When you are young, it is easy to think of debt as free money. Student loans, credit cards, car loans, and lines of credit seem to be everywhere and very easy to access. As a fourth-year university student who is about to graduate, I have started thinking about debt in a more intentional way, because I know I will soon be responsible for managing it on my own. Instead of just accepting it as part of life, I am trying to understand what I currently owe, how each type of debt works, and what my plan will be after graduation. This means being more aware of my student loans, staying on top of my credit card, and thinking ahead about how I want to approach repayment once I have a full-time income. I’m not trying to have everything figured out right now, but I want my debt to stay manageable and not turn into something that holds me back later.
Student loans
For many people my age, student loans are the first type of debt we encounter. Education is expensive and most students rely on government loans to cover tuition, books, and living expenses. One thing we are fortunate about in Canada is that government student loans do not accrue interest. In 2023, the Government of Canada eliminated all federal student loan interest, and most provinces have done the same, such as BC in 2019. This gives students the space to focus on their studies without the pressures of growing debt. Repayment usually starts after graduation, and there are programs to help reduce payments if your income is low.
That said, student loans are still debt. It is easy to borrow more than you actually need when the money is available, especially when thinking about short-term expenses. I have learned that even with student loans, it is important to track how much you owe and to consider what repayment might look like down the line. If you’re only focused on using the money now, you can lose sight of preparing for your future.
I have heard a lot of advice on how to manage student debt, but two approaches stand out to me the most.
The first is to use your student loans strictly for school-related expenses, mainly tuition and essential costs. It can be tempting to use leftover funds for things that are not necessary, especially when the money is already sitting in your account. But any extra amount you do not need can be returned or paid back early. Even sending back a few hundred dollars, like $200 or $300, can make a difference over time. It reduces your total balance and makes repayment more manageable later. Small decisions like this may not feel significant in the moment, but they add up and reflect a more intentional approach to borrowing.
The second approach is something I personally plan to follow after graduating. It is the idea of continuing to live like a student for one to two years after you start working full-time. Instead of immediately increasing the cost of your lifestyle, you manage your expenses carefully and focus on aggressively paying down your student loans. This can make a huge difference. As your income increases after graduation, your expenses do not have to increase accordingly! It is good to have discipline about seeing money in your bank account and not feeling like you have to spend it. For example, seeing $2,000 in your bank account does not mean that it’s time to upgrade your car or move into a more expensive apartment.
Even though student loans in Canada currently do not accrue interest, that is not something to rely on long term. Policies can change, especially with the current economic environment. Paying down your loans early not only reduces financial stress but also protects you from potential changes in the future. More importantly, it builds discipline and frees up your income sooner so you can focus on other financial goals.
Credit cards
Credit cards are probably the most common and also one of the easiest types of debt to misuse, especially for young people. They are convenient, easy to get, and often come with rewards that make them even more tempting. At the same time, they can be one of the most useful financial tools if used properly.
One of the biggest benefits of using a credit card responsibly is building your credit score. Your credit score plays a major role in your financial life. It can affect your ability to rent an apartment, get approved for loans, or even secure a good interest rate on a mortgage. Using a credit card and paying it off consistently shows lenders that you are reliable. There are also added benefits like cash back and rewards points. Many cards offer a small percentage back on your spending or points that can be used for travel or other rewards. While these should never be the main reason to spend money, they are a nice bonus if you are already making purchases you would have made anyway.
The main challenge with credit cards is the interest rates. Many cards have interest rates around 20 percent or higher. If you carry a balance, even small purchases can quickly grow into much larger amounts over time. This is where credit cards can shift from being a helpful tool to something that works against you.
There is also a psychological side to be careful of. People tend to spend more when using credit cards compared to using debit or cash, because they do not feel the impact right away.
As a first time credit card user, I kept hearing the same advice over and over again. Always make your payments on time and always pay your balance in full. For the most part, I followed that advice and stayed consistent. But there was one time where I missed a payment by accident, just once, and it was enough to show me how quickly things can add up.
I ended up getting charged around $29 just for being late on that one payment. It might not seem like a huge amount, but it made the consequence feel very real. It also made me more aware of how important it is to stay organized, whether that means setting reminders or turning on automatic payments.
Other types of debt: car loans, lines of credit, and mortgages
Car loans are common because vehicles are a big ticket expense and can be necessary to get to work or school. My perspective, though, is that cars steadily lose value over time. Borrowing a lot of money for something that decreases in value requires careful consideration before taking on a loan.
A line of credit allows you to borrow money up to a set limit, and you are only charged interest on the amount used. They can be useful for emergencies, but they can become a trap if used for everyday spending. It is easy to fall into a cycle of impulse spending and borrowing without realizing it. One of my favourite tactics is the 24-hour rule – if you feel a sudden need to make a purchase, wait 24 hours and see if you still feel the same need.
Mortgages are another major type of debt, and possibly the largest amount of debt you’ll have. A mortgage usually comes later in life when you decide to buy a home. It is often considered “good” debt because a house is an asset that usually grows in value over the long term. At the same time, mortgages are significant long-term commitments, often lasting decades. They require stable income and careful planning. Even though most people in their early twenties are not thinking about mortgages yet, understanding how they work is part of understanding the bigger picture of personal finance.
Why understanding debt early matters
Debt itself is not automatically good or bad. The real issue is whether it is understood and managed intentionally. Some debt can help you invest in your education or build a future, while other debt can quietly grow and create stress if ignored. Learning about debt early helps you avoid mistakes that are difficult to fix later. Similar to investing, the habits you build now can end up being more important than the raw dollar amounts. Being aware of interest rates, thinking carefully before borrowing, and understanding repayment plans are all essential parts to building a strong financial foundation.
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