Canada Student Loans & How to Apply

The tuition cost of post-secondary education in Canada is roughly $9,000 per year for Canadians and about $25,000 for foreign students depending on the degree and university reputation. Tuition fees are increasing every year and it can be shocking to see how much you need to pay not including the cost of housing, books, stationery, electronics, food, etc.

What is a student loan?

The government of Canada offers full-time and part-time student loans to eligible students through the Canada Student Grants and Loans Program. You will not be required to pay anything until 6 months after you graduate. You’ll however need to maintain a budget to make sure you don’t spend the entire amount early on in the school year, plus budgeting is the right thing to do. After finishing school, you will need to repay this loan with interest.

 How much do you get?

The amount you get depends on factors like:

·       Which province or territory do you reside in

·       What is your family income

·       If you have any dependents

·       Your total tuition fees and other living expenses

 How to apply

Your Canada student loan application will be required to be done with the province or territory in which you reside. To avoid heartaches and disappointments, find out if you qualify first, get to know how much you can get. The good news is the application is done online and in one application which simplifies the process.

If for some reason you cannot submit your application online, the below documents can be mailed via Canada Post:

·       Completed and signed Loan Agreement and Certificate of Eligibility

·       A void cheque or enter your banking information

·       A copy of both sides of valid government-issued photo identification, such as:

o   a driver's license

o   a Canadian passport

o   a provincially/territorially issued identification card with a photo

o   a Permanent Resident card

o   a Certificate of Indian Status with photo; or

o   a federal or provincial/territorial employee identification card

·       A copy of both sides of a document confirming your Social Insurance Number (SIN) such as:

o   a SIN card; or

o   confirmation of Social Insurance Number from Service Canada

Your university will need to confirm to the government that you’re enrolled in a course to receive the money.

When and how to pay federal student loans back

Even though you won’t be asked to repay this loan until you’ve graduated, you’ll need to prove that you’re enrolled in school every semester so that the government doesn’t expect you to start repayment. Some of the ways you can begin repayment is:

Pre-authorized debit

This is automatically set up if you received your student loan directly through your bank account. This is the easiest way to ensure timely and consistent payments. You don’t want penalties for late payments.

Online Payment

This can be done through online banking, telephone banking, bank drafts, cheques, etc. This method allows you to make lumpsum payments if you desire.

How much is Canada’s student loan interest on average?

When you take a student loan 60% is federal and 40% is provincial. The federal portion and the provincial portion of Canada’s student loan interest are different. Federal portion student loan interest is set at prime.

A prime rate which is also known as the lending rate is an annual interest rate influenced by the Bank of Canada’s policy and used by major banks to set interest rates for variable loans and lines of credit. As of March 2022, the prime rate is 2.7%. Provincial rates are set by the individual provinces.

Canada Student loan forgiveness, is it worth it?

Student loan forgiveness doesn’t come as easy as you might think. The government will not give up without a fight. If you miss 9 months of payment, your federal student loan will be forwarded to Canada Revenue Authority (CRA) for collection. You don’t want this to happen and here is why.

Missing student loan payments will negatively affect your credit score. You will need a healthy credit rating to survive in real after-school life therefore it’s important to safeguard it if you can. If you’re having trouble making payments due to various reasons, there are options.

You can get repayment assistance from the government of Canada or reduce your monthly payments to comfortable levels.

Topspin Finance money coaches always advocate for talking to your creditors instead of running away from them. It is therefore important to contact National Students Loans Service Centre (NSLSC) as soon as possible if you’re in financial distress. If your student loan was sent to CRA for collection, contact them to see if they can rehabilitate your loan to levels you can achieve without compromising your quality of life.

If you decide to file bankruptcy, be aware if it’s done within the first 7 years of completing your studies you will still need to continue paying back your student loan as it will not be erased.

Got any questions? Ask a Topspin Finance Money coach.