Most young Canadians will enroll in some form of post-secondary education, and over half of those students will accrue student loan debt in the process, this is according to Statistics Canada. With an estimated average student loan load of $17,000, student loans can be a rough introduction to the cold realities of debt for many youths.

It’s important to educate yourself as much as you can on student loans in Canada because they often have a significant influence on young Canadians with low earning prospects and because the average student loan load is so high. You might lessen the financial strain brought on by student loans while still pursuing post-secondary education if you had the appropriate information.

Student Loans in Canada

The phrase “student loan” refers to a wide range of financial products, including personal loans, student credit lines from banks, and installment loans backed by the government. The widely used form of student loans in Canada is issued by the provincial or federal government. In Ontario it is known as OSAP.

Student Loans from the Government

The provincial and federal governments of Canada provide student loans that fund not just the cost of tuition but also living expenses and textbooks. Depending on your demands, the amount of federal and provincial student loans you get may not be enough to pay for all of your expenses. Your loan provider will consider a number of factors when determining the sum of the student loan you will receive when you apply for one.

Private Institutions Lenders and Others

You may need to consider other choices if you are not eligible for government student loans or if the amount of the loan is not sufficient to pay for your whole post-secondary education. If so, you may want to think about the following alternatives:

• Student Line of Credit: It is offered by the majority of banks and credit unions. You are approved for a maximum limit but only have to pay interest on the funds that you actually withdraw. While you are still enrolled in school, student lines of credit typically only require you to make interest payments; when you graduate, some of these loans convert to installment loans.
• Personal Loans or Bank Student Loans: Traditional banks as well as internet lenders all provide personal loans. You should only take out a personal loan if you absolutely need to in order to reduce the amount of payments you’ll have to make while you’re in school. Personal loans are typically repaid monthly over a period of time.

Interest rates on student loans in Canada

Most student loans in Canada contain a federal and a provincial component, and each amount has its own student loan interest rate (although you’ll only make one repayment when repaying). For the federal student loan interest rate, you have two rates:

• a 2% fixed rate plus prime.
• a variable rate that is the same as the prime rate.

Fixed rates are precisely what they sound like; they remain constant during the duration of your loan repayment. A variable rate is less expensive but changes based on the prime rate in Canada. 

What Happens If I Can’t Pay Back My Student Loans?

Applying for the RAP (Repayment Assistance Plan) is possible. Every province offers a RAP, and while some of them differ in specifics, most of them are comparable to the federal RAP.

To qualify for RAP, you must demonstrate that your financial circumstances prevent you from making your monthly payments. You’ll be asked for information regarding your income, and based on that information, you might be required to make a payment that doesn’t go over 20% of your take-home pay.

Conclusion

Providers of federal and provincial student loans offer a great, affordable method to pay for your education. Government student loans come with several advantages, such as an interest-free term and a number of forgiveness options, and the application process is not difficult.

If you have accrued a lot of debt due to life challenges, and you are confused, let’s help you. EmpireOne Credit Solutions has helped many people battling debt get a fresh start. We offer a free and friendly consultation. Reach out to us today and let us give you a helping hand.