Wrote this one many years ago, but it is still topical. A Student Line of Credit is usually how many students getting a professional degree pay for it. By professional I mean lawyer, doctor, etc., and banks gladly give it to them. The banks want the “post graduation” business along with the interest.
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
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.
There is a Moral ?
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.
What is important to take away form this is that you are your own best advisor/advocate. So make sure you are aware of what you want and what they are trying to sell you. And then make sure you overcheck what they did because a lot of times it is not what you asked for. Even then errors will find their way in.
Be that with lawyers, doctors, banks, financial advisors, etc.
Do some research first, get their advise, take time to mull it over and then make a decsion on what you need and what you want.
If you count on them to take care of you you better hope you are lucky