If you are reading this you either have or are thinking of taking out a student loan for your studies. If you are a law school student, future student or future graduate, then you have come to the right place!
I completed both my undergrad degree and my law degree in Ontario and had to figure out financing for both on my own and what a mess that was.
It is VERY IMPORTANT to do your research and understand the mechanics of your loan before you go ahead and take on that debt.
The following are a short summary of the things I wish I knew before taking on my student loans and the 5 things you should know about your student loan:
1. Do your research
Whether you are entering an undergraduate program or thinking of getting a graduate degree you need to know what benefit this degree will reap in terms of dollars. This is just the most practical way to go about risk assessment. Questions to ask yourself are: how much will it cost for me to obtain this degree? How much do I expect to make my first year out of this program? What is the job market like in this field? What will the job market look like once I graduate?
2. Don’t forget your living expenses
Whether you are going away for school or staying home there are bound to be extra expenses you have to account for. I lived at home for undergrad but moved away for law school. The expenses of living on your own factor into the cost of obtaining that degree.
3. Public vs. Private loans
Know the difference. This is applicable to those who are looking to obtain government sponsored funding for a graduate level degree. In Ontario, we have OSAP which provides funding to many young people graduating from high school with little or no credit (at least not enough to take out a bank loan) as a result, the interest on an OSAP loan is relatively high.
4. Nothing is free
If you are taking out a student line of credit with a bank, the bank representative will often tell you things like, “you don’t have to make any payments during the time you are in school” and, “no interest is charged until you find a job”. These statements are NOT accurate and unfortunately we are often so distracted with all the other stressors of beginning a new program we neglect to take the time to fully understand and appreciate the mechanics of the loan.
Understand that although these student lines of credit often provide for a year grace period during which it is not payable (meaning a bill will not be delivered to you) the interest will continue to accumulate. In addition, the interest begins to accrue the moment the money is removed from the line of credit. Don’t be fooled by the comments made by the bank representatives, make sure you understand, ask questions and get everything in writing.
If your loan has an interest waiver provision, you must leave enough money in your loan from the maximum allowable balance each school year for the interest to be charged and then reversed.
An example: if you are given $50,000 a school year pursuant to the terms of your line of credit and you use that entire $50,000, interest will become payable despite the interest waiver provision. However if interest is, let’s say, $200 you must leave AT LEAST $200 of the $50,000 in the loan (unused) in order for the interest to be charged and reversed without any interest becoming payable on your end. I learned this the hard way. So in reality the $50,000 a school year is really only $49,800 to account for that $200 that must remain in the loan pursuant to this example).
5. Start thinking about the future
You need to begin thinking about your plan to tackle this debt. Being aware of your financial situation is harder than it seems especially when seeing the red in your account triggers stress and anxiety. The key is checking you bank account regularly and accepting what the situation is, having a solid plan for tackling your debt and then most importantly committing to that plan.
These are just some of the things I thought would be helpful for anyone who is looking into taking a loan out to finance their education.
Hope you found this helpful, for the struggle students out there, stay strong!
