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The university money crunch

What do you do when your student loans just aren’t enough?


 

Questions are welcome at jeff.rybak@utoronto.ca. Here’s one I received the other day:OSAP is only giving me so much money this year. I needed more money for books and rent but that is unlikely considering I’m an undergrad and I’m not yet considered an “independent.” I don’t want to have to drop out of university because I have $2,000 left to pay. I’m thinking I can either 1) ask for emergency assistance or 2) get a loan from a bank or 3) Borrow from a relative who isn’t stingy. What would you recommend in this type of situation?I’ll address these possibilities in order, and then talk about money that’s left to pay from last year.Requests for emergency funding (from the university I suppose?) are probably a last-ditch option. In my experience, they tend to be reserved for students who are about to get kicked out of their apartments and similar. So while I’d encourage you to keep your eye on that, they’ll only ask if you’ve explored all other options anyway, so you might as well do that first. It’s good you’ve realized this funding exists, however, and I’m pretty sure that just about every institution has some last line of funding, to ensure that students don’t end up on the street. It really is emergency assistance, but at least it’s there.Private bank loans are certainly possible. They don’t tend to have a lot of faith in unsecured undergraduate loans, but here’s where you can much more easily (and without embarrassment) ask for family help. The bank may want someone to co-sign your loan, and even if they don’t absolutely require it the co-signature of a more secure relative may get you a better rate. As an example, students in professional programs such as medicine or law can frequently secure loans at prime lending rate or prime plus 0.5%. Prime right now is 4.75% a year, so prime plus half would be 5.25%. You probably can’t do quite that well, even with a relative co-signing (banks have greater lending faith in professional programs), but you can absolutely do better with this option than other lending rates. More about that below.It’s always nice if you can hit up family for a loan. If it isn’t too embarrassing for you, and doesn’t create hardship for them, then I’d certainly go that route if it’s available. You sure aren’t going to get better terms on a loan from a bank, as the relative isn’t likely to charge you interest at all. Now, be realistic. Just because you feel certain relatives may be well off it still doesn’t mean they have thousands of dollars sitting around that they aren’t using. So approach the topic carefully to avoid embarrassing either yourself or anyone else. But if you do have relations you feel like you can ask, I’d certainly go for it.Now, if you’ve still got $2,000 to pay from the year just past I assume it’s still sitting on your balance due to the university? God, don’t do that anymore, or at least look into it closely. Here at U of T the interest they charge on unpaid balance is 1.5% compounded monthly. That’s almost 20% per year – or worse than your average credit card. Compare that to the prime lending rate I referenced earlier. On a $2,000 balance, over one year, that can make the difference of several hundred dollars. We’re talking real money. So once you secure a private line of credit from a bank (assuming you do) don’t ever carry a balance with the university again. Move it immediately to less expensive credit. That, or pay it off immediately with help from a relative, rather than leave it there throughout the year.Debt sucks. Remember that private debt won’t come with interest-free status or relief after school, so try to keep it to a minimum. But certainly use it where you need to. Hope that helps.—-As noted, questions are welcome. Even the ones I don’t post will still receive answers, and where I do use them here I’ll remove identifying information.


 
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