If your child is starting Junior Kindergarten this week (or next), and you have not opened an RESP for them, can I ask why you haven’t? Make it a back to school tradition, to make an RESP contribution on September 1st (as well as other times during the year).
Go to my RESP page, and read some of the stories there about how simple it is to open this kind of account, and how helpful it can be (and how much of a pain it can be to extract your money), but if you think your child has a chance of going to a post-secondary program, you need to start saving right now.
Some provinces are talking about changing their “student loan” system so that there are more grants given out, but I suspect the business of post-secondary education is going to keep out-stripping inflation for a good long time.
Last year I wrote about how my daughter got a Student Line of Credit, to help pay for her second degree, as a Chiropractor. Remember, I am the one that talks about being willing to change banks, but unfortunately, my daughter is changing banks due to the mistakes of the local branch of National Bank of Canada (which is the reason I changed banks a while ago as well).
The problems started when the line of credit was first set up, and has compounded since then:
It took 3 visits to get the student line of credit set up (we thought) with the local branch. Once the application forms were set up, the first application for the account was declined, because the young lady at the local branch was unaware of how to do the application, it was declined because the application was asking for the entire value of the loan (for all 4 years of the school). There had to be a reapplication to get the loan set up (finally).
The Student Line of Credit was actually set up as a standard unsecured line of credit. This caused the National Bank head office to call (more than once, and somewhat irate) to ask why weren’t the minimum payments being made to the account? It then would take an hour of explanation, and investigation for someone to figure out that the account had been set up incorrectly (by the local branch). The only way it could be fixed was by the local branch, and they failed (more than once) to remedy this issue. The account should be set up so that the interest payments do not need to be paid until my daughter graduated (but yes, they still compound).
There was an inability to make payments from other banks to the National Bank for this loan. This meant all banking would have to go through the National Bank only (or use Interac transfers to do things). This is also a shortcoming with the CIBC Student Line of Credit.
The on-line banking at National Bank, never really worked correctly for my daughter, she had to keep calling their on-line help folks to get access to the account (just to see what the balance was on the account). This happened every time she tried to access the account, and each time she would ask, “So with the information you have just given me, I can get access to my account”, and the help line person would say “Yes”. It worked that time, and then the next time, she had to call back in, because it would not let her in.
The straw that broke the camel’s back was that the National Bank Head Office decided that the “ceiling” (maximum for the loan) for students in Chiropractic College (for their entire program) was dropped by 33%, and because of this, the line of credit would not have covered the cost of the entire program. The reason for this change (we theorize) was that the Chiropractic College in Trois-Rivieres was consulted to see how much their program cost, and the maximum for the line of credit was lowered to reflect that program’s total cost. This is an issue, as my daughter is going to the College in Toronto (which has higher fees and costs). This meant my daughter had to change to another bank or she would have run out of money, so she is now in the process of changing to CIBC for her Student Line of Credit (and Free Banking too). There were inquiries made to the local National Bank branch to figure out why the Loan Cap was lowered, no real answer was given, just that it was being put in place, and that even though my daughter had been enrolled last year, and the loan agreement included the higher cap, her cap was being lowered in accordance with the new rules.
Keep this in mind if you want to change your Bank
Good Reasons to Change Banks
As you can see a great deal of frustration and confusion lead to my daughter changing her accounts over to CIBC. Naturally I was involved in the decision to change, as I am a guarantor on the student line of credit (or as Michael James would say, I have a Student Line of Credit). The change of the maximum loan limit was the main reason, but the other frustrations certainly made the decision to change, a simpler choice.
Remember, never be afraid to change banks, especially if you feel that you are not getting a very good deal. Also, this is why student debt is so darn high.
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
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
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.
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?
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).
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.
What about Co-Op Programs ?
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.