For sa国际传媒's post-secondary graduates, the academic stress of school is often replaced by a whole new headache:years鈥� worth of student loans.聽
Deciding how and when to prioritize paying off that debt can make an already worrisome task that much more difficult, but experts say it shouldn't come at the cost of saving for the future 鈥� whether that鈥檚 retirement, a first home or even a basic emergency fund.
This was something Dennis Anthonipillai was especially attuned to when he graduated from his master鈥檚 of public policy program at Simon Fraser University in 2020.聽
To get through both his undergraduate and graduate studies, Anthonipillai took out a total of $27,000 in government loans and $5,000 in credit card debt. Though he tried to pay as much off as he could by working summer jobs during his degrees, the cost of living and tuition meant he could only start thinking seriously about paying off his debt after he was out of school.
鈥淲hen I graduated, I couldn鈥檛 get advice from anyone I knew about how I should start paying off the debt I had,鈥� he said. 鈥淪o I went to Reddit, made the minimum payments I had to, and thought about it for a bit.鈥�
He began by considering how his own circumstances worked for him. At the time, he still lived with his parents, and graduating during the pandemic meant the interest on his government loans was waived 鈥� a policy that was recently implemented indefinitely at the federal level and by multiple provinces.
Jessica Moorhouse, a personal finance counsellor whose expertise focuses on providing financial advice to millennials, said that identifying what鈥檚 unique about your own financial situation is one of the most important steps.
鈥淭here really isn鈥檛 a one-size-fits-all approach to personal finance,鈥� she said. 鈥淵ou have to look at what you can make work and what you can鈥檛.鈥�
鈥淟iving at home is one of those classic examples of ways to put more money towards investments, but it isn鈥檛 possible for everyone 鈥� so someone who doesn鈥檛 have that advantage likely isn鈥檛 going to be able to repay their debt and save in the same way.鈥�
Nevertheless, she pointed to a few 鈥渟eemingly obvious but often overlooked鈥� things recent graduates should keep in mind when planning their debt repayment strategy. The first decision should be to prioritize paying off loans with interest first, making only the minimum payments on those without interest, and ensuring debt-related stress doesn鈥檛 get in the way of building savings.
鈥淚f you know that if you put all your energy into paying off a loan on the smaller side, and you can get it done in a year or two, then that might make sense for you,鈥� she said. 鈥淏ut if it鈥檚 a bigger loan that could take a decade to pay off even if you made more than the minimum payment a month, that could make years鈥� worth of a difference in terms of when you can retire.鈥�
After landing a job with the British Columbia government, Anthonipillai used every advantage he had to see his repayment strategy through. He began by paying off his high-interest credit card debt, made the minimum payments required towards his student loans, saved up six months鈥� worth of an emergency fund, and eventually began putting about 20 per cent of his income into investments.聽
When the federal and sa国际传媒 governments announced a permanent end to interest on student loans, he doubled down on his strategy 鈥� resisting the common temptation to pay off his debt as soon as possible.
鈥淎s a student, debt is kind of a given,鈥� he said. 鈥淪o even though taking out loans made me anxious, I knew I couldn鈥檛 let that anxiety take over and stop me from investing.鈥澛�
Otherwise, Anthonipillai added, he would have jeopardized his financial future in exchange for the unnecessary peace of mind of paying off a loan with no accumulating interest.聽
Instead, Anthonipillai has focused his personal finance strategy on diversifying his investment accounts. Though he still has a way to go in maxing out his tax-free savings account, he hopes he will be able to start putting some of his savings into a First Time Home Account to begin planning for his next stage of life.
鈥淚鈥檝e tried not to look at paying off my loans and investing as an either-or situation,鈥� said Anthonipillai. 鈥淚t鈥檚 really more about what鈥檚 been possible at different times in my life.鈥�
Moorhouse echoed this sentiment, highlighting the importance of having and maintaining multiple financial goals as one enters their 20s and 30s with a mix of debt and investments.
鈥淚 feel like in personal finance, the advice given 鈥� or the answer people want 鈥� is, 鈥楽hould I do A or B?鈥�,鈥� she said. 鈥淚n reality, the way we run our financial lives is by finding a way to combine them both.鈥�
鈥淲e should be working towards multiple financial goals at the same time. Maybe that means the timeline for the both of them will be increased a little bit, but the benefits of paying off your debt while investing are much greater than choosing to only do one or the other.鈥�
This report by The Canadian Press was first published June 13, 2023.
Pascale Malenfant, The Canadian Press
