Student Loans In Canada

Every year millions of students apply to colleges and universities across Canada. Many prospective students pursue a post-secondary education to open up career and networking opportunities. However, financing an education can often be too costly to pay without loans. 

In fact, there are more than 1.7 million student borrowers in Canada, and according to Statistics Canada the average student debtor owes at least $26,075. Financing an education is no small feat, luckily, there are many federal and provincial government loans to help you meet your educational and personal goals. 

Additionally, private student loans offered by banks and private lenders are also available if you are a mature student, planning on studying abroad or just need further assistance.  For more on student loans, how to apply for them, and your options for repayment, keep reading.

What Is A Student Loan?

Government student loans in Canada are offered by the federal government through the National Student Loan Centre (NSLC) and further assistance is offered by provincial governments. 

Student loans are a type of loan offered to those pursuing post-secondary education at either a college or university. These types of loans are meant to help cover the financial burden of higher education and are often used to cover the cost of tuition, books, housing, food, and other student living expenses. Government student loans differ from regular personal loans given by banks or private lenders, with the main difference being the repayment terms and interest rates.

Federal and provincial government student loans tend to have interest rates much lower than traditional loans granted by banks and private lenders. Moreover, when the time comes to repay your loan, payments are often automatically deferred until you graduate. Once you’ve graduated you will typically be given a 6-month ‘grace period’ where repayment is not required. This period is meant to give you time to settle into your post-grad life, find a job, and save up. However, some provinces may require you to start paying the interest fees on your loans immediately following your graduation.

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Types Of Student Loans In Canada 

As mentioned, there are many different ways you can get a student loan in Canada. While some are funded through the Government of Canada others are provided through financial institutions and private lenders.

Canada Student Loan Program (CSLP)

You can apply for a CSLP through the National Student Loan Centre (NSLC) if you want to continue your education full-time or part-time. A student can acquire a loan to cover up to 60% of their tuition fees through the CSLP. 

Canada Student Loan Program (CSLP) Eligibility For Full-Time Students

To be eligible for this loan, you must first meet certain criteria such as:

• Be a permanent resident in the province that offers the grant or loan.
• Be a full-time student (enrolled in a program for 12 of the 15 weeks of school).
• Full-time students must take at least 60% of the total course load for the year. 

Canada Student Loan Program (CSLP) Eligibility For Part-Time Students

Part-time students have slightly different requirements, such as:

• Income must not exceed the income threshold for part-time students.
• Are administratively documented as a part-time student in a qualified program.
• Be enrolled in at least 20% of a full-course load.

Make sure to check the local and federal student loan websites to see if your province of residence has any further requirements to qualify.

Student Loans From Banks

Banks provide a variety of loans including home loans, car loans, and personal loans. Similarly, you can use a bank to get a student loan to pay for your college or university tuition. Banks provide you with loans that must be repaid monthly over a set period of time. However, some banks provide special terms such as interest-only payments during school and after graduation up to a certain number of years. Since your bank loan would be repaid in monthly installments, it is best to borrow only what you need to keep your payments manageable.  

Do note, that banks often have high requirements, so qualifying for a student loan may be difficult. However, if you have good credit and stable finances, you may be able to take advantage of their low-interest rates and flexible terms.

Student Loans From Private Lenders

If you’re unable to qualify for a student loan with a bank, you can look into private lenders. These lenders have flexible requirements and accept a variety of students with different financial backgrounds. However, these lenders usually charge high-interest rates and don’t usually provide the same terms as banks and government-funded loans. There’s no grace period and payments are usually due each month after taking out the loan.

Student Line Of Credit

Another way to acquire a non-government student loan is through a personal line of credit, often known as a student line of credit. These types of loans do not require you to define how the money will be used. With a student line of credit, you can withdraw money from your line of credit up to your credit limit. Principal payments can be made at any time, however, you are expected to make monthly interest-only payments on the amount borrowed. Keep in mind that lines of credit through banks or other private lenders tend to have higher interest rates.

Another thing to keep in mind is that for certain lines of credit, you’ll need a cosigner. Typically, the cosigner would be your parent or guardian. Non-government lenders tend to require co-signers as it reduces the risk for lenders in the case of no payment. Additionally, having a co-signer might also result in a more affordable interest rate for you. Just make sure that before signing on the dotted line, read the terms and conditions of the line of credit. Ensure that you are also aware of the payback timeline, criteria, and interest rate.

