Jun. 5, 2021 "How some grads are crushing their student debt during the pandemic": Today I found this article by Priscilla Ki Sun Hwang on CBC News:
Three years ago, Godwin Scott graduated from Carleton University with about $120,000 in student debt.
Today, he's debt free.
"I'll be honest, it did not hit me that night," said Scott, 26, who made his final student loan payment last October, in the middle of the pandemic. "I still feel odd knowing that I don't owe somebody."
Scott is one of several post-secondary students who spoke to CBC Ottawa in 2017 about what they owed and how it was affecting their lives. We followed up to see where they are now, and how they're paying the rest of their debt off.
Scott, an international student at the time, had debt tied to an Indian bank that was charging about 13 per cent interest. He said he leaned on advice from financial experts and used Canada's tuition tax credit to defer taxes for a few years, but his best strategy was to get his overseas loan paid down as quickly as possible.
"When I graduated, I had a conversation with my friends [and family]. I asked them to sort of loan me maybe a couple thousand dollars that I could pay them back in a couple months," explained Scott, who said a handful of people trusted him and loaned him money at zero interest.
"[There] was an element of faith involved," he said.
Scott used the approximately $50,000 he borrowed from family and friends to slash his bank loan by nearly half.
He lived frugally in the basement of a pastor's home where he paid $500 per month in rent, allowing him to allocate about 80 per cent of his paycheque to his student loans.
As time went by, he was able to reduce the portion of his income earmarked for debt repayment to about 60 per cent.
"One thing I do want to share with the students coming into Canada is ... there's a responsibility on you to pay back what you borrowed ... quickly," he said.
"Because that's the best way to freedom, financially."
Cracking down on credit debt
Troy Curtis graduated from Carleton in the summer of 2019 with about $17,000 in debt through the Ontario Student Assistance Program (OSAP) and a credit line. He also had thousands of dollars in credit card debt for living expenses during school.
Curtis, 25, who's now a freelance digital marketing consultant and photographer, has about $10,000 left to pay.
"After I graduated, the biggest thing for me ... was making sure I found a job right away," he said. Eventually, Curtis found a position with a non-profit, and freelanced as a graphic designer and wedding photographer on the side.
"That's when I was able to start really each month cracking down on my credit card debt first," he said. It took a year and a half to pay down the card.
During the pandemic, Curtis's work-from-home situation remained static, but he found himself with more contracts due to greater demand for virtual conferences and other projects. He was making bigger dents in his debt and saving for the future, perhaps for a house, so he approached a financial adviser.
Curtis says he's now optimistic about his financial future.
"[I feel] more comfortable," he said. "$10,000 still left in debt is a lot, but it's definitely manageable. I can understand how to pay it back."
Goodbye to $30K in 2.5 years
Lauren Paulson, 27, graduated in December 2018 from Algonquin College with about $50,000 in debt — more than half of it through OSAP and the rest through a line of credit with her bank.
Less than three years in, the X-ray technologist with CHEO has crushed about $30,000 of it, "which I'm pretty happy with," Paulson said.
Paulson said she's "extremely fortunate" to have found a job right after school. She said her strategy centred largely on keeping her expenses down, and she's thankful her partner was able to purchase a house, a "huge factor" in her being able to pay off her debt so quickly.
"If I was in that situation putting so much of my paycheque each month toward rent, there's no way I would be able to have paid off this much debt so far," she said. "Luck was on my side in that sense."
Paulson also targeted her line of credit, which has a higher interest rate. Now, she's turned her focus toward OSAP, which has given her an interest-free grace period during the pandemic.
"I am super fortunate," she said. "I've never been super strong financially, or very smart with my finances, I would say. There's a reason I wound up with $50,000 in debt."
