Via Daniel W. it’s now possible to use Aeroplan points to make student loan payments in Canada.
In what’s surely a twist on the laws of money management, Ontario grads now can use a “points card” to actually get out of — not into — debt.
Loan-laden college and university graduates can fly, shop and charge their way to a smaller loan balance now that the province will let them — or any kind-hearted friend or relative — use Aeroplan points to pay down their Ontario student loans.
While the chair of the Canadian Federation of Students-Ontario says the plan “treats Ontario’s student debt crisis like an episode of Extreme Couponing,” the College Student Alliance hails it as “another avenue for paying off student debt.”
“Now a points card can go to something a little more positive,” said communications manager Veronica Barahona.
The problem, though, is how little you get for the points: 35,000 Aeroplan points converts to a CAD$250 loan payment (CAD$0.007 per point).
If you have significant debt, especially at a high interest rate or that you’re having challenges paying off, then you probably shouldn’t be:
- Taking too many leisure trips on which you’d earn Aeroplan points
- Earning Aeroplan points via credit card spend (sadly the article gives the example of someone doing just that)
You should be economizing and… paying down that debt.
And you should be earning as much cash back as you can (net of fees) with as little spend as you can and.. pay down that debt.
I can see someone traveling for business, where they’re earning their miles for tickets someone else is paying for, converting those miles into student debt payments.
It’s great that this is an option even if it’s a particularly poor value redemption.
I’d rather see someone find things they were going to buy otherwise, and redeem their points at a higher value for those, saving the cash to use for student loans. Even someone saddled with debt may find themselves needing travel, a saver award, or stuck paying for a family member’s travel where the points could be redeemed for a ticket at say two or three cents a point.
But that takes discipline. So if this helps you pay down debt, and you aren’t spending any money to accumulate these points, then so much for the good.
Unfortunately it turns out that it’s not usually the students redeeming their points for loan reductions.
“The average student redeems about $1,000 worth of points. And it’s often not the students themselves, but parents and grandparents, who make the donation.”