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Paying back your student loan

I finally paid off my student loan last year -- 12 years after graduating from university. I wish I could say I was right on track or that my approach was calculated, but in truth, my student loan was just something that lurked in the background and was paid automatically via a regular deposit to an old student bank account. I rarely gave it a second thought and only when I checked the balance and realized I was down to my last few thousand, did I decide to pay a lump sum and be done with it.

I'm not alone in my lax response to paying my student loan. While a 2011 BMO poll showed most students are optimistic about repaying their student loan -- 63 per cent expect to be rid of it within five years -- the reality is typically closer to 10 years, according to the Canada Student Loans Program.

Statistics Canada reports the average debt for undergraduates is about $19,000. It's a daunting start to your new adult life, especially with the reported scarcity of jobs for new grads.

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For students who graduated from college or university this spring, paying back students loans is a pending reality as interest is accumulating and they're halfway through the six-month no-payment grace period. 

Put debt in perspective
While it's easy to feel overwhelmed, Jeannette Brox, a CFP with Investors Group in Toronto, encourages borrowers to take a breath: "They incurred the debt for a good reason. Higher education ultimately will lead to a higher income. Put it in perspective -- it's an investment in your long-term future."

However, Canada Student Loans, like any loan, must be repaid. Unlike traditional loans, interest only begins to accumulate after graduation and repayment is not required until six months after graduation. (Note, even if you don't graduate, you have to pay back your loan when you stop attending school.) 

Once your grace period is up, you'll get information from the federal and provincial governments about how much is owed and how to set up a payment schedule.

TIP: Students tend to move around a lot so it's important to notify the student loan office of your most recent contact information.

In most cases, that's it. You meet your monthly obligations, and you can opt at any time to make lump-sum payments, increase monthly payments or pay off your debt in its entirety.

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