A student loan is a loan available to students, with funds used to meet their educational expenses, including textbooks, room and board, and college tuition. With some student loans, borrowers are not required to repay the loan until the grace period is over. It normally begins after the student leaves school or has completed his/her studies. Student loans are generally offered with a lower interest rate than other loans. In Canada, students can choose from government loans and student loans offered by private lenders. Many Canadian charter banks also have loan programs specifically designed for students in professional programs. Besides student loans, students can apply for scholarships, bursaries, and grants.
Government loans are available to Canadian citizens, protected persons, and permanent residents who have been residing in Canada for over a year. Federal government loans under the Canada Student Loans Program are offered to students in addition to student loans provided by their territory or province. Besides student loans, the government offers grants to students from low-income families, persons with permanent disabilities, and other students with special needs who face barriers to accessing postsecondary studies. In addition, students can apply for grants available in their province of residence.
Loans are advanced to full-time students and are interest-free while students are in full-time studies. Canadian students are eligible for up to 6.5 years or 340 weeks of interest-free financial assistance. Doctoral students are eligible for up to 7.5 years or 400 weeks of assistance (i.e. additional 60 weeks). Government loans are also offered to part-time students.
Students receive up to 60 percent of their assessed need or $210 a week, whichever is less. Provincial programs offer financing, which provides students with sufficient funds to cover their assessed need’s balance. Part-time students can apply for a student loan up to $10,000.
Students can choose from a floating interest rate or fixed interest rate. Newfoundland and Labrador offers provincial loans with no interest. Regarding repayment, borrowers who take a student loan may begin to repay it 6 months after graduation or after leaving school. Interest begins to accumulate upon graduation.
Students who are unable to temporarily meet their obligations are granted interest relief for a period of 6 to 30 months. Low income and unemployment are valid reasons to apply for interest relief. Extended interest relief is granted in some cases and for further 24 months. Students who are approved for interest relief are not required to make payments toward the outstanding principal, and the provincial or federal government pays interest on the borrower’s behalf. Revision of terms is another feature that allows students to manage repayments by taking their individual situations into consideration. The loan’s repayment period may be increased to lower the monthly payments if the student finds that the terms or repayment schedule are difficult to maintain. Students may also request a shorter repayment period and larger loan payments to pay off the loan more rapidly.
Students who are looking into Canadian student loans should apply through their territory or province of permanent residence. Canada student loans are offered alongside territorial and provincial assistance programs in Nova Scotia, Manitoba, Prince Edward Island, and Alberta. Students in British Columbia, New Brunswick, Saskatchewan, Newfoundland and Labrador, and Ontario are offered financial assistance by the provincial governments and the federal government. This is done through integrated student loans. Permanent residents in Yukon can apply for Canada student loans only. Government loans are not available to students in Nunavut, Quebec, and the Northwest Territories, which operate separate financial assistance programs.
Students in Ontario, Saskatchewan, New Brunswick, British Columbia, and Newfoundland and Labrador should fill out one application form to be submitted to their province of residence. Students are assessed for provincial loans, federal loans, and most Canada Student Grants. They may be granted a loan which is a combination of provincial and federal loans. Student loans are managed by and repaid to the National Student Loans Service Centre.
Students in Nova Scotia, Manitoba, Alberta, and Prince Edward Island complete one application and are eligible to receive one loan from their provincial government and one loan from the federal government. Loans are managed by and repaid to 2 loan providers – the student financial assistance officer of the respective provincial government and the NSLSC.
Finally, students in Nunavut, the Northwest Territories, and Quebec apply to their territory or province, but student grants and Canada student loans are not available. The financial assistance programs in these jurisdictions are partly funded by the Canadian government. Students repay their loans to their territory or province of residence. Students in Yukon can apply for student grants and Canada student loans if they are permanent residents. They can apply for student grants and loans through Yukon Student Aid and repay them through NSLSCContact Information.
