Four Points Financial Solutions Financial advisor Shawn R. Bjornsson, CPCA was featured in the November 17, 2016 issue of The Uniter, the official student newspaper of the University of Winnipeg.
The average student debt sits at $26,819. It will take a student 14 years and six months to pay off, if that student spends $220 dollars a month. But it is possible to pay back your student loans. If a student is struggling financially, and they can’t pay back the loan, there are also government assistance programs that can help.
There are two ways loan interest can be calculated on student loans. First is the “fixed” rate, where the interest rate doesn’t change for the duration of the loan. Then there’s the “floating” rate, where the interest will go up and down as the prime rate changes. The fixed option adds five per cent to your interest rate, while the floating option only adds 2.5 per cent. Shawn Bjornsson, a financial advisor for Four Points Financial Solutions, says if students have issues repaying their loans, the worst thing they could do is ignore them. “The most important thing is if you get behind … you report it. You try to communicate. Don’t ignore it, or it will snowball. If you do default, you’ll take a big hit to your credit score, you’re going to have a hard time getting a loan (or) a mortgage,” Bjornsson says. Bjornsson recommends the floating rate, as it’s cheaper and able to lower with the markets, but also says that it’s really up to the individual whether or not they want a consistent interest rate.
Bjornsson says students need to think of their education as opening a business: they will have to go into debt, but learning some basic financing will serve them well. “The big thing I talk about all the time is that they don’t teach financial stuff in school … You always want to spend less than you make. That’s the big rule of entrepreneurship,” Bjornsson says. “Pay yourself first, live within your means … If you save five to 10 per cent of what you make, it’s all relative.” Bjornsson says much like any other business, it’s hard to avoid going into debt when pursuing higher education, unless you have help from parents or other sources.