You’ve just graduated; now for the hard part. Here’s how to manage when OSAP collectors come calling.
On the day Alex Kenjeev was set to make his final student-loan payment, he decided to have a little fun with it, as any newly debt-free graduate might. By 2009, he had accumulated a staggering $190,000 in student loans to fund a four-year bachelor’s degree at Montreal’s McGill University and a joint law-MBA graduate program at U of T. But last May, Kenjeev walked into Scotiabank at Queen and Duncan and plopped down a reusable Longo’s bag filled with his remaining installment onto the counter. It amounted to $114,460—in cash.
The difference between this approach to repayment and that of other new grads is that, unlike Kenjeev, most of us don’t have the financial backing of a lucrative software start-up company or a job working for Dragon’s Den investment magnate Kevin O’Leary. While at school, many Ontario undergrads rely on a combination of part-time work income, moderate family support, borrowing from the government, and the occasional scholarship.
With the current workforce’s high demand for employees with higher education, the “No income, no job, no assets,” or “NINJA” generation, finds itself in a bit of a predicament: Either avoid government loans, don’t go to school, and risk unemployment, or acquire loans, attend university or college, maybe get a job, then wallow in debt to the tune of roughly $27,000, the estimated national average. How are recent grads expected to pay off their OSAP tabs if they can’t monetize the degrees they more or less bankrupted themselves to secure in the first place?
Donna Wall is the director of financial aid and awards at the University of Toronto. She says that for the financially secure, gainfully employed graduate, the ideal approach to paying down your student debt is to be proactive. “For former students who are working and can afford their payments, as with any other adult debt, the most important thing to do is to try and stay on top of your monthly payments and budget accordingly,” Wall says. “If you’re having trouble paying down your loan, don’t wait to ask for help. The longer you do, the more interest will accrue on the debt.”
In those cases where a combination of post-graduate NINJA factors have rendered punctual OSAP payments impossible, Wall suggests some lesser-known but helpful government programs available to recent graduates.
The first is Ontario’s Repayment Assistance Plan, or “RAP”—a loan-repayment program that guarantees no borrower will be required to devote more than 20 per cent of their family income to reduce their OSAP debt. For those grads scouring the job boards to no avail, the repayment assistance route means that, for their first five years on RAP, debtors will be able to make more affordable monthly payments. At income levels under $20,000, the government will pick up the interest that would be accruing on low-earners’ debt following graduation. The process involves making a phone call to the National Student Loans Service Centre (NSLSC), expressing interest in being considered for the program, and filling out an application. If your case is approved, you will have RAP status for six months. After that, you’ll need to continue reapplying every six months to ensure that you still meet the criteria to receive assistance.
Should you fail to qualify, Wall recommends phoning the NSLSC (1-888-815-4514) and asking to have your payment schedule revised. Typically, OSAP debt is distributed over about nine-and-a-half years, but you can ask to have your payments spread out over 14½ years. In the long-run, you may incur a bit more interest, but the monthly installments will be knocked down to a more manageable amount in that crucial interim period between your post-graduate couch-dwelling and cubicle-dwelling.
“Over time, and in most cases, the longer you work, the more your economic situation will improve,” says Wall. “This will put you in a better financial position to take on more of the responsibility of your debt, and as your income goes up, the government’s role in helping you pay will decrease.”
An undergraduate degree is quickly becoming the bare minimum requirement for employment, which wasn’t the case when our parents were starting their careers. And there are some undeniably new and difficult economic questions facing today’s graduates—for starters, how to avoid educating themselves right into the red. Fortunately, established resources do exist to alleviate, if not altogether solve, your academic-debt woes when OSAP officers come calling six months post-grad. Don’t let your pride get in the way of asking for financial aid. Thanks to your alma mater, you’re smarter than that.