Dealing with student debts can cause a lot of headache and stress, especially if you’re barely ever making a dent in the principal. If you can relate, keep reading to find out how you can deal with your college debts.
How common are college debts?
According to Statistics Canada, the total amount of student loan debt that is owed to the Government of Canada stands at approximately $22.3 billion dollars in 2020. For the average student, student loan debts will amount to about $28,000 for a bachelor’s degree and another $15,000 for graduate degrees. That’s a lot of money for a student — especially considering that the average starting salary in Canada stands at less than $38,000 per year and that it will take the average student 10 years to pay off their loan. That’s a heavy burden to carry for 10 years.
The silent consequences of dealing with college debts
Unfortunately, our financial situation can have a huge impact on our mental health. Although being rich doesn’t necessarily cause happiness, it is an important factor. According to the Department of Psychology at the University of Nebraska-Lincoln, a higher income can lead to purchasing things that will make you happy — things like better food, a gym membership, a home in a safer neighbourhood, vacations, etc.
Debt can be a huge burden that can lead to a constant feeling of anxiety, a low mood, and even lack of sleep. Those symptoms don’t seem that bad, but in fact, they can lead to depression and even an inability to work. This creates a vicious cycle that you never feel like you can get yourself out of.
How to deal with college debts
Although you might feel like there’s nothing you can do, that couldn’t be further from the truth. Below are some budgeting tips that might help you alleviate your burden.
Face your debts head-on
When you’re dealing with a lot of debts and you’re feeling overwhelmed, it might seem easier to just keep them out of your mind entirely. That’s why it’s common practice to deny that you even have any debts. Though it might make you feel good in the short term, this is a defence mechanism that will have nefarious effects on your future.
Don’t make that mistake. The longer you avoid dealing with your debts, the longer it will take you to get rid of them. Instead, face your debts head-on. Take stock of the amount of debts you have. The sooner you do this, the less likely will you be to worsen your situation by spending more money unnecessarily.
Avoiding your debts can lead to even more debts, which could lead to a bad credit score. That’s definitely not something you want if you’re trying to start your life. IT will lead to inability to get your own place, inability to get a car, and more.
Live like a college student
One of the most common problems people dealing with debts face is that they tend to spend more even though they can’t afford it. We get it — if you’re used to a certain lifestyle, forcing yourself to spend less can be pretty difficult. However, this is a necessary thing in order to ensure that your future self is financially healthy.
This is especially true if you’re still in school. If you’re still in school and you’re relying on your loans to pay for your things you need and want, then you’re really just taking money from your future self. And the more you take from your future self, the longer it will take for you to get your life on the track you want it to be on.
So if you find yourself dipping into your funds for things that aren’t related to your schooling, see if you can find a part-time job in order to pay for all the other stuff. Keep in mind that the smaller your expenses are, the less you’ll need to work, and the more you can focus on your studies. If you cannot get a job while studying full-time, reduce your expenses and only pay for the bare necessities. By this, we mean spending just enough to get by.
Create a budget
A budget is the one thing that will help you keep track of all of the money that is coming in and out of your accounts. It’s also the only thing that will help you rid yourself of your debts. After all, the more you track your money, the more you can figure out how much of that money can go towards your debts rather than your wants.
To create a budget, you need to list all of your monthly net income. Then, you have to list all of your expenses — both variable, fixed, and any periodic expenses you might have for that month. You should also include the minimum amount you need to set towards your debts. Afterwards, subtract your expenses and debts from your income. This is the money you have left over that you should set towards paying off your debts. That way, you’ll get rid of them faster.
If you don’t have any money left over, or worse, you realize you’re spending more than you’re making, see if you can lower your expenses. If you can’t, see if you can find ways of increasing your income, like finding a part-time job or a side-hustle. If you want to create the most comprehensive budget, use Allevia’s online budgeting tool. Allevia will help you track all of your money and will even offer you personalized solutions.
Consider debt consolidation
One of the solutions Allevia might offer you is debt consolidation. If you simply cannot find any means of decreasing your expenses or increasing your income, a debt consolidation might help.
A debt consolidation allows you to pool all of your debts together into one debt. This means that you’ll no longer have to worry about keeping track of all your payments — you’ll just have a single payment to make each month. What’s more is that debt consolidations will usually lower the amount of interest you pay. You’ll therefore be saving money in the long run.
Don’t know how to begin applying for a debt consolidation? Allevia’s got you covered. After Allevia analyzes your financial situation, if you’re eligible for a debt consolidation, you can apply directly through the platform.
Getting rid of your debts has become as easy as pushing a button.
