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.

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.

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.

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