Provincial Student Loans

Just as there are student loans offered by the federal government, there are also student loans offered through the provincial governments. The requirements, terms, interest, and repayment for provincial loans vary from province to province. The interest rate and attributes for each province are explained in the table below.

Canada Student Grants Program

The eligibility criteria for the Canada Student Grants Program are stringent, and not everyone who meets them is guaranteed the grant money. The reason why eligibility does not secure a grant is that the grant has a maximum amount of recipients to which the money can be awarded. Some grants may only select one individual, whilst other grants select several, and at times hundreds. 

Grants typically assess your financial needs, in which case the amount would be dependent on your financial situation. While some grants may have a specific set amount given to one individual, other ones may allocate the total sum amongst multiple recipients. For people with disabilities or those who have dependables, like children, additional grants are offered for further assistance.

Student Loans vs. Bursaries and Scholarships

Loans, bursaries, and scholarships are all intended to help you alleviate the financial burden of pursuing higher education. 

A bursary is a financial aid package for college students who may have trouble affording the cost of secondary education. Although many bursaries include academic requirements, their main goal is to assist students who lack the financial means to cover their tuition costs. In addition, when submitting an application for a bursary, you normally need to explain why you need the money. 

On the other hand, student loans, especially those from the government, typically do not require a certain academic standing or community involvement to be granted. 

Advantages Of A Student Loan

Student loans are a useful option for students and can help cover the cost of tuition, room and board, but they also come with a variety of other benefits:

• Paying off student loans on time can help you build a credit history.
• Most provincial student loans don’t require a credit check unless you are a mature student. (Mature students are defined as those above 22 years old.)
• Provincial and federal student loans provide multiple repayment and assistance options (some private student loans also offer assistance options).
• Provincial and federal student loans, depending on your province of residence, may be eligible for forgiveness or discharge in some cases.
• Student loans in Canada often have low-interest rates.
• You do not have to pay back your student loan during full-time studies.

Disadvantages Of A Student Loan

Student loans can be expensive to repay, which is why it’s so important to consider all of the possible disadvantages when choosing a student loan:

• You’re potentially starting your post-grad life and job with a significant amount of debt.
• Defaulting on your student loans may affect your credit scores. The reason for this is that your federal and provincial student loans are registered as installment loans and become a part of your payment history. Thus defaulting on your government loans would negatively impact your credit scores. 
• Interest is added to your principal balance. (With the exception of Manitoba, Nova Scotia and Prince Edward Island.)

Advantages Of Applying For Bursaries and Scholarships 

One of the best things about bursaries and scholarships is that you are not required to pay back the amount allocated to you. Bursaries and scholarships are also often given to students with high achieving marks or those who excel in a sport, the arts, humanitarian and environmental causes, or community services. If you are involved in any of the aforementioned activities, then bursaries and scholarships can be financially beneficial and a representation of your talents. Many use their scholarship award as a testimony to their skills when applying for a job or a Masters or PhD program following their undergraduate studies.

You’ll also benefit from the following when funding your education with bursaries or scholarships:

• Graduate debt-free.
• Bursaries and scholarships can also be an opportunity to network and will boost your CV as it showcases your academic and social/athletic merit.
• The bursary may also grant you extra allowances for certain things such as books and living and care needs.

Disadvantages Of Applying For Bursaries and Scholarships 

The major downside of bursaries is that they can be highly selective and can rely heavily on academic merit.

Furthermore, those who apply for bursaries and scholarships will likely experience the following disadvantages:

• Bursaries have to be re-applied for each academic year. Meaning, that you may be approved one year and rejected the next. 
• Bursaries sometimes require an interview.
• You may lose the bursary if you don’t pass all your courses. 
• For certain bursaries, you may need to do some work or volunteer with an organization after finishing your studies or during your studies.

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How To Apply For Student Loans In Canada

Depending on the type of loan you apply for the requirements and application process will vary.

Private Student Loans

To apply for a private student loan you can either contact a private personal loan lender or seek the loan services of a bank. Most private lenders and banks will require supporting documents to authorize the loan. 

