Everything You Need to Know About Student Loans in Canada
It’s no secret that post-secondary education, if you decide to attend, will likely be one of the most expensive endeavours of your life. Over 40% of recent Canadian graduates used a loan of some kind to pay for their education, and unless you’re lucky enough to have been born into money, you’ll probably need to push yourself into some level of education-related debt as well.
Before borrowing this significant amount of dough, do yourself a favour and learn the ins and outs of Canadian student loans as best you can. This way you can reap the considerable benefits of a post-secondary education while minimizing the financial consequences.
In This Article:
The Basics
In Canada, student financial aid typically covers at least tuition costs, if not more. Variables affecting the amount of aid awarded include:
- The cost of the borrower’s housing
- The time elapsed since the borrower graduated from high school
- The borrower’s parents’ yearly income
- The borrower’s yearly income
- If relocation is required for the borrower to attend post-secondary school
- The type of degree the borrower will pursue
The hard numbers typically decide the amount an applicant is approved for, regardless of what additional personal factors might be at play. If you’re dealing with challenging personal circumstances that are not easily communicable in a standard student loan application—for example, if you are estranged from one or both of your parents, or your parents are otherwise unable to provide you with financial support—it’s worth a shot to get in contact with the loan administrator’s customer service and ask if there can be a note made of your unique circumstances in your application file.
Canada offers loans at a federal level, and most provinces and territories offer their own funding as well. Payments aren’t due until six months after the loan recipient finishes school, regardless of whether the loan is federal or provincial. Unfortunately, almost every other aspect of student loans varies from one province or territory to the next.
Government-Provided Student Loans
The array of choices when it comes to paying for your post-secondary education can be vast and overwhelming. Familiarizing yourself with the options out there will result in the best funding and repayment schedule for your lifestyle.
Federal Student Loans
Federal loans issue an interest rate of 2.5% plus prime, with repayments due starting six months after the borrower finishes school. “Plus prime” refers to the average bank prime rate in Canada, which fluctuates often, but was at a whopping 3.95% back in January 2019. That means federal loans were subject to an interest rate of 6.45%, which as a student myself was admittedly hard to even think about. My current federal loan of $6,000 would be subject to nearly $400 in interest if I suddenly quit school.
The National Student Loans Service Centre is where the majority of federal loans originate. Although many students take out federal loans, provincial funding can give them access to additional thousands of dollars each year.
| Province/Territory | Interest Rate | Special Feature | Where to Apply |
|---|---|---|---|
| Newfoundland and Labrador | N/A | Non-refundable grants for approved students | Apply Here |
| Quebec | 0.50% + Prime | Loans and grants for full and part-time students | Apply Here |
| Manitoba | 0.0% | Zero interest student loans | Apply Here |
| Ontario | 1.0% + Prime | N/A | Apply Here |
| Alberta | Floating: Prime (CIBC) Fixed: 2.0% + Prime (CIBC) | Choice between fixed and variable rate | Apply Here |
| British Columbia | Prime | Easy online application, special programs for students with dependents | Apply Here |
| Saskatchewan | Prime + 2.0% | No provincial student aid option, federal only | Apply Here |
| New Brunswick | Prime + 2.0% | Unique Free Tuition plan | Apply Here |
| Nova Scotia | 0.0% | Zero interest for qualified borrowers | Apply Here |
| Prince Edward Island | 0.0% | No app required for bursaries, just enrollment | Apply Here |
| Nunavut | 1.0% below Prime | Special grants for lower-income households | Apply Here |
| Northwest Territories | 1.0% below Prime | 0.0% interest for those who live in NWT after school | Apply Here |
| Yukon | Prime + 2.0% | Academic excellence offers further aid | Apply Here |
Newfoundland and Labrador, Quebec, and Manitoba Student Loans
McGill University
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Newfoundland and Labrador, Quebec, and Manitoba are largely regarded as the best provinces for student financial aid, and recent developments in these provinces have made the loan process even easier. To begin with, these provinces are home to the lowest tuition rates in Canada, with Newfoundland and Labrador at an average of $2,885 per semester; Quebec at $2,961; and Manitoba at a slightly higher $4,501.
Aside from having low tuition rates, the financial aid process has also improved. Newfoundland and Labrador has removed the option of provincial student loans entirely, instead offering non-repayable student grants to all qualifying permanent residents. The grants can provide students with up to a maximum of $100/week of study, with a lifetime limit ranging from 340-520 weeks, depending on the student’s degree of study and whether or not the student has any registered disabilities. You can register for the grant via the province’s Advanced Education, Skills, and Labour page.
