5 Ways To Pay For Post-Secondary Education

Shoot, you didn’t (or couldn’t) save for
your child’s education while they were young. Now they’re getting ready to pack their
bags and enter the life of university or college education. Or perhaps you’re looking to pay for schooling
yourself. Tuition and other education costs can be expensive,
so how do you pay for it all? In today’s video, I’ll outline five ways
you can pay for education costs or put away short-term savings for it. I’m Susan Daley and this is Your Money,
Your Choices. The first option is to fund tuition and other
education costs from regular income each year. This can either be the parent or the student’s
income. In the parent’s case, using regular cash
flow to fund studies can be difficult. Education costs are hefty, and if you are
funding those through your regular annual income, this means something will have to
give. Whether that’s discretionary spending, retirement
savings, or your time to pick up extra work in order to earn more income. From a student’s perspective, assuming that
they’re a recent high school grad, their summer or part-time income may not be sufficient
to cover all the costs. If the student is working a significant amount
during their studies to pay for schooling, that could affect their grades, social life,
and ability to pick up school related extra-curriculars and events. Fortunately, many university and college programs
offer co-op opportunities. If you’re not familiar with co-op programs,
it’s simply a program where the university encourages companies to employ students over
4- or 8-month periods between semesters where students can gain valuable work experience
related to their education and get paid while working. I went through the co-op program while I was
at Laurier and it was invaluable. The second option for funding is scholarships
and bursaries. Scholarships and bursaries can come from many
different sources. I’ve included two links below that aggregate
a number of scholarships currently available. Many schools offer their own scholarships
and bursaries. Some are automatically awarded based on your
initial school application for first-year students or based on grades and your program
in later years. Others require you to apply each year and
can be based on merit, specific conditions, and/or need. There can also be scholarships available at
your workplace or your parents’ workplace. If you’re currently working and your education
is specifically related to your job, your employer may also pitch in to cover some or
all of the expenses. Filling out an application form for hundreds
or even thousands of dollars can be much more efficient than working a part-time job. Student loans are the third option for school
funding. The obvious place to start is government funding. There are many benefits of applying for government
student loans, like OSAP. One, since it’s a government plan they’ll
calculate if you’re eligible for any grants you don’t have to pay back, depending on
your personal situation and that of your parents. Another benefit is that you don’t accrue
interest on the loan until you graduate or leave full-time studies. Finally, government loans are eligible for
repayment assistance if you are unable to pay your loans due to low income or disability. The other option for student loans is to get
one from the bank. Usually, this occurs if government loans aren’t
sufficient or if you aren’t able to get government loans due to the financial status
of you and your parents (i.e. if you currently have too much money saved up, or your parents
earn too much money). Bank loans often require a co-signer who is
ultimately responsible for covering the loan if you cannot. This is most often a parent of the student. If you don’t earn enough to repay your government
student loan, you’ll receive repayment assistance, whereas a bank will come after your co-signer
for the money. Bank loans typically have higher interest
rates than government loans (especially if you’re incorporating the tax credit – which
I talk about in one of my previous videos, on debt repayment). Also, most bank student loans accrue interest
as soon as you borrow money, whereas interest only starts to accrue on government loans
when you graduate or six months after. It’s important to know the details of your
student loans so you’re meeting the requirements, paying the loans back on time and not paying
more than you need to. The fourth option is to save short-term within
a TFSA. For students just graduating high school and
going straight into university, this isn’t much of an option, since you have to be 18
to be eligible to put money into a TFSA. For older students, the TFSA can be used to
put away money for school and invested tax-free. Now if you’re in school and using this money
in the short-term (in other words less than 3 or 4 years) you might want to steer clear
from investing in any equities in the account. You don’t want the portfolio value to fall
when tuition is due without any time to recover those losses. But you can put part-time income or co-op
employment income in a high-interest TFSA for short-term savings that are tax-free. For more information about the TFSA and how
it works, you can check out my video here. The fifth option is to use the RRSP for education
expenses, through the lifelong learning plan. I outlined the Lifelong learning plan in this
video. This plan can only be used by student’s
who currently have an RRSP or if their spouse has an RRSP. The lifelong learning plan isn’t available
for parents wishing to provide their child with money for their education. For younger students, they can start saving
money in an RRSP as soon as they get the available room through earned income. This includes part-time and summer jobs, but
requires the student to file their taxes (even if they don’t owe anything). You don’t have to be 18 to open an RRSP. It likely doesn’t make sense for young high
school students to deduct the RRSP contributions from their income until they’re earning
enough to get a decent tax credit. But they can still contribute amounts to the
RRSP. I outline the mechanics and reasons for contributing
to an RRSP but not using the deduction in my video “RRSP Contribution vs. Deduction”. If contributions and taxable income for the
student are small, the tax shelter benefit of using an RRSP will be zero, or close to
it. However, there can be benefits for the student
to get used to regular retirement savings or having the money locked into the RRSP without
easy access to spend on other things. For mature students who may have worked full-time
between studies, their RRSPs might be more significant and can make up a large portion
of the education funding. These examples of education income don’t
require a great deal of planning in advance. My next video will talk about how to save
for your child’s education while they are young and you have time to invest. Be sure to subscribe so you don’t miss it. I’m Susan Daley and this has been Your Money,
Your Choices.

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