Five provinces run integrated provincial-federal student loan programs. These are British Columbia, New Brunswick, Ontario, Saskatchewan, and Newfoundland and Labrador. Students apply in one place only, and loan repayment and management takes place through the National Student Loans Service. Students who apply through the Ontario Student Assistance Program, for example, can get up to 30 percent off their tuition if they are college or university degree students or college certificate or diploma students. Loans and grants available through the program are based on financial need. Financial aid is assessed using the formula – eligible educational expenses minus expected financial contributions equals the financial aid required. There are options for graduate, part-time, and full-time students. Applicants should meet residency and citizenship requirements. To be eligible to receive financial assistance, applicants should attend OSAP-approved schools. Applicants who have defaulted on their existing student loans, provided false information, or failed to repay an OSAP overpayment may be restricted from receiving financial assistance.
Saskatchewan is another Canadian province that runs integrated student loan program. Permanent residents can apply for scholarships, grants, and student loans under the program. To be eligible to apply for student loans, one should be a Canadian citizen and a Saskatchewan resident, a protected person or a permanent resident. Applicants should be qualified to enroll or enrolled as full-time postsecondary students in a designated institution of higher education. Candidates are eligible to apply for a student loan if their other loans (if any) are in good standing. Borrowers who have defaulted on a student loan are not eligible. When applying for student loans, students are classified as belonging to 1 of 4 categories so that their financial need is calculated. These are: single independent student, single dependent student, single parent student, and married student. A single parent student, for example, is anyone who does not have a common law partner or spouse and has custody of child/children 50 percent of the time (or more).
Students in Newfoundland and Labrador can apply for a student loan through the Newfoundland and Labrador Integrated Student Loan Program. Students who are eligible to receive funding under the program are issued a Certificate of Eligibility. These certificates identify the amount of Canada Student Grants, federal loans, and provincial loans applicants are entitled to. Students who attend designated institutions of higher education and are enrolled full-time or part-time are eligible to receive financial assistance. Applications are not processed if they are not fully completed, the required information is missing/ has not been submitted, the application is received after the deadline, or the required documents or signatures are missing. In addition, applicants whose previous loans are not in good standing are not eligible to apply for financial assistance. Part-time students can apply for assistance as well. The applicant should be a permanent resident, a Canadian citizen, or designated as a protected person. Applicants for Canadian student loans must be enrolled in a certificate, diploma, or degree program that lasts 12 weeks or more within a 15-week period. In addition, loan recipients have to maintain satisfactory grades. Students who apply for a grant or a Canada student loan for the first time and are 22 years of age have to pass a credit check.
British Columbia runs the British Columbia Integrated Student Loan Program. Three types of funding are available through the program: scholarships, grants and bursaries, and student loans. Student loans are offered to part-time and full-time students whose previous student loans are in good standing. Interest on student loans is paid by the federal and provincial governments on behalf of borrowers who are enrolled full-time. Students have to be enrolled in 60 percent of a full-time course load at a minimum. Part-time students whose family income is below a set limit and are enrolled in a program at a designated institution are also eligible to receive a student loan. Need assessment for full-time and part-time students is different. Part-time students are offered financial assistance for child care, transportation, supplies, books, and tuition up to the funding maximum. Note that financial assistance does not cover the living costs of part-time students.
Applicants for a student loan must be residents of British Columbia and have a valid social insurance number. They should pursue a degree in an eligible postsecondary institution and be enrolled in an eligible program. Students should make a satisfactory academic progress while attending school. Students are not eligible to receive a loan if they have defaulted on other student loans or are delinquent. In addition, they are not eligible if they have any outstanding warrant for arrest or are incarcerated. Students who have an overaward or are under audit are not eligible as well.
