Many university and college students need to borrow money to help cover the cost of their post-secondary education.
According to the CBC, the average student graduates with nearly $30,000 in debt.
While that may seem alarming, it’s possible to pay back these loans fairly quickly if you’re responsible and learn how to manage debt effectively.
Although some students take out private loans or lines of credit (from banks, usually) the most common student loans are those offered by the government.
There are also other forms of financial aid, like scholarships, bursaries and grants, which you do not have to pay back; you can read more about these options here.
What is a student loan?
Student loans are a form of financial assistance offered by Canada’s federal and provincial governments.
They are given out based on financial need and differ from other loans in two main ways: first, they have relatively low interest rates and second, they have a payment- and/or interest-free grace period. Students do not have to begin paying back what they borrowed for six months after they graduate.
Both the federal and provincial governments offer student loans. They often work together so that students only have to submit one application to be considered for both kinds of assistance.
Full- and part-time students can qualify for these loans if they demonstrate financial need and meet the other eligibility requirements.
How do student loans work?
In Ontario, students who need a loan apply for federal and provincial assistance through the Ontario Student Assistance Program (more commonly known as OSAP).
Applying for OSAP also means you will automatically be considered for 30% off Ontario tuition.
Ontario residents must be Canadian citizens, permanent residents or protected persons to be eligible. The government will also look at which school and program you are enrolled in, your course load, your education-related expenses and your family’s financial contribution, among other things.
To qualify for a federal student loan, you basically need to be a Canadian citizen, permanent resident or protected person; be enrolled in a program offered by a designated post-secondary institution; and be taking at least 60% of a full course load if you’re a full-time student or 20-59% of a full course load if you’re a part time student. Read the full eligibility requirements.
You can learn more about the federal Canada Student Loans Program on the CanLearn website and visit the following websites for details about each provincial or territorial student assistance program:
- Alberta: http://www.alis.gov.ab.ca
- British Columbia: http://www.aved.gov.bc.ca/studentservices/
- Manitoba: http://www.studentaid.gov.mb.ca
- New Brunswick: http://www.studentaid.gnb.ca
- Newfoundland: http://www.ed.gov.nl.ca/studentaid/
- Nova Scotia: http://studentloans.ednet.ns.ca/
- Northwest Territories: http://www.nwtsfa.gov.nt.ca
- Nunavut: http://www.gov.nu.ca/education/index.htm
- Ontario: http://osap.gov.on.ca
- Prince Edward Island: http://www.studentloan.pe.ca
- Quebec: http://www.afe.gouv.qc.ca/Anglais/
- Saskatchewan: http://www.yesnet.yk.ca/sites/sfa
- Yukon: http://www.education.gov.yk.ca
How do I apply?
Students must apply for a loan through their provincial or territorial program, at which point they will automatically also be considered for a Canada Student Loan from the federal government.
In Ontario, students can apply for OSAP online or using a paper application form. Applicants also need to provide supporting documentation, most of which go to your school’s financial aid office. OSAP will then review the information you submitted, verify your reported income and confirm your enrollment with your school before letting you know whether or not you will receive a loan.
Things to consider before applying
Depending on your financial situation, a student loan may not be the best way to fund your education. If you are not able to demonstrate sufficient financial need, for example, you will need to find an alternate source of funding.
For some students, working part-time while in school is enough to cover the difference you need to pay for your tuition, textbook and living expenses. If that’s not an option however, you should look into lines of credit from banks and any kinds of financial aid that are offered by your school. It’s also worth applying for as many scholarships, bursaries and grants that you are eligible for, whether they are from the government, your school or private companies.
Before you apply for a loan, think about the responsibility it will involve. If you are not confident that it will be easy to find a job after you graduate that will help you pay back your loan, consider spending more time working before beginning your program so that you can save up what you need to get you through your studies.
Managing your loan
While you’re in school, be smart with your money. Try to keep your expenses low so you can avoid unnecessary spending. Read this article for great money-saving tips and this article for ways to shop for groceries on a budget. You’d be surprised how much a little bit of scrimping here and there will help you in the long run.
When thinking about repaying your loan in the long-term, try to strike a balance being conscious of your loan and the fact that you want to get out of debt as quickly as possible, without letting it become overwhelming or leave you feeling like you can’t spend on anything that’s not a strict necessity.
You may go on to take out other, bigger loans (like a mortgage) so it’s important to learn how to live with debt as a responsible adult. Obviously, the faster you can pay down your loan, the better off you’ll be – especially because you’ll save money on interest – but don’t let it control your life.
For suggestions on how to quickly repay a student loan, read this Q and A with a recent graduate who managed to pay off her OSAP just one year after finishing her master’s degree.