How some grads are crushing their student debt during the pandemic | CBC News
Sept. 6, 2022 "'Bear down' and 'be as frugal as you can': Baby-boomer financial experts speak from experience on ways to ride out a recession": Today I found this article by Lauren Bird on the Financial Post:
It was a time of big hair, shoulder pads and the Cold War. But something often less thought of when feeling nostalgic about the ’80s, was the interest rates that were high enough to make you dizzy.
The high interest rate made getting ahead almost impossible, says Mike Drak, who remembers his mortgage rate was 17.5 per cent at the time.
Consumer prices are 7.6 per cent higher than they were a year ago, according to July’s inflation numbers released by Statistics Canada. In June, it was 8.1 per cent. Rates like these haven’t been seen in decades.
And people who remember the ridiculously high interest rates that followed the high inflation of the ’70s say buckle down and be prudent, because we’re in for a long haul.
The Great Inflation of the 1970s and 80s
Experts have drawn parallels between the high inflation of five decades ago and what’s happening today.
Back then, there were several factors and global events that played into it, like the U.S. removing the gold standard (the monetary system in which a currency is backed by gold), but energy prices pushed things to their limit.
In 1973 the price of oil nearly quadrupled when the Organization of the Petroleum Exporting Countries’ (OPEC) enforced an oil embargo on the west for supporting Israel in the Yom Kippur War. There was a series of knock-on effects that caused inflation and stagnation to swell. Then, the Iranian Revolution at the end of the decade sent oil prices surging again.
“Rates were going up, it was almost monthly, they were increasing,” Drak says. “So it seemed like it was something that that didn’t seem like it was ever going to stop. And I remember saying at one point, ‘if I could ever find one day where I could find a mortgage rate for 10 per cent, I’d be the happiest person in the world.”
Pay down debt
Debt at that time rose quickly, says Drak – on houses, on credit cards and on vehicles.
“It was tough, scary times. But we were lucky because we could work. So our wages kept increasing – not at the same pace – but it necessitated both people working to help pay down debt.”
“You have to have a lot of discipline, you’d have to say I want to make lump sum additions annually on it, because the interest rate was crushing and I didn’t want to be trapped.”
Brad Lyons, a certified financial planner and an investment manager at Wiser Wealth Management based in Georgia, suggests people stay away from credit card debt especially.
“Pay off debt as much as [you] can, to the extent that [you’re] able to do so,” said Lyons, who was his early 20s at the start of the 1980s.
Stay invested
As tempting as it is to take out money from your investment accounts, especially as you watch numbers take a dive, Lyons says don’t fall for that temptation.
“During periods where you have decreased valuations in the stock markets, nobody likes to see their valuations in their accounts go down, their retirement plan accounts that they have become accustomed to seeing going up and up and up year after year after year,” Lyons says. “And now they’re seeing it go down some, but it’s going to come back over time.”
For younger generations, he says, this is an opportunity to invest at a lower price, if you can afford it.
“What we’re suggesting is that people remain invested, maintain their asset allocation that was designed in order to achieve their goals and objectives in the timeframes that they have set for themselves and continue to add to their investment portfolio through their retirement account savings.”
“By taking advantage of lower valuations you’re effectively buying more shares at a lower price,” says Lyons.
Save your pennies
Although it can be hard when every trip to the grocery store is costing you more, and the price of everything is going up, both Drak and Lyons say saving is hugely important, and it can also be advantageous.
“As interest rates continue to rise, we will begin to see interest rates higher in our savings accounts, and newly issued fixed income securities,” says Lyons.
Get settled in for the long haul
The 1980s was a long decade. There were two recessions and it was years before inflation was under control and interest rates began to drop. And although our current situation is a little different, if there’s anything to be learned from the past, it’s that inflation and higher interest rates will be here for a while yet.
“Bear down,” Drak tells younger generations going through a similar financial landscape.
“Try to work as hard as [you] can and make as much money as [you] can, and be as frugal as [you] can.
That’s the key. And there’s no way around it. You have to be prudent. You have to pull back and you have to watch your pennies.”
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