Government and Private Student Loans

GOVERNMENT STUDENT LOANS

 

Government student loans are processed through your province or territory of residence.

 

♦ The Northwest Territories, Nunavut, and Quebec have independent student loan programs. If you live in one of these provinces, information about Canada Student Loans and Grants does not apply to you.

 

♦ In all other regionsyou are assessed for provincial/territorial aid AND Canada Student Loans and Grants. You only submit one application.

 

On this page, our goal is to answer your most pressing general questions in a way that is easy to understand. However, we provide links to official government webpages throughout for specific requirements and regulations.

 

♦ CanLearn is a Government of Canada website with information about Canada Student Loans. They also provide a PDF guide for students.

 

The information on this page was last updated 07-22-17.

Canada Student Loan statistics

 

In 2014-2015, 489,000 full-time students received $2.7 billion in loans.

 

♦ 59% of full-time borrowers attended university, 32% attended college, and 9% attended a private institution.

 

♦ The average loan was $5,529 per student for the year, not including provincial and territorial loans.

 

◊ The average amount was highest for students attending private institutions ($7,557) and lowest for college students ($4,763).

 

♦ $20.9 million in Canada Student Loans were distributed to 12,100 part-time students. Support for part-time students has been expanding yearly.

 

♦ At graduation, the average Canada Student Loan balance was $12,783 (including all years of receiving federal student loans; not including provincial and territorial loans).

 

◊ Debt was highest among university students ($15,989) and lower for college students ($9,794) and students attending private institutions ($11,082)


◊ Debt is highest for students from Prince Edward Island ($16,741) and lowest for Manitoba students ($9,263).

 

♦ This data was reported in the 2014-2015 Canada Student Loans Annual Report.

Should I consider getting a government loan?


♦ Creating and following a budget will help you figure out if you need a loan and how much money you need.

 

♦ Compared to private loans, government loans have some advantages:

 

◊ During your studies, interest-free status is offered for full-time students and often for part-time students. Some provinces offer longer periods of interest-free status and/or lower interest rates on the provincial portion of the loan.

 

◊ Learn more about how interest works on government student loans below.

 

◊ You have 6 months after the end of your studies before you have to start repayment.

 

◊ Repayment assistance and debt forgiveness are available in some cases (learn more below).

 

◊ A tax credit is available for interest paid on government student loans.

 

♦ Private loans also have some advantages, find out more below.

 

♦ Even if you want to avoid debt, remember that if you apply for a government loan you will also be considered for non-repayable government grants and bursaries. You can also apply for other scholarships, bursaries, and grants. If you receive non-repayable funding, you can reject or repay the loan immediately.

 

◊ If you receive funding that was not claimed in your original application, you will have to notify your government student aid office of this added income and they may revise the amount of money you are eligible for in both loans and grants.

 

◊ For some students, loans are necessary to pursue post-secondary education. Before you choose to go into debt, think about:

 

◊ Your program choice: How much will it cost, what are the career prospects, and how much can I expect to earn following my education? Find out more about researching careers and PSE programs here.

 

◊ The choices you can make to save money, such as living at home. Find out more about planning your expenses here.

 

◊ The purpose of going into debt: “Good debt” is debt will add to your wealth and earning power, including taking out student loans. “Bad debt” is borrowing money to pay for things that you cannot afford. Learn more about good debt and bad debt.

Am I eligible for a government student loan?

 

Eligibility depends on several factors, including:

 

♦ Citizenship and residency, course load, credit rating (in some cases), previous student loans, satisfactory grades, your post-secondary institution and program, and your financial need (learn more about how the government determines financial need below).

 

♦ Make sure you meet all criteria by checking the CanLearn website and/or your provincial/territorial website.

 

♦ There are limits on student loans, which are different depending on the source of the loan.

 

◊ For Canada Student loans, there are lifetime limits on how long you can receive financial assistance.

 

◊ Some regions have limits on how long you can receive financial assistance for a particular program of study.

 

◊ In Manitoba, the limit is the intended length of the program plus one extra year.

 

◊ Some regions have limits on how many programs you can receive financial assistance for

 

◊ In Manitoba, applicants are eligible for funding for one of each type of educational program: degree, diploma and certificate. They can be eligible for an additional one if it is a prerequisite or an advancement.

 

◊ Some regions have limits on how much money you can owe at one time; the amount depends on your program of study.

 

◊ If you can’t find the information on your provincial/territorial website, call for assistance.

