BMO Bank of Montreal

BMO Bank of Montreal

August 22, 2011 12:21 ET

Students Asked "How You Gonna Pay?"

BMO survey: students optimistic their school-related debt load will be manageable once they graduate

- 70 per cent of students have summer jobs this year

- 61 per cent of post-secondary students who have jobs believe their summer earnings will cover their day to day expenses while at school

- 59 per cent say they'll owe less than $10,000 or nothing at all when they graduate

TORONTO, ONTARIO--(Marketwire - Aug. 22, 2011) - Despite an improving yet still soft job market for students, 70 per cent of Canadian post-secondary students say they have found summer jobs, according to the new BMO Student Summer Survey results released this week. That's good news considering almost half of them will rely on summer earnings to pay for post-secondary education (48 per cent) or cover day-to-day school-year expenses (61 per cent).

Post-secondary students across Canada say government loans and grants (66 per cent), parental support (56 per cent) and summer job income (47 per cent) are the three top sources of funding for their post-secondary education. Despite drawing on multiple sources to fund these costs, 66 per cent expect to have some debt when they graduate.

However, according to the study, conducted by Leger Marketing, students are most likely to think they will have under $10,000 (32 per cent) in school debt or no debt at all (27 per cent), and 63 per cent think they'll be able to pay off their debt within five years.

"It's not surprising that most students expect to have some debt when they finish their schooling, but we were concerned to see how little debt they thought they would have and how quickly they believed they could pay it off," said Su McVey, VP, Customer Communications & Marketing, BMO Bank of Montreal.

According to Statistics Canada, based on 2009 data, undergraduate students who receive Canada Student Loans pay an average of $5,138 in annual tuition, and have an average total loan balance of $18,800 upon graduation.

The Canada Student Loan Program indicated most students do pay off their loans in full (default rate is 14 per cent), and typically they take 9.5 years to do it, with some taking up to the maximum allowable repayment term of 14.5 years.

"We know the cost of a post-secondary education keeps increasing for Canadian students and their families, but so does the value of that education," said Ms. McVey. "It is, in many ways, the most important investment a person can make. While we can't influence the cost of education, banks like BMO CAN help students lower related costs, such as the day-to-day expenses they'll incur during the school year, by providing money-savings options and advice. By following some simple, smart steps, students can easily minimize their banking fees and lower their monthly expenses.

"For example, BMO's no-fee SPC MasterCard includes a free Student Price Card membership that provides 10 to 15 per cent discounts at hundreds of fashion, food, entertainment, lifestyle and travel retailers across Canada, and the option of receiving AIR MILES reward miles or cash back loyalty rewards on their cards."

BMO developed the BMO SmartSteps® for Students program to help students figure out how to budget and minimize banking fees. BMO offers free banking to students of up to 30 transactions each month among other benefits, and is the only bank to extend this offer to recent graduates with an extra year of free banking. Instead of a traditional student loan, students might want to consider a BMO Student Line of Credit, where they are only charged interest on what they actually borrow, and can borrow as little or as much as they want, up to their approved limit. Students can also make interest-only payments while still in school plus one year after graduation, giving the new graduate some flexibility as they make the transition into the work force.

"With the right saving, credit and loan products, and the right information, students could be reducing their costs throughout the school year, and we want to help them do that," said Ms. McVey.

BMO's 2011 Summer Student Survey was conducted from May 18-26, 2011, by Leger Marketing. The sample was 625 Canadians, 18 years or older currently attending college or university. The margin of error is plus or minus 3.9 per cent.


BMO SmartSteps® for Students

BMO encourages students and their parents to work together to establish responsible saving, spending and borrowing practices. To help, BMO developed the BMO SmartSteps for Students program designed to help students identify ways to minimize banking fees to lower monthly expenses, take advantage of valuable student discount programs and develop realistic budgets that outline how much they need and how much they can actually spend. BMO SmartSteps for Students is available at

• Develop a realistic budget. Set a budget for yourself so you know exactly how much you need and how much you can spend. Your budget should cover everything from your rent, utilities, and books down to your daily coffee. The BMO student budget calculator can help you develop a budget for the year.

  • Reducing your budgeted expenses by just $3 a day can add up to more than $1,000 in savings over a year.

• Monitor your actual spending. Part of sticking to a budget is continually being aware of what you actually spend and comparing it to what you budgeted. At the end of each week, do the comparison – if you're over budget in some areas, but under in others, make adjustments for the following week.

  • An easy and secure way to stay on track is by viewing all you transactions online. BMO provides you with a number of free money management software options through Online Banking such as BMO MoneyLogic.

• Keep your savings separate from your main account. Keep all the money you earn working during the summer – or from grants, bursaries, scholarships and family gifts – in a savings account and set up a weekly automatic transfer from your savings to your chequing account of just the money you need each week. Keeping the money separate reduces temptation to spend more than your budget allows.

  • Free savings and chequing accounts are included in selected student banking packages.

• Minimize your banking fees to lower your monthly expenses. Make sure you understand all of the transactions that are included in your banking package so you can avoid paying more than you need to.

  • At BMO students can bank for free while enrolled in school plus one year after graduation. That's a savings of $102 per year.

• Take advantage of student discount programs. BMO offers a free Student Price Card (SPC) that provides exclusive discounts and deals on fashion, shoes, accessories, sporting goods, restaurants.

  • Students can save the $9 annual fee with an SPC card from BMO, and save average discounts of 10 to 15 per cent on purchases at participating SPC merchants.

• Use your credit card smartly. Take advantage of the student BMO SPC MasterCard. There is no annual fee, and you have your choice of rewards. Plus, you get exclusive discounts at hundreds of Student Price Card Ltd. (SPC® Card) retailers nationwide.

  • By shopping at AIR MILES® reward miles sponsors you can also double your reward miles earned.

• Using a student line of credit instead of a bank loan can help reduce your interest costs because you're only paying interest on the amount you actually need to access, not the full amount of a traditional loan.

  • With a BMO Student Line of Credit you can continue to make interest-only payments up to one year after graduation/residency, to help you as you transition into the workforce.

BMO SmartSteps for Parents

  • More than 56 per cent of students polled said they'll rely on parents to pay for their post-secondary education. A reliable way for parents to maximize their savings for a child's education is through RESPs, which offer the benefits of a tax-sheltered investment and, coupled with the federal government's Canada Education Savings Grant (CESG), allows parents to keep on top of rising costs and gives them peace of mind in knowing that they can provide for their child's education.

For more details, see BMO SmartSteps for Students.

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