Student Lines of Credit

For my regular readers you will remember that I have a deal with my children, that I will attempt to pay for their first degree, in exchange I will not pay for their wedding ceremony, with the proviso that if I am asked to help out on the wedding (which I will do, I am not as heartless as I’d like to think I am), it is my party as well.  A follow on proviso is that they pay for any future degrees (although I will attempt to help out if it is possible).

With this in mind, my middle daughter decided to go to Chiropractic College, and applied for a Student Line of Credit. Most of the big banks, either:

  • Don’t offer very much money which is a problem as Chiropractic College is a very expensive degree
  • Weren’t interested in dealing with her
National Bank of Canada

National Bank of Canada

This led to going to the National Bank of Canada, which does offer a Student Line of Credit family of loans. The amount they will loan depends on what program you are in, and they view Chiropractic College as a “health care professional” program thus they will loan her enough money to cover most of her expenses (mind  you the degree is even more expensive, because she has to “live” in Toronto, which is not cheap). The nice part of their Student Line of Credit is , “…no payback of principal (sic) or interest while you are at school…”, which is useful.

My daughter thought she had set up one of these fine life sucking debt creatures (no I am not going soft on debt, I still hate it), however, she was mistaken. I ended up having to co-sign on her application (so really it’s my student line of credit), and this is why I am not happy (as well).

My daughter has been getting calls from the bank since she had the Line of Credit set up, and the problem kept getting “cleared up” (or more precisely it went away). Finally, this past week, luckily she was home, she got another call, and she went back to the National Bank branch where she set everything up, and she finally got to the heart of the problem, which was, they had not set it up a Student Line of Credit at all, they had set it up as a “regular” line of credit, and they were kind of miffed that she was not paying her minimum payments.

I was not present when all of this silliness transpired, but my daughter worked hard to start straightening the mess up. The young lady she spoke to first, was smart enough to figure out that she was out of her depth, and the  young man (who was lucky enough to be working on a Saturday) she dragged into the mess started to peel this smelly onion of a problem. He was the lucky one to figure out that the “Student Line of Credit” was set up as a regular “Line of Credit” and then realized the Pickle of a Predicament this created.

Evidently someone from “Head Office” will need to clean up the mess created by the  young lady who made the blunder setting things up initially, but the young man from the branch has triggered the Hazardous Debt cleanup team that will work on this problem (I hope).

Why does this all matter to me? First, I am very proud that my daughter dealt with all of this without my intervention. The important point for me, is that whatever Credit Rating penalties that might come out of this blunder, is going to be mine, because I am the co-signer on this debt vehicle, so the National Bank will soon get to enjoy the special treatment I have given TD over the years, stay tuned, this looks like it is going to be an interesting follow up.

The moral of this story? (even though it is not finished yet)?

  • Always follow-up with your bank when you set up a new account with the bank to make sure it is set up correctly. I have had Spousal RRSPs that were set up as regular RRSPs more than once, so follow up every time.
  • Careful what loans you co-sign for, they can end up hurting your credit rating
  • I still hate debt, and now I have another reason to hate debt.

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RESP : What does $350 Look like ?

Continuing on with my discussions about the relative cost of school and such, I have found another interesting example for all of those parents out there that are wondering, “Should I start saving for my child’s post-secondary education ?”. I have already scratch this topic a little with, So That is What $50,000 looks Like, but read on, it will be entertaining.

University Costs for RESP

Those Two Books Cost $350.00
(the computer is not included in that price)

First, a question: What does $350 look like at University (or to a parent of a child who is at College/University) ? Look at the picture on the right hand side of this, those two books. Those two books represent $350 or so in costs (the computer on top of the books is a lot more).

Big deal, says you? Yes, maybe that isn’t that expensive, except those two books are for only 1 course, and in some programs like Engineering or Computer Science there can be many courses with many very high-priced texts. A good number to remember is typically programs have at least 5 courses per term, with two terms a year and a four-year program, you have about 40 course sections that could have some expensive books to buy (or even more interesting expensive lab fees).

More numbers for thought would be that the Basic CESG (grant for your RESP) for a year is $500 (if you have max’ed out your deposits to your child’s RESP), so these two books pretty much almost ate that whole grant.

Do you still think an RESP is something that can wait for when your child gets older?

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University Cost How Much ?

Back in 2005, long before my oldest was going to start University I wrote University is Going to Cost How Much? Outlining from an article from the University of Waterloo, possible University costs over the four years of my daughters’ careers, little did I know how much was missed by me. This Throwback Thursday I will reexamine the naive view I had of the costs that were going to face me (financially), and hopefully help those still wondering how much this might cost, when their children go to a post secondary school.

Surprisingly the numbers quoted by the University of Waterloo Web Page aren’t really that out of whack (at the time):

  • A student in the Co-Op program living on campus would pay $10K-12K
  • Living Off-campus they’d pay $7K-$8K
  • If they lived at home $4K-6K

Now remember this was about 9 years ago, and the numbers quoted are for a 4 month stint (so the real annual numbers are doubled).

Graduates Moving

Doesn’t Look Expensive, does it?