Are international students eligible for student loans?


♦ International students with study permits do not qualify for government or bank loans in Canada.


♦ Students who are Permanent Residents (sometimes called landed immigrants) can be eligible for loans.


♦ International students may qualify for an emergency loan, find out more below.


♦ Information from the Government of Ontario.

How does the government determine financial need?

 

♦ Use the Student Financial Assistance Estimator to have your financial need estimated.

 

♦ Financial need is calculated based on information that you provide in your application, including: living situation, parental or spousal income, all of your available funding (savings, assets, scholarships), and the cost of your post-secondary program.

 

♦ The Parental Contribution Calculator provides an estimate of how much the government expects parents to contribute to their child’s education (based on income and other factors).

 

◊ Your parental income will be taken into account unless you are deemed an independent student. You are considered independent if any one of the following situations applies to you:

 

◊ You have been out of high school for at least 4 years.

 

◊ You have been employed for two periods of at least 12 months (without being a full-time student).

 

◊ You have been married or living common-law for 12 months

 

◊ You are widowed, divorced, separated, or a single parent with dependent children living with you.

 

♦ Your assessed need will be your allowable costs minus your resources.

 

◊ You can see how the government determines your expenses and funds based on living situation, parental income, and other factors here.

 

◊ There are exemptions for employment income and scholarships, meaning that up to a certain amount, this funding does not reduce your level of need.

 

♦ Loans may not cover all of your financial need. They are intended to help you pay for post-secondary education along with your other sources of funding (e.g., parents, employment).

 

♦ If you apply for bursaries or other awards requiring financial need, having a government student loan is an easy way to demonstrate your financial need.

 

◊ You will have to notify your government student aid office if you receive bursaries or other funding during the year.

Where and how do I apply for a government student loan?

 

All students apply for student loans through their province/territory of permanent residence (where you have lived for the last 12 consecutive months before your study period, not including time spent in post-secondary studies). There is no separate application system for federal loans and grants, you will be assessed for Canada Student Loans and Grants if your province or territory participates in the program.

 

In all regions:

 

♦ Applying online makes the process much faster and easier.

 

♦ You can apply for a loan before you have been officially accepted into your program.

 

◊ Apply early, it can take several weeks to receive your funds after submitting an application.

 

♦ Changes in your circumstances must be reported as soon as possible to the student loan provider.

 

♦ If you want to continue receiving loans, you must re-apply for a student loan every year. This will keep your current/past loans in interest-free status.

 

◊ If you are continuing your studies but are no longer taking out a loan and you want to keep your loan interest-free, you have to submit a form to confirm your enrolment. Learn more here.

 

You can access your provincial/territorial student aid website and guidebook below (if applicable). Guidebooks are very helpful resources because you can easily find the topics you are looking for using the search function:

                               

Alberta                                        Website              2017/18 Guidebook

 

British Columbia                           Website              2017/18 Guide

 

Manitoba                                     Website

2017/18 Guidebook

 

New Brunswick                             Website              2017/18 Guidebook

 

Newfoundland  & Labrador            Website              2017/18 Application Guide

 

Northwest Territories                    Website              2017/2018 Student Handbook             

 

Nova Scotia                                 Website

2017/18 Guidebook

 

Nunavut                                      Website               Benefits Guide

 

Ontario                                       Website

2017/18 Guide

 

Prince Edward Island                    Website              2016/17 Student Financial Assistance Guide

 

Quebec                                       Website              2017/18 English Guidebook 

 

Saskatchewan                             Website              2017/2018 Handbook

  

Yukon: Students from the Yukon can apply for Canada Student Loans and Grants. The Yukon government does not offer student loans, but does offer non-repayable funding.

What do I need to apply for a government loan?


Generally, you will need (if applicable to you):

 

Financial information: Your income tax return from last year, your income (before deductions) from your pre-study period (i.e., summer income), income for the future academic year, bank account information (including balances and investments), your parents’ tax return (unless you are considered independent), your spouse's tax return.

 

Educational information: information about previous post-secondary studies, name and length of your education program, amount of tuition and compulsory fees (see budgeting page for more information).

 

Other: Your SIN number, the year/make/model of your vehicle, moving expenses, commuting distance.

 

If any of your information changes after you submit your application, you must notify your government student aid office.

How do I receive my government student loan?


♦ Whether or not you qualify for a student loan, you will receive a notice of assessment in the mail that specifies exactly how much funding you qualify for and why. You may also be able to access this information online.

