Hidden Costs of School


Student Finance 101 often fields media requests for information related to students or higher education. For example, we recently provided student summer savings tips to jobpostings.ca (on an article we'll link when it appears).

This week I talked to Jon Tattrie of Metro News about the hidden costs of education. 

The idea isn't to scare students from getting their education - quite the opposite. We just want to make sure they're prepared, by having a good understanding of the costs beyond tuition. 

Here is a link to that Metro News article. We recommend it for all high school students planning for the next stage of their education. 

And here is what I'd add about the hidden costs of interest charges:

Remember the interest costs will make your student loan bigger when
it's time to repay. After all, a government student loan in Canada can
cost as much as 5% over the prime rate, which makes a total of 7.75% at

People think of their student loan as if it was interest-free. It is
how it is in some countries, but not in most of Canada. So if students
borrow $20,000, they often think of that is what they will repay. But
when you factor in the interest costs, that may be a $30,000 loan - or

What you'll actually pay for that $20,000 loan will depend on the
amount of time you take to pay, the interest rate and the terms you set
(whether a fixed or floating (variable) interest rate.

If you paid back in the regular time period of 114-120 months, using a
floating rate and if Canada's prime rate did not budge all that time
from it's current historic low of 2.25% - you'd need to pay just over

But let's get real. Canada's interest rates are extremely
unlikely to stay at rock-bottom for 10 years. So in reality the least a
student with a $20,000 loan would have to repay over that time period
would probably be $28,000 or more.

Quite frankly, if you can graduate from a 4-year program with
only $20,000 in student loans, you'll be doing very well. The
average government student loan for new grads in Canada is getting
close to $30,000. Before repayment, that is. So do everything you can
to keep your debt low.

For more on this, see tomorrow's post on More Hidden School Costs.

© Jeannine Mitchell 2010 - 2012