Five ways to pay for post-secondary education
By ATB Financial 1 March 2021 5 min read
Whether you’re in the middle of a post-secondary program or looking forward to starting your first semester, having a plan in place for how you’ll finance your studies is a super important part of being ready to go back to school. Maybe you’re one of many Canadians for whom COVID-19 has made the prospect of paying tuition and making ends meet as a student that much more complicated and challenging. The good news is that you have options when it comes to paying your bills and setting yourself up for success—in student life and beyond.
Here are five different ways to fund your post-secondary education.
1. Student loans
Generally easy to apply and qualify for, government student loans are disbursed based on program costs, your projected cost of living while in school, and your (or, if you are a dependent, your parents’) level of income. In Alberta, you apply for both national and provincial student loans through a single application with the National Student Loan Service Centre, but repay and manage national and provincial loans through separate online portals.
Student loans are a bit different from bank loans. For instance, the interest rate on government student loans is often higher than on a bank loan or student line of credit (LOC). However, student loans do not start accruing interest for six months after you finish studying, and their repayment options (which include payment deferral) are more flexible than the repayment options on a loan or LOC you might receive from a bank.
So what’s the best way to take advantage of a student loan? Many students who receive a government student loan receive a larger sum than is required to pay their tuition. Make sure you’re not taking on more debt than you need to—even though it seems like free money now, it won’t seem that way in four or six years when you have to start repaying it!
If you think you may need access to some of the money you’re not using right away, consider putting it into a tax-free savings account (TFSA); you’ll still be able to withdraw it in an emergency, but you won’t be as tempted to spend it. If you're confident you won't need the full amount of the loan, consider repaying a portion of the loan while you're still in school, or investing the extra money to redeem before your program of study ends.
2. Student line of credit (LOC)
Another borrowing option is a student line of credit, issued by a financial institution. Student LOCs, like ATB’s Students First Line of Credit, usually offer slightly lower interest rates than government student loans, but keep in mind that LOCs start accruing interest as soon as you withdraw from them (though you only pay interest on the amount you’ve withdrawn, not necessarily on the full amount you’ve qualified for). Interest payments must be made monthly.
For this reason, applying for a line of credit requires you to demonstrate sufficient income to make interest payments, or to co-sign with someone else who demonstrates sufficient income (usually a parent).
The amount you’re eligible for when you apply for a student LOC depends on the type of program you’re in. Repayment terms also differ based on program, but as a general rule you’re only required to start making payments on the principal amount after you’ve graduated.
Bontu Galataa, a post-secondary strategy leader at ATB, recommends using a student LOC “to bridge any gaps left after you’ve applied for government student loans.” Because you only pay interest on the amount you withdraw and can make payments on your principal as early as you want to, an LOC offers a financial cushion without the cost of interest on a regular loan.
It is a good option to manage debt at the cheapest cost possible therefore considering products that have a lower interest rate such as the student LOC will allow you to move debt around to reduce interest costs. For example, if you have high interest debt (like credit card debt), transferring it to an LOC may be more a manageable and affordable way to maintain it until you're able to start paying it off.
3. Bursaries, scholarships and grants
Bursaries, scholarships and grants are a great way to finance your education. Like student loans, they’re a funding option uniquely available to students—but unlike student loans, they don’t need to be repaid.
When you apply for a government student loan, you’re automatically considered for a low-income bursary. If you qualify for it, you’ll receive the bursary amount along with your loan disbursement.
Pay attention to any scholarships or grants available through the institution you’re attending. While many external scholarship applications involve lengthy applications and essays, many internal scholarships are awarded based on grades and/or accomplishments recognized by your instructors. In some universities, just maintaining a high GPA can mean a tuition reduction of hundreds or thousands of dollars.
For more scholarship opportunities, check out our guide to scholarships in Alberta.
4. Registered Education Savings Plan (RESP)
If your parents have put aside money for your post-secondary education in an RESP, they’ll be able to withdraw funds on your behalf as soon as they can provide proof that you’ve registered full- or part-time in an approved institution.
5. Working while in school
First, we should say that working part-time while in school isn’t always possible or healthy for everyone. But if you’re able to hold down a job while also maintaining your academic standing (and your sanity!), even a very modest stream of income can go a long way toward reducing your debt upon graduation.
You may still need to borrow as a back-up, or to make up the difference between what you’re able to earn and what you need to spend, but the less debt you acquire while you’re in school, the more stable your financial situation will be when you walk across that stage and into the next phase of your life.
P.S. (saving while in school)
Another way to lessen the financial load of post-secondary is to re-examine your cost of living. Have you considered living with roommates? Studying remotely? Creating a budget? Changing your schedule or taking fewer courses at a time to allow you to work a couple of days a week?
Regardless of how much you’re borrowing or what your living expenses are, get into the habit of saving a portion of whatever you earn. Many students find themselves in a precarious financial position, especially if they’re no longer living at home.
Building up a small emergency fund to draw on, rather than racking up credit card debt when you have unexpected expenses, is an effective way to reduce your anxiety and help you maintain a sense of control over your finances, even while you’re still living the stressful life of a student.