 

♦ Your notice of assessment will explain what is required of you to actually receive this funding (slightly different in every region).

 

♦ Follow the instructions carefully and contact your government student aid office if you have any questions.

 

♦ Forms will have to be signed indicating that you consent to the terms of the funding.

 

♦ You will have to get confirmation of enrolment from your institution in the manner specified.

 

♦ You will have to set-up the direct deposit of your funds into a bank account.

 

◊ It will take several days for funds to actually be deposited, which is why it is important to start your application process early.

 

♦ Some provinces have required confirmation forms that you must submit after your funding has been approved to ensure that you are receiving the right amount.

 

◊ In all regions, you must update your government student aid office if the information you reported in your application has changed.

Student loan auditing


Students are randomly selected to be audited every year. If errors in the information you have given to your student loan provider are found, consequences may apply, including having to repay student loans or grants.

 

♦ Be sure to keep any documents that can verify the information you have provided (e.g., copies of tax returns, tax slips, bank statements, and information about your post-secondary program).

How does interest work on government student loans?


Canada Student Loans


♦ While you are studying as a full-time or part-time student, interest will not be charged on your loan (loans have been interest-free for part-time students since 2012). Interest will be charged and begin to accumulate when you end your studies (however, you do not have to begin repayment for 6 months).

 

◊ If you had a full-time loan and you switch to part-time studies, you will begin to be charged interest on the loan from your full-time studies.

 

♦ When it is time to begin repaying, students can choose between a fixed interest rate (which will not change for the duration of your loan) and a variable, or “floating,” interest rate (which can change).

 

♦ The fixed interest rate is the prime rate + 5%

 

◊ You start at a higher rate, however it will not change even if the prime rate goes up.

 

♦ The floating interest rate is prime + 2.5%

 

◊ Your interest rate can go up or down if the prime rate changes.

 

♦ Visit the CanLearn website to stay up-to-date on interest rates.

 

Provincial/territorial loans


♦ Each region has its own interest-free periods and interest rates on the provincial/territorial portion of your loan. Often, it is difficult to find this information on government student aid websites. Your interest-free period and interest rate will be indicated on your notice of assessment.

 

♦ In 2014, interest rates across the provinces and territories were either the same as those of Canada Student Loan rates or lower (e.g., in NFL & L and PEI provincial loans are interest-free). In some provinces, the interest-free period extends for 6 months after you end your studies (e.g., Alberta).

 

Interest-free status


If you apply for a new student loan, your interest-free status will be maintained. However, if you no longer apply for loans but are still in school, you must complete and submit the necessary forms to confirm your enrolment. Learn more here and/or contact your student loan provider for more information.

 

Student loan interest tax credit


You are eligible for a federal and provincial/territorial tax credit for interest paid on government student loans each year.

 

♦ Keep your payment documentation.

 

♦ Your government student aid agency will send you a yearly statement that details how much interest you paid for the tax year.

 

♦ You can carry it forward for 5 years.

 

♦ Find out more here.

How do I repay my government student loan?

 

♦ You must start paying back your government student loan 6 months after leaving or completing your program (in all regions), but you can start earlier.

 

♦ If you do not receive a notice regarding repayment in the mail before your 6-month grace period is over, contact your student loan provider.

 

You must complete and sign a repayment schedule, you will provide information such as the account you will use to repay the loan and how long you plan to take to repay your loan.

 

◊ There will be a default payment plan, however you can make it shorter or increase it up to a maximum number of years.

 

◊ Based on the time period you choose to repay your loan, the amount you must pay each month will be calculated for you, including interest (these will be equal payments every month).

 

 ◊ If you are using your 6-month grace period, you can choose to pay off the interest accrued in this time as a lump sum.

 

◊ The longer it takes to repay your loan, the more you will be paying for your student loan in the end:

 

◊ With a 6-month grace period, using a 5.5% interest rate (the 2014 floating rate for Canada Student Loans), $10,000 in loans will cost you:

 

◊ $1,775.87 in interest if you take 5 years to repay (monthly payments of $196.26)

 

◊ $3,381.29 in interest if you take 10 years to repay (monthly payments of $111.51)

 

◊ You can save $1600 over the course of your repayment if you pay an extra $85 per month.

 

◊ Try out more repayment options using the Loan Repayment Estimator calculator. Note that in many cases you will be taking out two loans with two different interest rates, which this calculator does not include.

