue with this program was not the program itself, it was how I used it.
For the first year of working, on albeit a very low wage, I applied to and was accepted through RAP to make payments geared to my income.

This translated to me paying $56 a month on a $20,275 loan for 12 months.
In those 12 months while I managed to spend $3000 on crap on my credit cards (and countless amounts more in cash), I paid a very sad $672 off my principal.
One day I looked at my statement and they estimated that at this pace it would take me 45 years to pay off the whole loan.

For those 12 months I used RAP as a way to avoid acting on, or even thinking about my loan.
I should have instead used those 12 months as a temporary time to help me re-organize my finances to prioritize a loan payment.

In November 2012 when I first looked at the mess of my finances I finally started using RAP responsibly. I applied for one more 6 month term, during which I promised myself I would pay off all my credit card debt and secure at least $3000 in emergency funds.

Having the high interest debt taken care of and the security of an emergency fund in place I was much more comfortable paying off my loan.

In May 2013 I set-up automatic payments of $300/month to my student loan. This act alone shortened my repayment term to 7.6 years. Saving me 37.4 years!

Now I use this $300 as the bare minimum monthly payment and work hard to roll over any extra funds.
Using this method I’ve paid off more than $3000 since May, which averages $750/month.

My short term plan is to keep this process up, paying a moderate amount of money towards my loan while also building up a nest egg for the future, as I may return to school.
I hesitate to give a solid ‘student debt free’ goal date as I’m unsure about school next year, but I plan to even save at least $100 a month if/when I become a student so I can apply it as a large lump sum if/when I graduate again.

How are you tackling your student loans?


2 thoughts on “Congratulations Graduate! That will be $20,000 please

  1. Pingback: A Security Blanket Made of Money | Prosperous Not for Profit

  2. Pingback: You Don’t Need More Money to Make a Budget | Prosperous Not for Profit

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