Is it better to get a student loan or line of credit?

October 7, 2024

Financial Strategy

Are you sending a kid off to college or university this year? Within the next few years? I will be!

Kid 1 is working during his gap year, and then he’s off to college next year. There is a lot of excitement for all of us when thinking about his post-secondary education. It’s a big step, and we want to make sure that we have all of our financial ducks in a row to make it successful for him.

Luckily, he and kid 2 had RESP’s set up for them several years ago, and his current job will help with some of the extras outside of tuition and books, but the costs of schooling have gotten higher in recent years, so we need to identify any funding gaps in advance. Luckily, there are many options out there for parents & students.

One of the ways to offset the costs for schooling is to apply for & receive scholarships, bursaries, and other financial awards. Many colleges, universities, and other organizations offer opportunities to apply for these. Here are a couple of places to get you started.

StudentAward$ – https://buff.ly/3TdAJUu
ScholarshipsCanada – https://buff.ly/3Tea5uM

Another option is to look into government loans, or lines of credit through established financial institutions.

There are pro’s and con’s to loans vs. getting a line of credit, and it is important to find the best fit for your family and financial situation. Interest rates, how to qualify, how much a student is approved for, and repayment conditions differ greatly between the 2 options.

Student loans often don’t require a cosigner or high credit score, and are able to offer low or fixed interest rates, along with interest free periods during or after your degree. There is capping on how much can be borrowed, and restrictions on what it is used for.
Lines of credit are more flexible about what it can be used for and allow you to borrow a higher limit. Unlike a student loan you need a good credit score and a parent to cosign. There is a risk of overspending because of the opportunity to make interest only payments and not prioritize paying it off quickly after school is done.

If you have questions about education funding, want to look at the options available, or see how this can fit into a cash flow plan, I’m always happy to help.