The biggest advantage to taking out student loans in Quebec is the province’s impressively low interest rate: prime plus 0.5%. Better yet, if applying for Quebec financial aid, which is done through Aide Financiere aux Etudes, it’s mandatory to have your eligibility checked for bursaries. Bursaries are granted on the basis of financial need, scholarly excellence, and more.
There’s also great news for any Manitoba residents – Manitoba just implemented a 0% interest rate on all provincial student loans. Yes, you read that correctly. 0%. Check the user-friendly online application process to be instantly linked to the Manitoba student portal.
Ontario Student Loans
University of Toronto
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In Ontario, post-secondary financial aid is administered by the Ontario Student Assistance Program. Once registered, all of your financial assistance processes will be run through this site.
Ontario offers a relatively low interest rate for their provincial student loans: 1% plus prime.
Alberta Student Loans
Alberta is my home province, so all of my provincial funding has run through the Student Aid Alberta Service Centre. Like most provincial systems, the website will prompt you through most of the loan process.
Alberta student loans utilize CIBC’s official prime rate for determining their interest. If you stick to a floating rate, your interest will fluctuate with prime, without any interest added on top of that.
British Columbia Student Loans
Student Aid BC recently reduced repayment interest to prime. This means that your interest could fluctuate along with the bank prime rate, but there won’t be any extra interest on top of this, like most other provinces have. If the prime rate is 3.95%, then your interest percentage will be 3.95%.
British Columbia surpasses expectations again with its online application process. A step-by-step walk through is provided, and borrowers are also provided with a budget worksheet and an approximate funding limit even before they finish applying.
Saskatchewan Student Loans
University of Saskatchewan
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Saskatchewan is the only province that doesn’t have a specific government system designed for student funding, meaning that the National Student Loans Service Centre handles all loan processes. This also means that the repayment rates and timelines will be the same both provincially and federally, so refer to all information under NSLSC for queries about a Saskatchewan provincial loan.
Other Provinces and Territories
New Brunswick, Nova Scotia, Prince Edward Island, Nunavut, Northwest Territories, and Yukon all have their own provincial-level websites for student financial aid with an online application process.
PEI has a debt reduction program that will knock off up to $3,500 per academic year from a borrower’s outstanding loan balance. PEI is also a fantastic province for student bursaries, awarding anywhere between $4,400 and $8,800 for residents. Finally, PEI issues a one-year grace period, rather than the standard six months, meaning loans won’t acquire interest nor will payments be enforced for one year after finishing school.
It’s important to note that Nova Scotia and New Brunswick both have considerably high tuition rates. But Nova Scotia at least has a loan forgiveness program to help with that, as well as an interest rate of zero.
Canada Student Loan Repayment
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Indebted students can take advantage of the minimum 6-month grace period, but that’s not the only solution for those who are struggling financially after they graduate.
You might be eligible to repeatedly apply for a delay in your repayment, depending on your personal salary. If your salary is below $25,000 (with a family of 1), you’re eligible to apply for a repayment delay, often coming in increments of six months. This could total up to 10 six-month periods without any fees.
If you are making payments, NSLSC ensures some flexible repayment options among all types of government funding. Large payments are ideal to minimize the amount of interest paid over time, but if your financial situation necessitates smaller payments, that is an option as well. An automatic payment plan will be assigned to you after you finish your first six months out of school, but this isn’t set in stone, and monthly payment amounts can often be reduced or raised as necessary.
Beyond Government Aid
Some students make the choice to look for privatized funding, usually through bank loans or alternative lenders. In most circumstances a private loan’s interest rates will be higher than the rates offered by federal or provincial loans. But there are exceptions. Personal variables, such as your home province or expected career path, may encourage you to choose a private loan over traditional government funding. Some private lenders offer a longer grace period after graduation than the 6-month period provided by government student loans, and some might offer a lower interest rate as well.
The most commonly sought product for private student financial assistance is a line of credit from a bank. Almost all Canadian banks offer a line of credit specifically for students. Interest rates for student lines of credit are approximately equal to the prime rate, with some banks offering lower. RBC offers an interest rate of prime minus 0.25%, which is obviously better than most government rates. TD will offer a rate of prime that can be better or equivalent to government funding, depending on your province.
