No more pencils, no more books —?for recent graduates fall is all about paying off debts

Tyler Welch was a voice of fiscal prudence, preaching over the airwaves about budgeting and living within one's means. His show was called Common Cents.

Once a week over the 2014-15 school year, Welch used his weekly slot on McMaster University's campus radio station to dole out personal finance tips and tricks he thought his peers should know. He had just finished his undergraduate degree via correspondence, leaving the London School of Economics with a BA in international relations — and $24,245 in debt.

That is right around the Canadian national average, and with post-secondary classes reconvening next month, it is a figure many new and future graduates will soon confront.

“Just because you're about to graduate doesn't mean you're a big shot, because you still have a bunch of money in debt,” Welch says. “But that's what a lot of people fall into. They graduate, get their first high-paying job, and they've never seen a paycheque like that before. You squander it, and that's how you end up in debt for 10 years.”

Welch plans to be debt-free by next February, less than two years after earning his diploma.

“I've been working like an adult, but living like a student,” says Welch, who has been employed full-time since graduating — first at the radio station, and now for an entrepreneurship program at McMaster.

“I still live in a house that I share with six other men, most of which are students. It's dingy, but the rent is low. I bike everywhere, don't own a car, try to not eat out too often and save close to 70 per cent of my income.”

For many Canadian students, money is an acute concern. The cost of an education mounts quickly, and post-tuition costs like textbooks, living expenses and ancillary course fees can add up to more than they — or their parents — anticipate.

Students cover their expenses in many ways, including RESPs, student lines of credit and government loans. In B.C., Saskatchewan, Ontario, New Brunswick and Newfoundland and Labrador, prospective and current students can apply for “integrated” loans — combined assistance from the province and the federal government — which offer a six-month grace period after graduation before payments are due. But on the federal portion of the loan, usually about 60 per cent, interest accrues immediately.

In 2010, Statistics Canada found that half of university graduates left school indebted to either the government or another institution, and 41 per cent owed $25,000 or more. The mean undergraduate debt load that year was $26,300. When StatsCan followed up three years later, 34 per cent of the graduates with debt had paid it all off, and those with outstanding payments still owed, on average, $19,800.

Last week, a CIBC poll found that 37 per cent of current post-secondary students were unsure they'd be able to manage their finances after graduating, and 36 per cent anticipated a debt load of $25,000 or higher.

“For a lot of (students), the financial literacy skills that they're developing are still in their infancy. It's difficult for them to manage this growing debt,” said Spencer Nestico-Semianiw, president of the Ontario Undergraduate Student Alliance and the McMaster Students Union's vice-president of education.

It is a concern echoed by Patricia White, the executive director of Credit Counselling Canada. She says she often hears stories of new graduates taken aback by the debt they accumulated and unaware of how, or even to what institution, to make payments.

“It takes some concerted effort to really buckle down and control your expenses — even when you get a job right out of school. Even with the best of circumstances,” White says.

“That's what we see: you're not realistic about where things are at, and you need to be.

“You need to be paying that debt as soon as you can,” she says. “Other life experiences (are) coming down the road at you, whether it's a wedding or a car or other future goals.”

Debt is a given for many students. But there are ways to keep it under control, White says, and it starts with sound money management.

She recommends establishing a spending plan and tracking purchases by sub-category — entertainment, food and drugstore goods, for instance, rather than just “miscellaneous” — so students have a better sense of where money can be saved and put towards debt. Any student loan repayment program should also account for other types of debt that will need to be paid for, like credit card bills or large investments, she adds.

“(Students) might be thinking of other debt — let's say, for example, buying a used car, or something like that, to get to a job,” White says. “There's a lot of things that need to be considered.”

But finding work can be a slow process.

Aliçia Raimundo was unemployed for six months after graduating from the University of Waterloo's psychology and business program in 2012. Now, she holds three part-time positions, scratching out the equivalent of a 40-hour workweek.

“It was a bit of a rude awakening, and especially with the economy the way it is, just the struggle to find a (sustainable) job that gives you enough to live on and pay off your debt,” Raimundo says.

Raimundo says she has erased her $15,000 debt load with the help of her parents — but added that many people are left to tackle their loans alone.

“There's a lot of things compounded: inability to find a job, but also kind of not having money management, to know to pay it off right away,” she says.

Welch, meanwhile, is enrolled in a graduate correspondence program through the University of London, while working full-time in Hamilton. He turned down a chance to study international relations at the University of Edinburgh, which would have cost nearly $30,000 in tuition alone.

“The lifestyle I live has been exactly the same as it (was) when OSAP (the Ontario Student Assistance Program) was paying my bills,” he says. “It's just now, I happen to have a bunch of extra income as well. I just didn't change my lifestyle, but put all the extra money to debt, instead.”