Canada Student Loans - Part 3 The Bureaucracy

Ok, here it is...the final post of the trilogy.

In my experience with the government institutions that administer student loans in Canada, its very obvious that people are are being cost thousands of dollars as a result of this bureaucracy.

Here are two examples that I have personally experienced that likely occur regularily:

My first experience happened during the Christmas break of my third year. During the period between Christmas and new years, I logged into my bank account to check the balance to make sure that my rent would clear in a couple days. To my surprise, my account was about $250 less than expected. At the time $250 was a massive amount of money to go missing. I followed up with my bank and all they could tell me was that it was a "pre-authorized debit". Wonderful, that sure helped. It took going into my home branch before they would tell me that it was my student loan payment that had been taken out. This was extremely odd as I was still in school.
When I contacted the National Student loan center they informed me that I failed to submit the "Federal" portion of the paperwork which documented that I was still in school. After checking, they did confirm they had my provincial portion. Despite having one but not the other, both my provincial and federal loans went into repayment. The real issue here is that the procedure for submitting your full time student documentation is to take your loan documents to a processing center (in my case, the table beside where I got the documents) and they send them off to all the institutions. This would of course mean that either the processing center, or the loan office themselves made the mistake. The frustration here is that despite proving I had submitted the form, all that the loan office was prepared to do was refund the principle. This meant that I would have to repay these dollars later and the interest portion would be lost forever. Furthermore, all the interest that had accrued from April-December would be tacked on to my principle.

The second issue to affect my sister is equally frustrating. She just finished school this September following a year in a post-grad college program and 4 months of unpaid co-op. She was fortunate to find a job within a month and wanted to start repaying her loan. Before she received her first paycheck, she received her loan consolidation paperwork that is typically sent out about 5 months after you graduate. This didn't make sense to her, so she called the national student loan center. She was told that their records indicated that she had finished school in April. She informed them that her program ran from September 2005-September 2006 and lasted 3 semesters. The loan center informed her that since she was already finished school, it was too late to have her status changed. This would result in about $1,000 in interest being tacked onto her loan before she even had a chance to repay. Could somebody please explain how this could have been avoided? It couldn't. Our student loan system is a joke and needs to be fixed.

I would have to suggest that Canada adopt a US style system where students would take their loans to a bank to have them consolidated. That way, the student could work with the bank over any mistakes as well as negotiate better rates. Even better, just get rid of the "there is nothing we can do" mentality that exists with this bureaucracy.

How much is your time worth?

A post this week about the value of one's time really got me thinking. Blueprint for Financial Prosperity wrote the following: http://www.bargaineering.com/articles/how-much-is-your-time-worth-myth.html.

I couldn't agree more with this post. I thought I would approach this post from a different angle.
Yesterday I was at Home Depot buying paint. I could not believe how busy the store was. I walked in at 7pm on a Friday and it looked worse than noon Saturday. While buying the paint, the associate informed me that it was "Midnight Madness". Other than a few door crashers, there werent really any other significant differences between "Midnight Madness" and every other Friday night. It was these door crashers that had me amazed. At 7pm, lines had formed in front of the displays for each of the door crashers. The amazing thing about these lines was that these door crashers were not available until 9pm. People were willing to wait 2 hours just to save a little bit of money. How much money you ask? Well here were the door crashers:

1) Fiesta BBQ Regular $139 on sale for $89.
-While on the surface, it may look like you are being paid $25/hr to wait to buy this BBQ. Consider that its November, and BBQ season here in Toronto Ended at least a month ago. My guess is that this BBQ is being sold for about $10-$20 less that in was during the end of season sales just a few weeks ago.
2) Phillips Compact DVD Player - $39 (no reg price given). Note: Longest Line
-To me this doesn't really seem like savings at all. DVD players can be purchased under $50 on a regular basis. While the quality on a $50 DVD player may not be great, I doubt the one being offered here was any better. Just at quick look at Futureshop and I found a DVD player for $29 and I don't need to leave my house to buy it.

3) Ryobi 5 in 1 Multi-Tool Set $149 Reg $249
-Of all the door crashers, this is easily the best, but its still not great. Last week at Canadian Tire I saw a very similar deal. Consider also that 2 of the 5 tools are a flashlight and a hand vacuum.

I think the above are examples of where time really should be equated with money. If one were to simply shop around, they would realize that these door crashers simply are not that great a deal. Secondly, would these people not be better fulfilled as human beings if they were to spend those 2 hours with their families on a Friday night instead of leaning on their shopping carts in line at the home depot?

When Asking Can Help

In my last post I talked about how asking for something hurt my credit. This post will be dedicated to two instances where I asked for something and it came out in my favour.

