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Ontario Students Can Use Aeroplan Points to Pay Off Student Debt

June 22, 2015
3 mins
A pile of credit cards, Canadian banknotes and coins

Are you up to your ears in student debt? You’re not alone.

Try these numbers on for size: the average university student graduated $22,000 in debt in 2013, while the average two-year college grad owed $13,000.

That’s a tough way to enter the workforce, especially when there’s no guarantee you’ll land a well-paying job. With thousands facing five-figure debts, new grads are forced delay major life milestones, including buying a home, getting married and starting a family. In fact, our Cost of the Future study found the average university student faces a 14-year timeline to pay off their student debt!

A new take on extra credit

The Ontario government is throwing students a debt lifeline of sorts. A formal partnership has been reached between the Ontario Student Assistance Program (OSAP) and HigherEdPoints whereby students can apply accumulated Aeroplan miles against the balance of their student loan.

At first glance this seem like a great, innovative solution to tackle student debt, but the plan has received mixed reviews. While the College Student Alliance is a fan, calling it “another avenue for paying off student debt,” the Canadian Federation of Students-Ontario isn’t impressed, saying the plan “treats Ontario’s student debt crisis like an episode of extreme couponing.”

The pros of using points

This isn’t the first time Aeroplan and HigherEdPoints have teamed up. A number of Ontario’s most prestigious colleges and universities, including York and Ryerson, already let students use their Aeroplan points to pay their tuition.

Paying off student debt with Aeroplan points is the next logical step. Under the Higher Points program, students can ask family, friends and even their employers to transfer Aeroplan points to cover student debt in denominations of $250. Despite little promotion, $120,000 in tuition and student loan offset have already been converted. The government is planning to promote this option more heavily in the fall so more students will take advantage.

Credit card cons

With the household debt-to-income ratio near a record high, encouraging students and their parents to overindulge in frivolous spending is that last thing we need. Credit cards are a valuable financial tool when used responsibly.

However, far too many people swipe their credit card just to earn reward points, losing sight of spending. When their credit card statement arrives at the end of the month, they’re amazed at how much they spent.

The plan has been criticized for helping out high-income families. It’s hard to argue with the facts: the families that spend the most will benefit the most. Students with wealthy parents willing to donate their Aeroplan points will come out ahead of low- and middle-income families who don’t spend as much. As a result, wealthy families will be able to pay off student debt sooner, only exasperating the existing income inequality.

An expensive way to pay

While using Aeroplan points may seem like an innovative solution, when you look at how many points you’ll have to redeem, you probably won’t be as thrilled.

You’ll need to spend $35,000 on your credit card just to pay off $250 in student debt. With the average university debt pegged at $22,000, you’d have to spend $3.1 million to pay off your entire student debt with Aeroplan points.

While it sounds great on paper, this plan is a Band-Aid solution to a giant-sized problem surrounding student debt. All I can say is don’t quit your part-time job and rely on Aeroplan points. If you do you’ll be  in for a rude awakening.

The amount of spending you’ll need to do means you probably won’t even be able to cover next year’s tuition increase with this program.

Sean Cooper

Sean Cooper is the author of the new book, Burn Your Mortgage. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Financial Journalist, Speaker and Money Coach, his articles and blogs have been featured in publications such as The Toronto Star, Globe and Mail, Financial Post, Tangerine: Forward Thinking blog and TheDot. You can follow him on Twitter @SeanCooperWrite.

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