Most students expect to be debt free within five years although as many as four in 10 will graduate with more than $25,000 in debt
TORONTO, Aug. 18, 2014 /CNW/ - A new CIBC (TSX: CM) (NYSE: CM) poll conducted by Leger finds that half of Canadian college and university students (51 per cent) must borrow to pay for their education. Most students are optimistic that they will repay their debt within five years, yet the majority of them said they expect to graduate with debt loads of more than $10,000. Further, four in 10 expect to owe over $25,000 by the time they graduate.
Key findings of the poll include:
- 51 per cent of Canadian post-secondary students have or will need to borrow money to pay for their education, including tuition, books and living expenses
- By the time they complete their education, 73 per cent of students expect to owe more than $10,000
- 40 per cent expect to have more than $25,000 in student debt
- Two-thirds (66 per cent) expect to pay back their debt in five years or less
"It's not surprising that many students need to borrow money to cover the cost of post-secondary education, particularly those living away from home or studying a specialized program," says Christina Kramer, Executive Vice President, Retail and Business Banking, CIBC. "It's important for them to take the time to review their finances and build a manageable debt repayment plan so that they won't feel so financially stressed in school and can better manage debt once they've graduated."
Have a realistic plan to reduce and repay debt
Most students (66 per cent) believe they can pay back their debt in five years or less, with nearly a quarter (23 per cent) of them being far more optimistic -- expecting it will take only two years or less to pay off their student loans. Just 34 per cent said they believe it will take them more than six years to wipe the slate clean.
"While their intentions are admirable, they may not be realistic," says Ms. Kramer. "As students graduate and look to start their careers, they will likely be moving out on their own, saving for a car or a down payment on a home, or even starting a family. That's why it's important for students to manage the amount of debt they take on, develop a budget that helps them carefully manage their spending while in school, and have a plan to pay off debt once they graduate."
A CIBC poll, released earlier this month, found that the majority of students (73 per cent) with summer jobs won't make enough money to pay for their college or university costs and will need to work during the school year to support their school expenses. Most of them (53 per cent) working this summer expect to earn between $1,001 and $5,000, with about one quarter (26 per cent) expecting to earn between $5,001 and $10,000.
Advice to help manage education costs and reduce debt:
- Talk to an Advisor - Making debt reduction a focus of conversation with an advisor can help students understand their overall financial picture and put realistic steps in place to reduce interest costs and accelerate debt repayment.
- Create a budget - Having a financial plan in place can help students make the most of their resources, while in school and after graduation. Talk to an advisor or use the CIBC online Budget Calculator to get a clear picture of all your expenses, and how much you have to spend.
- Track spending - Use the CIBC Mobile Banking App to follow account transactions and balances in real time. Services such as CIBC CreditSmart® can help students stick to their budget, by allowing them to set a budget limit on each spending category on their credit card, and be notified by phone, email or online message when they exceed their customized budget.
- Stick to your plan - Once you have a plan in place, stick to it. If you fall off track, get back to your budget as soon as possible to keep your expenses in check.
KEY POLL FINDINGS - NATIONAL
How much college and university students who are borrowing money expect they will owe by the time they complete their education:
|$10,000 or less||26%|
|Between $10,001 and $25,000||33%|
|Between $25,001 and $50,000||27%|
|Between $50,001 and $75,000||6%|
|More than $75,000||7%|
How long college and university students who are borrowing money think it will take to pay back all the money they borrowed:
|2 years or less||23%|
|Between 3 and 5 years||43%|
|Between 6 and 10 years||23%|
|More than 10 years||11%|
Results are based on a CIBC poll conducted online by Leger, which surveyed 500 Canadian university or college students. The associated margin of error for a probabilistic sample of the same size is +/-4.38%, 19 times out of 20. Polling was conducted between July 10 and 17, 2014.
CIBC is a leading Canadian-based global financial institution with nearly 11 million personal banking and business clients. Through our three major business units - Retail and Business Banking, Wealth Management and Wholesale Banking - CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world. You can find other news releases and information about CIBC in our Media Centre on our corporate website at www.cibc.com.