 

♦ Altering your repayment plan:

 

◊ At any time, you can revise your repayment schedule through the Revision of Terms Plan. Payments can be decreased temporarily, or you can change the time period of repayment to decrease or increase payments permanently.

 

◊ You can also make lump-sum payments on your loan at any time to pay off your debt more quickly.

 

♦ In British Columbia, Saskatchewan, Ontario, New Brunswick, and Newfoundland and Labrador, provincial loans are integrated with the Canada Student Loan Program. This means that both loans are managed through one account, borrowers do not have to pay back separate loans to two different places.

 

♦ It is up to you to make sure your payment plan is in order.

 

◊ Make sure your address is up-to-date and you have sufficient funds in your bank account.

What if I have difficulty repaying my government student loan?

 

♦ Defaulting is when borrowers fail to make payments on their loan. Defaulting will negatively affect your credit score.

 

♦ The federal government supported 185,000 students who were experiencing difficulty in repaying their loans in 2011-2012 with repayment assistance.

 

♦ Use this calculator to find out if you qualify for repayment assistance for Canada Student Loans. Eligibility is based on your financial situation, including family income, family size and outstanding loan balance(s). Learn more about the types of assistance offered for federal loans.

 

♦ Provinces and territories offer their own repayment assistance programs (see your regional website).

 

♦ To discuss repayment options, you can contact the National Student Loans Service Centre (NSLSC) or your provincial or territorial student aid office.

 

♦ If you are in a situation in which you have decided to declare bankruptcy, your student loan debt will not automatically be discharged (i.e., eliminated). You must have ended your full-time or part-time studies at least 7 years prior for your student loans to be forgiven.

 

◊ If you can prove financial hardship, you may have student loans discharged 5 years after ending your studies if you have declared bankruptcy, find out more.

PRIVATE STUDENT LOANS

 

♦ Private student loans usually come in the form of student lines of credit at banks or credit unions.

 

♦ Taking out a loan from a financial institution is an option for students who are not eligible for government loans, students who received insufficient funding through government loans, or students who want to borrow money as they need it (through a line of credit) rather than all at once (as it is done with government loans).

 

◊ Some lines of credits are designated for students in professional programs (e.g., medicine, pharmacy).

 

♦ Generally, government loans are a better option than private loans because of the benefits that are offered:

 

◊ Availability of non-repayable grants

 

◊ Interest-free period

 

◊ Tax credit on interest payments

 

◊ Repayment assistance

 

♦ However, private loans are a better option than going into debt on a credit card because the interest rates are much lower.            

What should I know before taking out a private student loan?

 

♦ Compare different student lines of credit:

 

◊ It is a good idea to research different loans to get the best interest rate and terms for your loan.

 

◊ Here are some questions you should research before taking out a loan.

 

◊ Here is a useful calculator for comparing different loans.

 

♦ You may need a co-signer/co-borrower/guarantor. The co-signer is responsible for repaying the loan if you are unable to. Therefore, their credit score will also be a factor.

 

◊ A co-signer is usually required when the applicant has insufficient income or credit history (common for students).

How do withdrawals, interest, and repayment work on a private student loan?

 

♦ Money can be withdrawn from your line of credit as you need it, up to your credit limit.

 

◊ Interest will be charged on the amount you actually use, not the credit limit. 

 

◊ You will receive a monthly statement with the balance and interest owing on your line of credit.

 

♦ Generally, you will have to pay the interest on your loan while you are in school and during a grace-period of up to 12 months after graduation. You will then have to set up a payment plan to start paying off the principal.

 

◊ Unlike government loans, private loans do not have an interest-free period.

 

◊ In some cases, private student loans may offer lower interest rates than government student loans.

 

◊ You should be able to make payments on your balance at any time.

More information about private student loans

 

♦ You will have to visit or contact financial institutions to find out their specific policies for student lines of credits and determine if you qualify.


Fund Your Future provides a side-by-side comparison of government student loans and a Scotiabank line of credit for students, which can give you an idea of the differences you might expect between a government and private loan.


♦ This Globe and Mail article (2012) offers some advice on choosing between government student loans and lines of credit.

EMERGENCY LOANS


♦ Many institutions offer emergency loans to students. If you experience sudden financial difficulties – such as unexpected expenses or a delay in funding – you may qualify.


♦ Check your institution’s website for details.


♦ Part-time students may not qualify.


♦ International students may qualify.


♦ These are not intended to be a substitute for other sources of funding. Students are expected to have a plan to cover their normal school expenses.