09/02/2012 05:00 EDT | Updated 11/01/2012 05:12 EDT

Post-secondary students urged to seek financial advice before applying for loans

TORONTO - Many post-secondary students are graduating with a heavy debtload along with their degree, but financial experts say that shouldn't scare people away from going to school.

They say there are ways for students to manage their money, whether they're already facing school debt or are preparing to go into debt by applying for student loans.

Jeffrey Schwartz, executive director at the not-for-profit organization Consolidated Credit Counseling Services of Canada, Inc., says the first problem and solution is that students need more financial education.

"Students need to develop good money budgeting skills and they need to become financially literate," says Schwartz. "Often that's troublesome because they haven't had any courses in financial management up until this point."

Consolidated Credit assists students and families with financial crisis and debt management problems through counselling and debt consolidation.

Before students even think about applying for student loans, Schwartz recommends students and families decide if going away for school is a good economical decision.

Swartz says many students want to study abroad for the experience, but they have to understand the savings that can be had by studying in their home town.

"If there's huge savings at home, that means likely you're not going to have the same level of debt that's hanging over your head after having graduated and heading into the workforce," he says.

Once students have chosen a university and decide they require financial assistance, Schwartz recommends comparison shopping for student loans just as someone would shop for the best cellphone plan.

"You really need to shop around and try to find the student loan for you," he says. "Assess all the different options that are available."

Schwartz says students should also keep in mind how much money they expect to earn once they enter the workforce in relation to the amount of debt they will have to pay back.

A recent BMO survey suggests about half of post-secondary students are taking on debt for school, and 58 per cent of those with loans expect to owe upwards of $20,000 when they finish school.

One-fifth, or 21 per cent of students, will graduate with debt double that amount.

Having a realistic estimate will help students manage their debt, making it easier to pay off in the long run.

Schwartz says a good rule of thumb is that students should spend no more than eight to 10 per cent of their income paying back loans.

Students can also look to their post-secondary institution for advice.

"I do quite a bit of budgeting layouts for students," says Pamela Swinimer, assistant registrar of financial aid at Dalhousie University in Halifax. "I'll get them to create a budget, we'll sit down and go through it and figure out where the shortfall is."

Swinimer agrees students should shop around for the best interest rate and repayment system program for loans, but also take other steps to keep their finances in order.

She and Schwartz suggest students take on part-time jobs to help meet budgetary shortfalls.

"There are opportunities for people to take on additional part-time work (on campus) to help not only stop spending but at the same time, have some money put aside so you can pay for your education," Schwartz said.

For some, it could be as simple as skipping that hot breakfast at the fast food joint across the street.

"How often are you going to the coffee shop just to pick up a coffee and a bagel?" Schwartz questions.

That extra $10 spent on food that can be brought from home can go toward paying off a debt or a students' savings, he says.

If you do feel you're getting into financial trouble, getting financial advice is your best bet.

"Seek help early as opposed to later," says Schwartz. "Try and address the problem as soon as you can."