Different Types of Education Funding & Loans
There are different options for student loans in Canada. You can choose to go with a personal loan or line of credit from a private institution, or you can apply for Federal Student Aid through your province.
A grant is a sum of money that you do not have to pay back. When you apply through your province or territory, you are automatically assessed and can receive grants depending on different factors surrounding your financial situation. Eligibility for grants through the Government of Canada is based on your financial need, your combined family income and part-time or full-time enrollment in a program at a government designated institution. You can find the application for grants here.
A personal loan is a loan acquired through a private institution such as a bank or a credit union. They are an option in the event that you do not qualify for any federal student aid, or if your student aid cannot cover all of your expected expenses. They act as a regular loan and start accumulating interest as soon as you start repayment.
Line of Credit
A line of credit works a bit differently, it is a preset loan amount that you can borrow from as you need it. Interest works by accumulating on the amount you borrow until the time that the balance is paid in full. You can obtain a line of credit through a private institution, and some banks offer a student line of credit with extra benefits as opposed to a regular line of credit.
Registered Education Savings Plan (RESP)
If you are a beneficiary of an RESP, you can use funds from this investment account to pay for tuition and other school related expenses. Students can generally access money from the RESP tax-free since those pursuing further education usually have little, if any, income. What can be deducted in an RESP is any positive interest that is earned on the investment, it is taxed when the money is withdrawn for the beneficiary.
Federal Student Aid
Federal Student Aid is also offered to those seeking post-secondary education. You can apply through your province or territory and you are assessed on a number of different things to determine what amount you will receive through grants and/or loans. The factors that are taken into account when deciding how much aid you will receive pertain to the program you are looking to enroll in and its varying factors as well as the financial responsibility you already hold outside the cost of post-secondary. Things like tuition and other necessary fees, the length of the program, if you’re a full time or part time student, if you have dependents in your household, your annual family income, and so on. To get an idea of how much you could be eligible for, you can use the Student Aid Estimator.
However, not every province is a part of the federal student aid program. Quebec, Northwest Territories and Nunavut have their own student aid programs set in place. Yu should also double check that the school and program you are applying for is backed by student aid.
List for All Provincial Portals to Apply for Student Aid: https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/province-apply.html
List of Designated Educational Institutions: https://www.canada.ca/en/employment-social-development/programs/designated-schools.html
To apply in Northwest Territories: https://www.ece.gov.nt.ca/en/services/student-financial-assistance
Repayment of Loans
As of April 1st, 2023, the Government of Canada will eliminate the interest on the federal portion of student loans! You are still responsible for interest accumulated before this date and the interest rate still applies to the provincial portion of your loan. Interest rates for student loans in Canada can be fixed or variable, and differ from province to province. The variable interest rate is generally the current prime interest rate plus one or two percent. British Columbia, Nova Scotia, Manitoba, PEI, Newfoundland and Labrador and New Brunswick have also eliminated interest on the provincial portion of student aid loans!
To calculate your repayment with interest, you can use this free Repayment Calculator: https://hellosafe.ca/en/tools/student-loan-calculator
If you are having a hard time paying back your student loan, the government also offers the Repayment Assistance Program, RAP for short, or RAP-D for students living with disability. You can apply for RAP as soon as you start repaying your loan. Depending on how much money you make, you may be able to qualify for reduced payments or no payments whatsoever. The government may also pay interest as you make payments towards the principal amount of the loan. You do have to reply for RAP every 6 months to ascertain if you are still eligible, and the longest amount of time you can stay on the repayment program is 15 years, or 10 years if you are on the RAP-D Program.
Link to apply for the Repayment Assistance Program: https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay/assistance/rap/apply.html
Beyond Repayment Assistance
What if the Repayment Assistance Program is not enough? What if you were not eligible for student aid but still needed to take out a personal loan to pay for your schooling? If your student loan has you feeling like you are drowning in debt, there are other options out there to get rid of it once and for all.
Consumer Proposal or Bankruptcy for Student Loans
Applying for a consumer proposal to help pay off our loan can be very effective. It can reduce the amount you are set to repay and freeze the interest on any further payments toward your student loans. However, if you want to include your student loan it does have to be 7 years since you have last attended school if you want to safely get rid of the debt. If you’re not sure how long you have been out of school, you can call the National Student Loans Service Centre (NSLSC) at 1-888-815-4514
On the other hand, what happens if you want to apply for a student loan while on a consumer proposal? If you are still attending school and need to apply for student aid while in a consumer proposal, there are some guidelines to follow. You will need a letter from your trustee stating that any current student loans you have are not being included in the proposal that you are on, they must also disclose that they will not seize any funds that come in from student aid. On top of that, you would also have to stay in the same program that you were previously a part of. It is also required that you submit this letter in unison with your application form.
Not everyone has the money saved or readily available to them when it comes to schooling, thankfully, there are resources for you out there to pursue higher learning and work towards building your career. With the student aid programs in place in Canada, it can make it that much easier to start your travels through the post-secondary education system. Everyone deserves an education and the means to achieve it by. With interest on federal loans being ruled out, it seems as though student loans have never been more beneficial to those in need, but this is a new policy and student loans can still create a weight on your shoulders. One that may seem impossible to carry. If your student loans have become too much to bare, give us a call at 800-335-8176 to see if you qualify for debt relief in regards to your student loans!