To demonstrate your ability to make repayments, you will most likely need to provide the following:

• Credit score & history
• Proof of income
• Bank statement
• Proof of identification 
• Social Insurance Number (SIN)

Government Student Loans

You must submit your application well in advance of the start of your academic year if you choose to use a government-backed student loan to pay for your education. As opposed to a loan where you may apply once and is automatically reissued each school year, government loans require you to reapply ahead of each school year. You can check the application deadlines on the website of the province where you reside. 

To qualify for student loans, requirements vary from province to province. In general, you will most likely be asked to provide the following:

• Proof of identification and Canadian citizenship or permanent residency. 
• Social Insurance Number (SIN)
• Proof of your parent or guardian’s net income.
• Proof of residence within the province where the loan is offered.
• Proof of registration and enrollment from an educational institution.
• Proof of tuition fees and education costs.

Repayment Of Government Student Loans

Loans backed by the government are less difficult to repay as interest rates are lower, and are not expected to be paid back until 6-months following your graduation. Furthermore, the government provides students a six-month grace period after graduating before requiring repayment of the loan. 

Grace Period

This six-month term is interest-free, which means you’ll be able to pay off your principal loan straight away. Moreover, you can start making payments while you are still in school. Doing so can be great as early payment reduces the total amount of debt owed and speeds up the payback process. 

Interest Rates

Government loans also have a fixed interest rate which can be altered to a variable interest rate depending on your needs. All in all, the whole repayment process is quite simple. Once you’ve graduated, the government will send you a letter describing your loan, interest, and payback plan. Your repayment plan and accumulated interest depends on the loan amount which you received throughout your studies, and thus varies for each individual. 

Student Loan Forgiveness In Canada

If you’re strapped for cash and worried about repayment, students can apply for “forgiveness programmes” from the government. Specific qualifying criteria vary by location, however, you may be able to have a portion of your debt forgiven.

Repayment Of Provincial Student Loans

Provincial and territorial repayment plans and repayment assistance vary. 

Alberta Student Loans

• The province of Alberta offers a one-time option to choose a fixed rate of a 3-year to 9.5-year repayment Plan.

British Columbia Student Loans

• B.C will not be charging interest on loans granted after February 2019.
• Loan default rehabilitation available.
• Three types of B.C. student loans: direct lend, risk-sharing and guaranteed. You must make a separate payment for each type of loan you have.

Manitoba Student Loans

• 0% interest student loans.
• Repayment Assistance Plan (RAP) is available with a 15-year repayment option.
• Your monthly payments will not go over 20% of your monthly income.
• You’ve been in repayment for 10 years or you are applying as a borrower with a permanent disability the Manitoba government will pay a portion of your loan amount.
• If you are a borrower with a severe permanent disability that prevents you from working and going to school, you may be eligible to have your loans forgiven.

New Brunswick Student Loans

• Loan repayment begins 6 months after graduation.
• During the six-month non-repayment period, interest will accumulate on the New Brunswick portion of your student loan.
• A Repayment Assistance Plan (RAP) is currently being developed.

Newfoundland and Labrador Student Loans

• Repayment begins six months after your full-time or part-time studies end.
• Interest does accrue throughout the non-repayment period.
• Newfoundland and Labrador Student Loans are interest-free.
• Through the Repayment Assistance Plan (RAP), you may qualify for a reduced monthly payment or no monthly payment. (You will need to reapply every six months)
• Under the Revision of Terms measure, you can ask to have your student loan payments decreased if you are having difficulty repaying your student loan debt.
• Through the Repayment Assistance Plan for Borrowers with Permanent Disability (RAP-PD), you may qualify for a reduced monthly payment (or no monthly payment at all). The NSLSC considers expenses related to your disability in determining eligibility.
• You may be eligible to have your loans forgiven through the Severe Permanent Disability Benefit if you have a severe permanent disability.
• You may be eligible for Canada Student Loan Forgiveness for Family Doctors and Nurses if you are working as a family doctor, resident in family medicine, nurse or nurse practitioner in a designated rural or remote community.

Northwest Territories Student Loans

• During your six-month interest-free period, the Government of the Northwest Territories will not charge interest on your outstanding loan(s).
• Students that have received a student loan under the NWT Student Financial Assistance Act and Regulations may apply for loan remission, zero percent interest, and/or the Northern Bonus.