In most situations, banks expect an in-person appointment in order to apply for a student line of credit. Proof of enrolment is also required, as well as information about the institution you plan on attending, usually including your class schedule and the title of the degree you’ll graduate with.
Once you’ve compared rates and terms with a few different lenders, you can use our loan payoff calculator to figure out the loan that best works for you.
My Helpful Tips
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Here are some final tips to make the student loan process easier, based on my own personal experience:
Apply Early
Apply for financial aid at least four months before you plan on starting school. The chances of complications or confusion are very high, and it’s best to allow wiggle room to sort everything out, accounting for the typically lengthy response times of bureaucracy.
Always Look for “Free Money”
Many student loan sites will have a section promoting the chance to apply for bursaries or grants. As you apply for loans, also be sure to apply to any grants you qualify for. Money you don’t have to repay is far preferable to money you do have to repay (typically with interest).
Apply with the Right Province
If you moved provinces for school, you are still going to seek funding from the systems in your original province. For example, I moved to Toronto for university, but I still have to be registered with Alberta’s student loan centre for my funding. I had to learn this the hard way (after wasting months trying to switch to OSAP to no avail). Keep in mind the general rule of thumb: apply for provincial funding from the same province/territory in which you graduated high school.
Article comments
Hi everyone,
Just wondering is it possible in British Columbia to use my student loan living expenses to put as a down payment towards a house at all? Wasn’t able to find much information any where online and was just curious.
Hi Nick,
Student loans are advanced with the understanding that they’ll be used towards education expenses. That said, the definition of living expenses is kind of a grey area. Your expenses won’t be audited. Whether you use them to throw a kegger or put it towards a downpayment is up to you. Either way, your lender will expect that you repay the loan according to the terms of your agreement.
Hello everyone,
I just got my loan approved and it was super fast, I’m in Alberta. i haven’t signed an agreement yet, but wondering if given the option, which is best between floating rate or fixed rate of interest? Also the maximum amount i got including grants covers just about half of what I need, but adding personal funds to it makes it pretty tight, I am going for my MBA in the states. Is there a possibility to increase this without using a private loan or do you reckon a student line of credit would help with little interest. Thanks
Hi Steve,
Floating vs fixed will depend on your appetite for risk. A fixed rate will be predictable where as the floating has the potential to change and impact what may already be a tight budget. Use the Government of Canada’s Loan Repayment Estimator to crunch the numbers and see which works best for you. As for the possibility to increase- ask. If that doesn’t pan out, consider a part time job to supplement your personal funds otherwise you could always fallback to a student line of credit if needed.
Hey everyone, this is not a negative comment towards the author but as a person who has been receiving student loans from Manitoba, it may seem great on paper but it is actually a nightmare! For the first 3 years of my schooling, I was considered a dependent, even though I had to financially support myself and lived in complete poverty, I was not eligible for any funding. I’m not too sure if this applies to every province. Another issue is that it is NOT user friendly, the application process, I will admit, is mostly straight forward, however, they take a long time to process, they always give me a statement and end up taking at least $500 or more away from me without telling me a reason, and good luck contacting them because you will have to wait all day on the phone and emails are responded to at a snail’s pace. When my friends from Saskatchewan contact their provincial student aid they never wait that long for a response. The website hasn’t been updated for years, at least 8-10 years since it had the same layout when my older siblings applied for student aid, and the people who work there have always been rude to me. Besides that, they have a somewhat strict list on which schools are accepted to be eligible for student aid, for example, I’m completing my masters at Yorkville and for some reason it is approved by the NSLC and most other provinces but not Manitoba because they claim that it is not approved by the NSLC, it just shows how out-dated their systems are. From personal experience, Manitoba truly is not a place to get student aid from, not that people really have a choice anyway.
Hi Jill,
That sounds like a really frustrating experience. I wonder if any of our readers have experienced something similar? I hope, at least, that the bulk of this is behind you and that you’re either have or are about to wrap up your studies. We’ll be here to help get you on the right financial path as you step into the next stage of your career.
Hi Everyone,
I’m a permanent resident in Canada and want to go for studies in USA (professional healthcare program). Can someone please guide me to the options available for loans/grants that I can apply to cover the tuition cost?
Hi Rahul,
Start your search with the academic institution where you want to study. You may be qualified to apply for scholarships or eligible for financial aid there. Next consider government student assistance programs, you could still be eligible for a mix of grants and loans even if you will be studying abroad. Best of luck with your studies. Best to you in your future studies.
