How not to spend your student loan

Whether you’re well underway with your undergraduate studies or you’re planning to embark on a PhD, higher education is a big deal. And it means you’ve already put a ton of work into your education.

Figuring out how to pay for school, however, isn’t alway as as easy as it may seem. That’s why thousands of Canadians take out student loans each year so they can get a great education - even if they don’t have the money to pay for it upfront.

Unfortunately, your university degree probably won’t come with a crash course in how to manage your student loans.

The good news is that you can study, have a good time, and be excellent at managing your loan debt all at the same time, thanks to the nifty tools that come with your KOHO prepaid Mastercard® account.

To get you started, we’ve put together this quick guide to understanding student loans. We’ve even included some top tips to help you stay ahead of your student loans using the great features in your KOHO account.

Student loan basics

Canadian students have access to a number of different loan options, both at the federal and provincial/territorial level.

The Canada Student Loan Program (CSLP) is a particularly popular option from the federal government that’s available to both full- and part-time students. With one application, you can apply for grants - which don’t need to be repaid - and loans, which you’ll pay off after you’ve completed school.

Your eligibility for these programs depends on where you live, your family’s income, whether you have dependents, and if you have a disability, among other factors.

There are also lifetime limits on how many weeks you can receive loan or grant money without accruing interest. After you graduate or finish your studies, you then have a 6 month grace period before you need to start paying back what you owe.

Pretty simple, right?

Well, kind of.

You’ll also have to reapply for more loan money before the start of each academic year and there’s always a chance that your application may be rejected. If so, you can often apply for a student line of credit as an alternative.

Student lines of credit are similar to loans, but instead, you get pre-approved for a certain amount of money, like $30,000. Then, you can take out as much money up to that limit that you need to cover your expenses, such as tuition, books, food, and housing.

The catch is that whatever money you use immediately starts accruing interest, which you’ll have to pay off once you leave school.

The take home message here is that student loans usually don’t start racking up interest until after you leave school while lines of credit will accrue interest as soon as you use the money to pay for your expenses.

Regardless of which option you choose, you’ll still need to have a plan for how you’re going to spend your student funds and what you’re going to do to pay it all off in a timely fashion once you graduate. That’s where your KOHO account comes into the picture.

"Unfortunately, your university degree probably won’t come with a crash course in how to manage your student loans."

Managing your student budget

Student loans can be worth tens of thousands of dollars, so it’s easy to overspend when you have so much money at your disposal.

Each year, way too many students end up partying away their student loans, which ultimately comes back to haunt them long after they’ve graduated.

We’re certainly not saying that you shouldn’t have a good time while in university - by all means, enjoy yourself! However, it’s important to remember that paying off your loans and lines of credit starts long before you ever receive your diploma.

Although your tuition fees are more or less non-negotiable expenses, as a student, your living expenses are within your ability to control. This is especially critical to keep in mind if you have a line of credit that will start to rack up interest as soon as you spend any money.

While this might not seem like a big deal now, any money you spend while in university is being borrowed, not only from the government or a bank, but from your future self!

You can stay on top of your spending using your KOHO account’s great budgeting tools. To start out, check out our ultimate budget template and get to work figuring out precisely what your monthly expenses actually are.

You can then use your in-app budgeting tools to help you understand what you’re spending your money on. KOHO Insights will automatically categorize your spending and can help you identify where you can cut back on the non-essentials wherever possible.

Also, don’t forget to start building up your savings while you’re still in school. If you want to tackle your loans head-on after graduation, you’ll want to set yourself up for success by having a small emergency fund to fall back on, just in case.

If you’re planning on working a part-time job while in school, set aside some of that income to put into your savings. You can also set up RoundUps on your KOHO prepaid Mastercard so that you automatically build up savings with every purchase.

That way, you can enjoy school, stick to a budget, and graduate with savings that can help support you as you pay off your loans.

"While this might not seem like a big deal now, any money you spend while in university is being borrowed, not only from the government or a bank, but from your future self!"

Paying off your loans after school

Once you’ve graduated, your school years might be over, but your loan repayment is just getting started. Paying off tens of thousands of dollars of student loans may seem like an insurmountable challenge, but you’re well prepared to rise to the occasion.

If you’ve managed to stick to a budget while in school, keep up the good work! As soon as you graduate, it’s time to create a plan that will help you balance loans and life without driving yourself into major debt.

The key is to adjust your budget so that it allows you to pay for your living expenses and monthly loan payment without sacrificing your ability to save for the future.

All too often, people focus so much on paying off their loans that they forget to build their savings. This can lead to a vicious cycle where you end up taking on extra credit card debt to support yourself until your student loans are a thing of the past.

To help prevent this not-so-nice situation, you’ll need to take full advantage of all the tools at your disposal. If you have a KOHO Extra account, you can start by talking to a financial coach for free in the KOHO app. Doing so can help you create a solid plan for paying off your student debt without disrupting your ability to pay for your day-to-day expenses.

With your financial plan in hand, you can use your KOHO prepaid Mastercard to keep your spending in check. Your prepaid card also allows you to rack up cash back, which you can then use to help pay off those loans so you can live debt-free.

Student loans done right

Student loans are a great way to finance your education, but it’s easy to get stuck in a cycle of debt if they’re not managed properly. Your KOHO account provides a whole slew of tools, from financial coaching, to cash back on groceries and transportation, to help you crush your student debt in no time. Smart budgeting as college a student is a skill that will pay off during your university years and far down the road!