Student debt rockets up

Well, I just received a letter stating that my student debt had rocketed up to $25,500 – that’s before this year’s added debt is applied!

I knew I owed about $17,000 thus far and – based on previous years’ assessments – I expected to finish my degree with about $20,000 total. Somehow now, it suddenly looks like this will be more like $32,000!

How did this happen? Well, my accumulating debt was being assessed by the government at old rates (from the early 2000s), despite  a massive jump in university fees about three years ago. I assumed that because I started a different degree first and then transferred, the government had figured (for some reason) that they had to continue to charge me the same way. That’s certainly what my statements showed.

Well, apparently not. Apparently, that was an oversight on their part … and they’ve now added what they call `prior year adjustments’ of about $5000 to my total. On top of that, the debt added from my studies last year is higher than it ever was in previous years, and I assume that will be the same this year.

This is pretty sad in some respects. Somehow $20,000 of debt sounds much more manageable than $32,000. I mean, I know I will pay it off the same way. The debt is not interest bearing, and the system of repayment is that 6% of my salary will be taken to cover it from next year (when I start earning a full-time income). It just means it will take a lot longer to pay it all off.

I’m not going to change priorities. I need to focus on raising a 20% deposit for a home, and the student debt is manageable as is. In fact, if I was to die, the government would just wipe the debt and if I wanted to stop working for any reason (maternity/living overseas/laziness) and my income dropped below the threshold, payment would stop and the government would not attempt to make me start paying it again. If my income jumped above the threshold again, the debt would again start to be repaid.

So it makes more sense to boost emergency savings and buy a house than worry about getting rid of it early. That said, if I ever came into a reasonable sum, I might elect to get rid of it quickly.

All up, it’s not every day that you end up essentially $8000 further in debt than you thought you were! But I guess I’ll cope with it OK. It’s not going to be fun to see the drop on NetworthIQ though.

  

 

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6 Comments »

  1. Tammy said

    From someone that has been reading your blog for a short period of time, I’m sorry to hear you’ve discovered this additional debt. That is so upsetting.

    I just discovered recently that I didn’t have as much in my retirement fund as I thought I did, and had to adjust my Networth IQ page. I was off by almost 3000. My rising networth numbers took quite a nose dive. The graph is sad to look at, but I’m glad to know I’m more in line with what I actually have rather than what I thought I had.

  2. debtfretter said

    Thanks for your comments Tammy – it sure was a bit of a shock! But I’m philosophical about it.
    I’m sure what you are describing with your retirement accounts has happened to a lot of people because of the drop in share markets in recent months. But a lot of people don’t pay much attention to their retirement funds.
    Mine are currently about the same as this time last year, if not a little bit less.
    I’m assuming you won’t need your retirement funds soon, so it won’t make much difference to either of us in the long term, but it is still sad to see that line go down on the NetworthIQ graph!
    I agree with you, though, that it is better to be honest about what you truly have, rather than just leave it and wait for it to go back up.
    Thanks for reading!

  3. louise said

    I agree with your reasoning, I don’t even count my student debt or make any extra payments. I consider it part of my tax . We are really lucky to have a system like we do, and with clever tax dedcutions and a good accountant you can reduced your taxable income considerably.

  4. Louise – I’m with you on this one. I will be happy to call myself `debt free’ in a few weeks time, depsite this debt.
    I just consider it an ongoing cost.

  5. Dolly Iris said

    I pay 8.5% on my student loan with BC student loan in Canada. This loan is with the government. I used to have a Federal loan that was at the same interest rate. It’s my only debt left and at 8.5% I want it gone.

    I have never tried to figure out my net worth but I’m guessing its probably in the negative because all I have is my small EFund and my shrinking BC student loan and unfortunately the loan is bigger, lol.

  6. my wife and i are also in the process of buying a house. although our student loans are considered ‘positive debt’ or ‘good debt’ in the eyes of our bank, it’s still hard for to swallow writing a check for a thousand plus a month and to consider that ‘positive’ or ‘good.’

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