Your parents aren’t alone in thinking a university education is the only way to landing a good job. A recent Statistics Canada study says that a university degree is still the top path to future wealth. It shows that for every $1 earned by a graduate of a four-year degree, a high school diploma grad will earn between $0.74 and $0.75. University graduates are also 20 per cent to 40 per cent more likely to be employed in a full-time job.
Pursuing post-secondary education may be the surest way to landing that “dream” career, but it is expensive and, if you aren’t careful, your student experience could land you in debt.
The average university graduate has more than $28,000 in student debt. So if you choose to get a credit card, a student credit card is your best option. Also, you must ensure you use your credit responsibly and pay off your balance in full every month.
If you have money worries, there are steps you can take to reduce the amount of money you borrow by applying for grants and bursaries, living at home, and finding a more cost-effective program. But one of the best ways to minimize student loan debt is to have a part-time job.
We know what you’re thinking: “A part-time job that only pays minimum wage won't make a dent in the thousands of dollars I’ll borrow, especially if I move away for school.”
The Government of Canada says full-time students paid an average of $16,600 (including tuition, books, living expenses, and student fees) for post-secondary education in 2014–2015. That could add up to $66,400 over four years.
Here’s how you could offset this cost.
The average minimum wage across Canada is about $11. If you work 10 hours a week throughout the school year for eight months ($6,600 total) and 37.5 hours per week in the summer for four months ($3,520 total), you'll work around 920 hours and earn $10,120 in a year. After paying taxes as well as CPP and EI premiums, you’ll end up with about $9,400.
That adds up to $37,600 over four years of school. In a perfect world, if you’re able to use the whole amount to pay for your expenses, you’d be able to cut your student loan debt by more than half to $28,800.
As you can see, having a minimum wage job can be an excellent way to decrease the amount of debt you’ll take on. But let’s be honest, dealing with annoying shifts, menial work, and low pay isn't very appealing.
Fortunately, there are options for earning money if you’re not interested in working a minimum wage job, such as tutoring and participating in a co-op program through school.
A co-op program allows you to apply concepts learned in your classes to paid work terms. Co-op work terms give you relevant work experience while earning a more than minimum wage.
If you work 10 hours a week tutoring at $20 per hour for eight months of the year ($9,000 total) and you take on a co-op program where you’re paid $15 an hour for 37.5 hours a week ($6,400 total), you'll earn about $15,400 a year. After taxes and CPP and EI premiums, you’ll net about $13,677 if you live in Ontario.
Over four years, that adds up to $54,708. If you’re able to use the whole amount to pay for your expenses, you’d graduate with just $11,692 in debt. That’s a big difference compared to working a minimum wage job.
Earning an income in some way during post-secondary is the most effective step you can take towards reducing your student loan debt. It may not seem worth it at the time when you’re receiving tiny paycheques and taking on so much debt, but remember that every little bit helps in the long run!