Finally, students in New Brunswick can apply for student loans through the New Brunswick Integrated Loan Program. To be eligible to apply for a student loan, students should be pursuing studies leading to a certificate, diploma, or undergraduate degree at a designated postsecondary institution. Students who are enrolled part-time can apply for a student loan as well. They have to fill out the Part-time Student Loans and/or Grant Application, including their personal data, income and asset information, spouse’s/common law’s income, applicant’s declaration and signature, and spouse’s declaration and signature. In addition, they should include information about their program, with separate sections to be completed by the applicant’s educational institution and the provincial/territorial ministry. Applications for student loans are assessed on the basis of the following costs: transportation to and from school, books and supplies, child care costs which will be incurred to attend school, and compulsory school fees such as tuition. Applicants who take studies through distance learning or correspondence may not be assessed transportation and child care costs.
Loans from private financial institutions are one alternative for students who are not eligible to receive a government loan or require additional funds. They can apply for loans with various banks, credit unions, and other financial institutions. Note that the Royal Bank of Canada, BMO, TD Bank, and CIBC offer student lines of credit to their clients.
Students can also obtain specialized loans from different sources. For example, financial aid offices disburse emergency loans which are short-term loans with a term of about 90 days. Emergency loans are offered to persons in dire straits.
It should be noted that private student loans differ from government student loans in a number of ways. First, with government student loans, applicants are not required to have a guarantor. One exception is British Columbia where students under the age of 19 need a guarantor to apply for a B.C. student loan. Some of the private financial institutions offering student loans require that applicants have a guarantor. Second, full-time students begin to pay interest on government loans only after they have completed their studies. They also pay interest if they have reached the lifetime limit for financial assistance. With non-government student loans, borrowers have to pay interest throughout their studies. The start date of repayment also differs. It is 6 months after graduating or leaving school for government loans. Students who obtain a private student loan start making payments immediately. Repayment help is available for government loans, such as a temporary pass on interest payments and paying the principal. Repayment help is usually more difficult to access with private loans and varies by loan provider.
While this suggests that government loans are a better option, students in need of additional funds may apply for a private loan and negotiate the terms. They are usually able to reach an agreement because banks and other private lenders seek to establish long-term relationships with potential high-income earners who are young and well educated. It is recommended to ask one’s bank of choice to match a competitor’s best offer. Borrowers whose relatives have dealt with or are clients of a particular Canadian financial institution may want to ask for a preferred lending rate. Applicants who are turned down should find out why because their credit score may be based on some inaccuracies.
When negotiating with Canadian banks, it pays to ask financial institutions for a half- or a quarter-percent lower interest rate. If the bank agrees, this will save a substantial amount of money over the term of the loan.
Bad credit student loans are available from some Canadian financial providers, but they are not as abundant as standard student loans. Getting access to funds to meet one’s college expenses may be difficult because most financial institutions require credit verifications, which makes students with bad credit unlikely candidates. Bad credit student loans are one alternative, but borrowers should not expect that the loan amount will be sufficient for a 4-year study in some expensive school. Another problem is that lenders that provide bad credit student loans may offer a repayment plan only after completion of studies. Persons who apply for a student loan from a private financial institution may have to apply jointly with a cosigner who has a strong credit history. This can be a friend, relative, or family member with good credit. Obviously, bad credit student loans go with higher interest rates to compensate for the risk loan providers take.
Students who choose to consolidate their loans combine multiple student loans into one loan and repay it at a lower interest rate. The new loan is used to pay off the balances on the existing loans. This works much like refinancing a mortgage. The main benefit of student loan consolidation is that it helps lower the monthly payments. At the same time, students who consolidate student loans may end up paying a lot of money in interest in the long run.
It makes sense to consolidate student loans when the borrower is repaying high interest loans or wants to deal with one financial institution only. Persons who have variable rate loans may want to lock in a fixed rate for added protection. Student loan consolidation is also beneficial for borrowers who need a way out of default. Borrowers who are in default will be unable to obtain new loans, making it more difficult to go back to school. Moreover, they may face the prospect of collection procedures. Student loan consolidation works to give such borrowers a fresh start and will stop collections, including tax intercepts and garnishments.