Life skills and career tips for Canada's lawyers in training
Issue link: https://digital.canadianlawyermag.com/i/50902
low-fee accounts, credit cards, and even medical and dental plans. Ray Baldelli, vice president of retail loans at Scotiabank, says it does not ad- vertise the maximum amount it will lend to students. As one of the fi rst banks in Canada to build professional lines of credit, Scotiabank develops its program based on fi nancial need on a student-by- student basis. "We want these students to understand that we help them with their fi nancing so they can focus on their studies," he says, adding the idea behind the lines of credit is to allow for students to use only what they need as they need it, unlike traditional loans. Unlike some banks, Scotiabank car- ries the interest into the balance of its products, so students don't have to make payments while they are in school. Th ere's two reasons: one is getting stu- dents accustomed to making payments; the other is letting them focus on study- ing so wrapping in monthly payments. Penny Spence has been advising law students on fi nancial issues for more than a decade. As director of student fi nancial services at Osgoode Hall Law School, she helped build the country's fi rst professional student line of credit program through the Royal Bank of Canada. Th e original line of credit had a maximum of $15,000 a year for three years and a $10,000 increase for articling. Th at has been increased to $75,000. One of Spence's chief concerns is keep- ing the available credit low. "We have al- ways with the Royal Bank tried to keep the amount they will lend students as low as possible, I know that sounds counter- productive, but students will spend what they can get their hands on." To that end, she says there are now between 30 and 40 students at Osgoode who will graduate with upwards of $100,000 in debt. One tactic law schools are using to get students to start thinking about how to pay for their debt loads is to have students complete fi nancial plans as part of the ap- plication process. Th is is sometimes the fi rst time students have to think about their fi nancial situation. Oſt en students will live at home and parents pay for their undergrad. With law school, they oſt en must come up with the money, and are on their own for the fi rst time dealing with household budgets. One common thought is, "I'll make it all back in the summer or when I'm a lawyer." Th ink again, says Spence. Consider there are 900 law students at Osgoode alone — one of six Ontario law schools. Each sum- mer, many of those students look to Bay Street for the peachiest placements. "Th ere [are] a handful of these big, top jobs, there are not that many, so if you come to law school with the perception, 'Oh I'll be able to get a big job in the summer, that'll pay me enough,' it doesn't happen," she says. Spence also warns about working through law school, part time or other- wise. When planning to do so, students, especially in their fi rst year, can expect their grades to suff er. Th is of course cuts The students are very, very helpful with each other. If there [are] financial issues, we have an office in law school, a broad student services office, that is the place you go to whenever you have any kind of issue. — Arun Krishnamurti, Students' Law Society, University of Windsor into the ability to get a summer place- ment. "Some just have to, and they do it somehow, but it takes a pretty amaz- ing student to balance [a job and] law school," she says. "In second and third year it is easier to do because they can set their own timetables and they've gone through fi rst year and they know how much they have to work. But fi rst year is a tough year so they are better to start out with a clean slate." Spence says the fi nancial services offi ce tries to make students aware from the be- ginning how much it will cost. From the moment a student applies to Osgoode, he or she has to develop a fi nancial plan. Based on that, Spence's offi ce outlines the bursaries the student may be able to get in the acceptance package. Th e student is then encouraged to apply for government loans and speak to a bank, possibly about lines of credit. While Osgoode has a working relationship with RBC, students are not required to use its services. Th ere is $3 million in bursaries — a.k.a. free money — available at Osgoode for students in need. "When they apply for a bursary, they must have a student line of credit in place, or documented proof they have been turned down. Th ey must have proof they have government funding in place or documented proof they have been turned down — those are the two require- ments for a bursary," says Spence. For students with clean credit, getting a professional student line of credit is fairly easy, she says. Th e same is not true for stu- dents with bad credit, slow payment histo- ries, unpaid accounts, writeoff s or R9s (a revolving account in very poor standing), or bankruptcy. Students can check their credit with both of Canada's credit agen- cies, TransUnion and Equifax. Just as students may have diff erent credit situations when coming into law school, some students may be at diff er- ent points in their lives. One program developed by the Government of Canada to encourage education at all ages is the Lifelong Learning Plan. In most cases, anyone holding non-locked RRSPs can cash them out and pay a withholding tax. However, the LLP allows students to avoid the withholding tax, as long as they keep to a repayment schedule once they fi nish school. Th e plan allows for a student to withdraw $10,000 a year from RRSPs tax-free to a maximum of $20,000. A spouse can also withdraw the same amounts, meaning a total of $40,000 can be withdrawn from plans, basically the cost of tuition and books for a three-year program at most Canadian law schools. Th e repayment of the LLP withdraw- als begins once the student has been out of school at least one full year. Th e repay- ment is 10 per cent of the total amount of the LLP withdrawals, each year for 10 years and never incurs interest. Th e only issue is when the full 10 per cent is not re- paid, the student is then forced to pay the tax on the amount unpaid. No matter what way law students de- cide to pay for their education, unless they have the philanthropic relative, they can expect to have debt, says Spen- ce. But a key to managing that debt takes working with banks, the law school, and tapping into the learned experiences of other students. n C ANADIAN Lawyer 4STUDENTS SPRING 2010 7