When I moved into my new home this past summer, I had to make the calls to transfer my cable/phone/internet. After making the phonecall to Rogers to transfer the cable and internet at my old apartment. I decided to shop around a little bit. I noticed that Bell was offering its cable (satelite) for about $10 per month cheaper. They were also offering a PVR for 1 year. I used this opportunity and called Rogers about this deal. They new I meant business because I had alredy put in the move order. I told them that I needed them to match the prices that Bell was offering. They not only matched Bell, they went a little further. I received $15 per month off my bill, and a PVR free for a year (worth $240). Not too shabby if I dont say so myself.

Emboldened by this experience, I decided to use this tactic on my cell phone provider. My fiance and I were both Fido users. My contract just expired and my fiance's doesnt expire until February. My current phone just isnt cutting it anymore and I would love a new one. So I called Fido to see what they could do. Since I wasnt under contract, they were falling over themselves to keep me. I would up with a couples plan for $35/month with free VM/Caller ID for a year. I also have two camera phones on their way for free. The best part is that this is all on a 2 year contract, and my Fiance's contract was torn up in favour of the new one. Since we didnt used to be on a couples plan, this is a savings of about $15/month, plus the VM& Caller ID.

With the comeptition out there these days, it never hurts to ask. Oh, wait. It does hurt when it comes to things that require credit checks.

Until next time,

Simply Asking May Hurt Your Credit

Since I moved in with my fiancé this past spring, I entered in three large transactions (bought an engagement ring, bout my first car, bought a house), all of which impacted my credit. They taught me a great deal about my credit score, and frankly, made me question the methods used to calculate ones credit score. Hopefully over the next few paragraphs I can impart one piece of credit wisdom I learned since the spring.

In the fall of last year, while on the phone with my bank, I was offered a line of credit. I was planning to propose to my girlfriend over the next few months, and figured it wouldn’t be a bad idea. I asked what the rate would be if I were to open my line of credit. The rate I was quoted was prime +2%. This was at least 1% more than I was willing to pay. So I declined. This was my first mistake. By asking for the rate, I had essentially applied for the line of credit. This was despite the fact that they offered it, and I was only asking for the rate. I mean really, if somebody says “do you want to buy this?” and you say “how much?”, Did you really apply for anything? We will get to why this matters in a minute.

Fast-forward to the spring of this year. I’ve decided to propose to my long-time girlfriend and knew that once we moved in together, we would need a car. I figured this would be a good time to open up a line of credit. So, this time I call my bank and tell them I would now like sign up again for a line of credit. After a few minutes of waiting on hold, I’m told that the bank was not willing to extend any credit to me at that time.

I was shocked. They had pre-approved me just a few months earlier and there was nothing else that would have hurt my credit. So I contacted Equifax and asked why this would be. After getting the runaround for several phone calls, I was finally informed that my credit score was low because of the number of credit requests I had made in the past two years. WHAT???? "Your credit score was lowered because your credit was access several times over the last two years". You cant be serious? So when I asked for the rate on that line of credit in the fall, I was hurting my credit. In the fall I had also closed a student credit card and opened a new credit card with a much better rate (prime +1). This apparently also damaged my credit score. To top it off, when I moved to Toronto to start my current job, the apartment I moved into also ran a credit check…again, hurting my credit.

I think this methodology is extremely unfair to those starting out in life. Of course you will need to have a number of credit checks/open new credit once you finish school and start your life as an adult. You credit report is already adversely affected by having “young credit”, why make it a double whammy by hurting you for starting your life?

So here is the moral of the story, think twice before giving somebody your SIN unless you are absolutely applying for credit. It hurts your credit score and may not do you any good.

Until next time,

Extended Warranty Frustration

Today the unthinkable happened. My TV broke!!!! Well, Im not sure if that is entirely accurate. The top lefthand corner of my TV screen now has a very noticeable blueish blob. When the screen is showing something dark or simply blue, you cant notice. But when it light there is a blue blob threatening to take over my TV.

I dont normally purchase extended warranty because I dont think the price is fair relative to the price of the item. Typically extended warranty is approximately 20% of the value of the item. Here is my logic: 1) The item typically comes with 1 year of warranty anyway. 2)It costs you about 20% of the value of the item. 3)Most items follow the bathtub reliability curve. Therefore, if it is going to break, its going to break early in its life or not until much later.
Think about all the items you own where you had the option of buying extended warranty. Did 1 out of 5 of them break in years 2-3....othewise you wasted your money on extended warranty.