I am a Canadian citizen, planning to move to B.C for college and uni. I have been staying abroad (out of Canada with my family). I wanted to apply for grants and scholarships (as further studies is expensive), can I do that? Do you need tax records paid in Canada to apply? coz we live abroad. If I don’t qualify for the grant I would like to take a loan, can you help with how I can go about that.
Hi Ashley,
You don’t need to be a Canadian resident to open an RESP. However, you do need to have a valid Social Insurance Number. Also, even though a person who opens an account (the subscriber) doesn’t have to be a Canadian resident, the beneficiary of the account (you) must be a Canadian resident in order for Government grants to be paid into the account. If the you as the beneficiary are not a Canadian resident, an RESP can be maintained, but no contributions can be made. The Tax-sheltered status on the RESP does not apply if the subscriber (the person who opened the account) is not a Canadian resident. In that case, local tax rules, wherever they are living, apply
What if you have a student loan and its not yet paid, will it affect if you decided to transfer to another province?
Hi Maureen,
No, for example, I had a student loan that I applied for in B.C. where I grew up, but I went to school in Ontario. I still had to pay both my federal loan and my BC provincial loan (no matter what) on the original schedule I was given at the start of my payment period (six months after leaving school). They track you down wherever you are and you have to pay it back based on the original payment terms you agreed to.
Hey, I just have a question: If I applied and received student aid through Alberta as a dependant but will no longer be eligible as an independent, can I then apply for BC loans?
Hi Fia,
In order to apply for BC student loans, you must be a BC resident. Are you a BC resident? Once you are a BC resident, you become ineligible for Alberta student loans, so you can’t double dip in both provinces. For example, I was a BC resident but I went to school in Toronto, so I was eligible for the BC provincial student loans and the national (federal) student loans, but not the provincial student loans from Ontario.
Hi,
I have a really hard time understanding the interest rate charged to my student loan. Currently in my account it says my Loan is charged against interest rate at 2.45%. Article above says that federal loans are 2.5 plus prime which doesn’t make sense. Am I missing something here?
Hi Sid,
Not knowing the details of your loan, it looks like you chose a floating interest rate equal to prime out of your two options because even though it’s not 2.5% that you’re being charged, it’s pretty close, so if I had to guess, I’d say that’s the case.
I called about my account to be paid got a CSR and doing a verification but i could not remember my old address so moved on to next verification everything was ok. as all was ok CSR wanted to change my address but i wanted to know the address that was on file but the CSR said she could not let me know, I asked to speak to Supervisor and CSR tell me to have a good day and hang up. I think that is very rude and if that is my file and i can change it i should be able to know what it was. Why is it ok to give out my info and yet then when it is time to get info from your own file you are treated like a dog.
Hi Eureka, I hope you eventually found another CSR. Just because one of them is rude, don’t let that stop you. I hope you eventually got the information you needed.
What amount does the interest rate charge against? The total amount owing? and when does it apply? Is it an annual charge or a monthly charge like a credit card?
Hi Joeseph,
Good question, here’s how student loans in Canada work as far as interest is concerned:
Interest is applied monthly on the total principle amount owing similar to a credit card. When payments on student loans were suspended during the COVID-19 lockdown in March, interest continued to accumulate monthly and was to be paid once payments resumed.
Hi Meagan,
Great article thank you for supplying this valuable info.
I am looking for grants and bursaries for my girlfriend. She is from Mexico and has only lived in BC for 2 years. Do you know of any grants for international students in need of financial aid for education?
Thank you,
Rick
Hi Rick,
There are many scholarships and bursaries for international students looking to study in Canada. You can find them here: https:// www . educanada . ca / scholarships – bourses / non_can / index.aspx? lang=eng You can also find provincial awards and scholarships at https:// www. lear nlive bc . ca / learn / scholarships # scholarships Happy hunting and good luck to your girlfriend.
Hi Meagan,
I grew up in Ontario and went to school and university there, after graduation I moved to Alberta for work and now (4 years later) I am planning on returning to Ontario to go back to school. Would you suggest applying to OSAP or Alberta Student Loans in this case?
Olha,
Since you grew up in ontario, were you born there? I ould suggest applying for OSAP since you will be living there, you grew up there and will be going to school there. If you were born in Alberta, you may be able to apply for Alberta student loans, but generally, you apply based on where you are going to go to school and where you were born and raised.