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Avoiding School Debt Is All In The Planning

Do your homework and you’ll find you have deeper pockets.

Famous statesman Edmund Burke once said “you can never plan the future by the past.” No disrespect to Mr. Burke – or to my Irish heritage – but I’m going to respectfully disagree, particularly when it comes to budgeting for your child’s post-secondary education, and preparing for the amount of debt they could incur once they graduate. Every year, I see people falling into the same financial trap of failing to plan adequately for the numerous “hidden” costs that can pile up. I’ve placed that in quotations, because these expenses aren’t really hidden at all; by looking at the past, you’ll get a pretty accurate picture of where things are headed and the key things you need to save for.

Case in point: last week, the Globe & Mail released its annual Canadian University Report, which I highly recommend you read. The report goes into an impressive amount of detail on what you can expect to pay if you’re sending your child away next fall. Of particular note is a section at the end which details average undergraduate tuition fees by subject.  While the report paints a pretty bleak picture, I can pretty much guarantee by this time next year – if previous upward trends in tuition and general living expenses are anything to go by – the figures it sources will have actually increased. Here again, learning from the past serves us well.

So now that you’re aware of the not-so-hidden costs, what are some ways to mitigate the post-grad debt fallout? In my previous post, I extolled the virtues of the Trudeau government’s Canada Child Benefit, and I haven’t changed my stance on that; it’s still a great help, as are, of course, RESPs and the grants that go along with them (provided you start saving early and that you qualify). Barring your child taking out a bank loan or a line of credit – something I would recommend you avoid, as these usually need to be repaid while the student is still in school – what are some effective ways of planning for the inevitable financial hit so you come out ahead rather than in the red? Here are a few suggestions that come to mind:

Develop a long-term student budget. By “long-term,” I mean for the entirety of your child’s post-secondary enrollment. If you’ve taught them to respect the value of money – something I always recommend you do from an early age – you’ll find it much easier to sit them down and temper their spending expectations, while working out sensible, realistic goals for each year. At the end of each semester, revisit the budget, see if you’re on track to meet those goals, and adjust as necessary.

Work out living arrangements early. Don’t leave any of this to chance (or to the last minute). Research everything exhaustively, from the type of transportation in the area, to meal plans, to the type of residence you can best afford. A great way to cut costs here is to look at an off-campus co-op residence, where students pay reduced rent and help with the general upkeep (dishwashing, etc.) to make up for it. Off-campus housing will almost alway be cheaper, just be careful it doesn’t leave them so far from campus that transit expenses become an issue.

Consider a cheaper school. Your child may be smart enough to get into an Ivy league institution, but that doesn’t mean you’ll be able to afford it. Start researching and talking with him or her about tuition expenses well before it’s time to apply. As a parent, you should take charge steering the conversation – for example, what college or university works within the family/student budget – and price out a variety of options. Remember, post-secondary institutions are businesses, and the ones that charge big bucks don’t necessarily have better curriculums. Beware of branding and hype.

Accelerate graduation. Believe it or not, it’s possible to get that four-year degree in less time if you map it out correctly. Again, research and planning are key here, from matriculation until graduation. What classes is your child going to take? When? Which semester? And so on. If a class happens to be full, write the dean’s office or the professor and see if they can qualify for an override or exception. If your child can handle the workload, consider enrolling them in a summer semester.

Drawing up a financial plan for your child’s post-secondary education is hard work, but year after year it’s becoming increasingly necessary. If the past has taught us anything, it’s that the cost of education will continue to rise as our overall quality of life improves, so it’s best to be ahead of the game.

Do you have any suggestions for lightening the financial burden on your child or children once they graduate?  As always, I welcome your comments and feedback below.

Until next time,

Start Early. Save Often. Stay Invested. ™