Despite saying all this, I did have extended warranty on my TV that just broke. You see, the TV was a gift, and the giver was nice enough to purchase it on my behalf. Good thing.
Unfortunately, the extended warranty does not really provide any added convenience other than the extended time period. I now need to bring the TV into the store it was purchased at, and they will try and fix it. This can take up to 2 months. How am I to function without my TV for 2 months? More importantly, how I am supposed to get a 27 inch flatscreen tube television into my car?

Until next time,

Best and Worst Money Moves

Alot of the financial blogs out there seem to be addressing this issue lately, so I thought I would throw my hat in the ring on the subject. I should also give credit to the blog that originated this subject: http://www.bargaineering.com/articles/ .

Worst Money Move:

Racking up tonnes of student debt.
When I graduated from university, I owed in excess of $40,000. I'm currently paying $600 a month for these loans, and it will take me 6 more years to finish paying it. See my other blog entries for some ranting and advice about student loans. The real mistake here was not knowing what I wanted to do coming out of high school. I thought doctor was a decent calling so I started university pursuing a biology degree. Unfortunately, when I got there biology in university was alot different than biology in high school. In high school, I found that it was the sciences that required critical thinking and analysis, which business type courses were read and regurgitate. At the university level, this pulls a 180. Through my first 3 semesters, all my work involved reading the text and answering multiple choice questions. I was miserable. My roommates were all economics or business majors. I realized a definite calling, so after completing my degree in bio, I started in on an economics degree. The reason I didn't switch after 3 semesters was because those 3 semesters would have been completely wasted (obviously there isn't alot of overlap between a bio and economics degree.

When it was all said and done, I had spent 6 years in university and acquired two degrees (including some summer courses). Had I simply known that business was my calling, I could have likely saved about $20,000, and started work a couple years earlier.

My Best Money Move:

My best money move was easily investing while I was still in school. I was fortunate enough to be in university when the .com bubble burst. I was in tune enough with investing that I learned a lesson from this, without actually having to suffer any losses. I was looking to invest in something low risk, with the intention of paying back that money towards my student loans after graduation. I got to know income trusts very well and made alot of money on them. As a result of this early investment, I had about $30,000 saved by March of this year (about 1.5 years out of school). While most of my friends are still paying off their credit card debts incurred during school, I have already bought a car, a house and an engagement ring. Now if I could only get rid of those damn student loans....

Until next time,

Thanksgiving Giveaway at "My Money Blog"

One of the best personal finance blogs out there is "My Money Blog". You can find it at mymoneyblog.com. They currently have a contest to give away a bunch of personal finance books. I reccomend checking it out.

Until next time,

Choosing The Right Gym

Ok, so if you are somebody who is trying to be moneywise, you have probably read some of the other money conscious blogs out there. I find that a fairly consistent piece of advice for saving money is to cut out those health club fees. The alternative for physical fitness that is typically given is to walk/run/bike outside since these activities are of course free. However, as a Canadian, this simply isnt practical. Cycling isnt really an option from October to March and walking/running loose their appeal from about November-February. There are obviously going to be exceptions to that, but lets be honest, if one is to be successful at regular exercise, it needs to be routine. I dont see that happening if you have to skip a few days because of a blizzard, or even rain.

Another issue with the spendthrift suggestions for physical fitness is its lack of strength training. Building/maintaining muscle is almost as important to health as is cardiovascular training. Unless these blogs would have me constantly moving the furniture in my home, this area is completely missed.

So here are my suggestions:

1) Avoid the trendy "clubs".
This probably goes without saying, but there are alot more affordable ways to have access to health equipment than joining a club. By club I mean places that often have club in the name ie "Adelaide Club", "Granite Club", "Hunt Club". These places are either more expensive, or have significantly less focus on fitness than a health club.

2)Avoid the personal trainer.
Any health club (different than above) I have ever joined has required some sort of initial assessment performed by a personal trainer. This is more of a sales pitch than a health assessment. The reason of this meeting is to try and get you to pay for the personal trainer. Trainers can often cost as much per session, as the clubs cost per month. AVOID!!!! While they may provide better results for those of us lacking in motivation, I really cant justify the price.

3)The older the club/the better the price.
Much like buying a car, the older the equipment at your gym is, the less you are going to pay each month to use it. While this may not be true 100% of the time, its a pretty safe bet. Therefore, avoid the club that just opened and is often part of a national chain. Think about it, does it really make much of a difference if that big metal plate is 2 days or 10 years old? Also, its my experience that the flashy new club will often be busier than the older club. So if you like waiting for machines, go with the new club.

4) Go with a community gym.
Community gyms are almost always going to cost less than a health club. You will find these at your local community center. Often times you will also get access to a full sized pool that isnt available at the health club and the machinery may even be on par with the glitzy healthclub.


Until next time