The interesting extra costs that I learned about (the hard way) are:

  • Computing device of some kind, be it a tablet, laptop, desktop or all of them, is going to cost you and you had better make sure you have a reliable I.T. set up (all 3 of my daughters had their laptops blow up during final exams). You will more likely than not have to replace those devices after about 2 years. That is about a $400-$2000 cost (every two  years, not including any I.T. issues, like hard drive failures and the like).
  • Trips home, if the kids are not living at home, they will want to come home, and depending on how far away they live this cost could add up to more than $1000 per 4 month term. Yes, we can all say, “They should just stay there for Thanksgiving!”, and other hard-line statements, but until you have lived the life, careful about your comments.
  • Fees and such are an interesting add-on that most universities charge. Some you can try to get refunds on (if your Health insurance covers your kids, then don’t pay for the University’s Health insurance as well), however there are many “activity fees” that are non-refundable as well, so watch out for those they can add up.
  • Living off campus can be cheaper, unless you have to furnish that apartment, and supply plates, pots, pans, etc., as well. A one time cost, but still not an expense to forget about (yes used furniture places are great for this to save money). Other incidental costs like Internet Access and heating bills add up as well, figure out a monthly budget with your kids so they learn how to live within their means.

If your child is looking at a Co-Op program, talk with them about the importance of learning to be self-sustaining, and how proud they might feel paying for all of their education themselves, they might fall for that ploy too.

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Canadian Students Pay Net Zero Tuition ?

The Higher Education Strategy Associates and specifically Alex Usher feel that Canadian Students (in higher education) have it better than any generation previously according to their publication Canadian Students Pay Net Zero Tuition.

The arithmetic put forward is quite simple:

An interesting little bit of arithmetic (note I do not call in Mathematics), but a little simplistic in some ways as well.

Are We Graduating a Generation of Debtors ?

Are We Graduating a Generation of Debtors ?

Data ignored in this study  are:

  • Accommodation and living expenses, how many students live away from home ? One might argue it is the student’s choice to move away from home to study “abroad” as it were, however many programs are only offered in specific places, and Canada has many Universities, but not one in every town.
  • Books and similar supplies are not really mentioned. Yes, many E-books should be cheaper, but from my small sample they really aren’t (but I do agree they are easier to pack up at the end of a school term).

The student assistance model seems to have a flawed assumption that all the “$10B” is offered to every student, which is really not so.

  1. They mention "...$350 million or so in First Nations’ Band Funding under the Post-Secondary Student Support Program ...", my kids (and a majority of students) have no rights to make claims against this.
  2. Then we have "...universities collectively gave out just over $1.5 billion in scholarships...", again these are not necessarily available to all students, some are Merit based (i.e. marks), some are activity based (athletes, volunteering, etc.,) and some are Academic Area based (e.g. Scholarships specifically for Electrical Engineering students, etc.,)
  3. Grants? "... $350 million for provincial merit grants and tri-council scholarships ..." , again many kids are excluded from those grants because their parents are too affluent, and thus the student is not deserving to receive that grant.

I am not really disputing the numbers, I think the studies are quite comprehensive, but also naive in my opinion. I do like the follow-up article by Mr. Usher Good and Bad Arguments Against Education Tax Credits.

Most of my readers already know my opinions of the sometimes oppressive costs of Post Secondary Education (check out my RESP menu item and scroll down a bit), I think the statement about Net Zero Tuition is hokum, but I do agree Canada tries to make Post Secondary Education less fiscally destructive than in the U.S., but I think Canada can do better. A University Graduate with $50,000 in debt to start paying off the day they graduate is a worrisome concept, in my opinion.

My real opinion is that Post-secondary education should be available to anyone who wants to do it, at no cost, I guess that is my Quebecois roots showing.

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Tax Fun: Moving Costs for Students

Today (April 30th) is usually the last day of the lease for students, especially those about to graduate.

The trick most landlords get students to do is to sign their lease so that they must pay for the summer months if they want the rental for the next school year (and except in a few University towns, there is little chance of subletting those rentals), thus their lease usually ends on April 30th.

The one thing for those graduating students to remember is that if they are moving out of their University living quarters and are moving to a new city to get a job, that is a moving expense, that is deductible (unless  your employer reimburses you for it, then it also becomes income too).

Graduates Moving

Graduates Moving Costs

What does the CRA say exactly about this?

Who can claim moving expenses?

If you have moved and established a new home to work or to run a business at a new location, you can claim eligible moving expenses.

You can also claim moving expenses if you moved to take courses as a student in full-time attendance enrolled in a post-secondary program at a university, college, or other educational institution.

To qualify, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new place of work or school. Complete Part 2 of Form T1-M to determine if you meet the distance requirement to claim your moving expenses. If the result on line 3 is less than 40 kilometres, you do not qualify to claim your moving expenses.

You must complete a separate Form T1-M for each eligible move and enter on line 219 of your return, the total of all amounts from line 23 in Part 4 of each form.

Can you claim this every year if you move back home and then back to school? I don’t think so, however, if you graduate from one school and then start at a new school (in a different city) that might be a very different story.

Oh and your taxes are due very soon as well!

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