Nova Scotia Student Loans

• Loan forgiveness for all students in eligible programs completed at a Nova Scotia university. It is assessed automatically.
• The Debt Cap benefit is automatically assessed for all university students who meet the Debt Cap criteria (for NS Student Loans issued from Aug 2011 to July 2015).
• Zero interest on NS Student Loans.
• Debt Reduction Program (for NS Student Loans issued from August 1, 2003, to July 31, 2008). You may also qualify for the Employment Bonus Award and Repayment Bonus Award.
• Canada Student Loan Forgiveness for Family Doctors and Nurses.
• Use income tax refunds, your education tax credits and other income tax advantages for students to make lump sum payments and reduce your loans.

Nunavut Student Loans

• Many scholarships and bursaries for a variety of students.
• Primary Loan must return to live and work in Nunavut to have these loans forgiven.
• Secondary loan must be repaid in full.

Ontario Student Loans

• Repayment assistance for rural nurses.
• Repayment begins 6-months after the end of your post-secondary studies. 
• You will be charged interest on the Ontario portion of your loan during your six-month grace period. This interest will be added to your loan principal.
• Between April 1, 2021, and March 31, 2023, Canada will not be charging interest on the federal portion of an OSAP loan.
• Extend your grace period by another six months if you own or co-own a new business in Ontario, or work for or volunteer with a not-for-profit organization.
• Payments are based on a 9½ year pay-back schedule.
• If you’re having trouble repaying your loan, you might be able to get repayment assistance.
• If you have a severe permanent disability and you can’t attend work or school, you can apply for the Severe Permanent Disability Benefit. Contact the Federal Student Loans Service Centre.
• You can lower your monthly payments by extending your repayment period from 9½ up to 14½ years.

Prince Edward Island Student Loans

• Those who have a medical residency may be able to set their loan balance to “non-repayment” status until they complete their residency program.
• 12-month grace period for all graduates.
• PEI Student Loan Rehabilitation Program provides you with a six-month payment schedule as a way to bring your defaulted PEI Student Loan back into good standing. 
• Once you complete the plan, your loan will be transferred back to Edulinx PEI, where you will continue with regular monthly payments.
• If you have a severe permanent disability that prevents you from participating in post-secondary studies and the labour force for the rest of your life, you may be able to have your student loans cancelled through the Severe Permanent Disability Benefit.
• The Debt Reduction Grant program provides graduates with assistance with their student loan repayment and encourages students to live and work in our island communities after graduating from a post-secondary institution.

Québec Student Loans

• Allowances and grants for qualifying students.
• Due to the pandemic, measures have been implemented that suspend interest on student loans between April 1, 2021, to March 31, 2023.
• Six-month grace period after the end of post-secondary studies.
• If necessary, you can apply to defer repayment of your student debt under the Deferred Payment Plan.
• If you do not make the payments scheduled in your student loan repayment agreement, the Ministry will be required to repay your debt to your financial institution.
• your file will be transferred to the Collection Department. The consequences will be as follows:
• Your Québec income tax and Solidarity Tax Credit refunds will be applied to the repayment of your student debt, in accordance with section 31 of the Tax Administration Act.
• Your student loan debt could be reduced by 15 % if you complete your program within the prescribed period of time.
• Can request that the interest be capitalized, that is, added to your student debt.
• From the time you begin repaying your student debt until the time it is fully repaid, you receive a tax break.

Saskatchewan Student Loans

• Loan forgiveness for nurses.
• Student Loan Forgiveness Program for Veterinarians and Veterinary Technologists
• Six-month grace period for all graduates.
• Repayment Assistance Plan (RAP) available with a 15-year limit.

Yukon Student Loans

• Six-month grace period for all graduates.

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Student Loan Repayment In British Columbia And Yukon

In British Columbia and Yukon, accessing and repayment of student loans differ from other Canadian provinces and territories. When the repayment process begins, all government-issued loans are repaid through the federal government under the National Student Loan Service Centre (NSLSC). However, in the case of B.C, student loans are repaid through the province of British Columbia.

Meanwhile, in Yukon, the Department of Education administers the Canada Student Loan and Grant Programs on behalf of the Government of Canada. Meaning that the government of Yukon does not offer additional student loans, but instead facilitates student loans on behalf of the federal government.

Conclusion

Pursuing higher education can be stressful when you’re worried about your finances and ability to afford your tuition, books and cost of living. Fortunately, there are many options available to help alleviate these stress factors, allowing you to focus on your studies. If you’re looking for funding, make sure to do your research and explore all options to see what you qualify for.