Repaying your student loans

Leaving school and beginning to pay your student loans can be an intimidating experience. Student Services can help you manage your debt load effectively and stay in good standing with your lenders.

Keeping in touch with your lenders is the most important way to avoid difficulty during repayment. Be sure to update your lenders with your current address if you move after leaving school.

If you are not in a financial position to begin repayment, there are programs to help you manage your debt load. Review the applicable section below for more information.

Repayment information for full-time Canadian students

Full-time students automatically enter repayment six months after they leave full-time study. The date you leave full-time study is the date you last attend school and not the date of your graduation ceremony. If you withdraw part way through your study period, you enter repayment six months from the date of your withdrawal.

Repayment programs are specific to each loan and lender. Research all your options and stay in touch with your lender during your repayment period. It is always better to be proactive when times are tough, rather than being reactive to calls from your lender when payments are missed.

Repayment Assistance Plan for Canada student loans

On August 1, 2009, the new federal student loan Repayment Assistance Plan was introduced to assist borrowers who are having difficulty paying back their student loan debt. The plan makes it easier for borrowers to manage their debt by paying back what they can reasonably afford.

What does this mean for you?

  • The repayment period will not last longer than 15 years (or 10 years for students with disabilities).
  • Monthly payments are based on an income-to-debt ratio and will not exceed 20% of a family’s income. In certain situations, some borrowers may not have to make payments until their income increases.
  • You must apply and have your eligibility determined. Not everyone will qualify and enrolment is not automatic.
  • The Federal Interest Relief and the Debt Reduction in Repayment programs have been discontinued. Borrowers who were approved for these programs before August 1, 2009, may continue the programs until their approved period ends, or they may apply for the Repayment Assistance Plan.

For more information on how the program works, eligibility criteria, and how to apply for the program, visit CanLearn’s Repayment Assistance Plan.

BC student loans

Refer to out-of-province loans for information on repayment programs for provinces other than BC, or contact your provincial loan provider.

StudentAidBC offers a variety of programs to assist borrowers who are experiencing difficulty in repaying their student loans.

It is the borrower’s responsibility to:

  • Keep an up-to-date address and telephone number on file with the bank and/or Student Loan Centre which holds their student loans.
  • Contact the bank and/or Student Loan Centre before the expiry of the six-month grace period to discuss terms of loan repayment.
  • Make regular payments on loan(s) as specified in the agreement.
  • Discuss alternative arrangements with the bank and/or Student Loan Centre if payments cannot be maintained due to individual circumstances.
  • If re-registering in full-time studies, reinstate old student loans in interest/payment-free status by taking enrolment confirmation forms (CSL Schedule 2, BCSL Certificate 2, Copy 22a, Ontario Loan Form R, etc.) to the bank and/or Student Loan Centre at the start of the new academic session.

It is very important that the borrower take the time to read and understand the terms under which their student loans have been provided. Once student loans go into repayment, they should be treated like any form of commercial debt, such as car loans or credit cards. Contrary to popular belief, student loans are not forgiven if they are ignored for an extended period. Accordingly, penalties for a default on student loans are in keeping with those encountered with commercial credit. These include:

  • Disqualification for future government student loans.
  • Damaged credit rating and possible ineligibility for various forms of commercial credit such as car loans, mortgages, and credit cards.
  • Referral of the defaulted loan to collection agencies and skip tracing agencies.
  • Legal action, which could result in garnishee orders on wages.
  • Diversion of income tax refunds and tax credits to the repayment of Canada student loans which have reverted to the federal government.

1. Can I start making payments early or before my loan goes into repayment?

Yes, this is a wise way of paying down the principal debt and reducing the interest charged during your six-month grace period. You must contact your lender(s) to arrange early payments and get them to send you a consolidation agreement.

2. What is a consolidation agreement? What happens if I don’t sign it?

A consolidation agreement is your lender’s legal document outlining the terms of repayment. It should include your total loan balance, the expected monthly payments, the start date of repayment, the interest rate, and the amortization period. Your lender(s) will send you this form when you are reaching the end of your study period.
If you do not sign and return the consolidation agreement, your loans will still go into repayment. However, you will not be eligible for any repayment assistance programs until you have signed it.

3. Should I consolidate all of my student loans into a single loan with a bank?

There are both advantage and disadvantage to consolidating your student loans into one bank loan. The advantages of consolidation are:

  • You only have to deal with one lender
  • You only have one monthly payment instead of two or three
  • You’ll have a fixed, possibly lower, interest rate

The disadvantages of consolidation are:

  • You are no longer eligible for government debt management programs (Repayment Assistance Plan or BC Interest Relief).
  • You will not be eligible for tax credits for interest payment when filing your tax returns.
  • You will not be eligible for interest-free status if you return for more post-secondary studies.
  • You will be unable to claim student loan payments on future student loan applications.

4. Should I double up my monthly payments

Yes, when you can. This is recommended as it will decrease the overall amount of interest that you will pay on your student loans. Even if you can’t double up but you can only make an extra payment of $25 or $50 each month, it will make a big difference in the long run.

5. What happens if I can’t repay my student loan(s)?

Find out more about your repayment options or contact your lender(s). You can also meet with a Student Services advisor to work out a financial plan for paying back your student loans after graduation.

6. What happens if I default on my student loan(s) repayment?

Contact your lender(s) to find out about your options to keep your loan in good standing. Defaulting on your student loans can result in the loans being sent to collections, a poor credit rating, loss of future income tax refunds and/or GST credits, wage garnishment or property liens, and potential legal action.

7. How long is the repayment period? What is the interest rate? What is prime?

To answer your questions about repayment periods, interest rates, and primes, visit CanLearn.

8. If my question isn’t answered here, where else can I find answers?

Check out CanLearn for more information.

The grace period

The six months after you leave full-time study is called your grace period. During this time your loans will accrue interest, but you do not have to make any payments.
Update your lenders with your current contact information. They will mail you information about:

  • The total amount that you owe
  • The amount of your monthly payments
  • Your monthly payment date
  • Current interest rates
  • The banking information that your lender has on file

Repayment

After your six month grace period ends, you will automatically enter repayment.

Payments are automatically withdrawn from your bank account at the end of each month, unless you indicate otherwise.

The correspondence you receive during your grace period gives you the opportunity to review your repayment information and modify the terms. But, you can contact your lender anytime after repayment begins to discuss or modify the details of your repayment terms.

Repayment calculator

Wondering how you’re going to repay your student loans or how much your monthly payments will be when you graduate?

Check out the the Loan Repayment Estimator at CanLearn’s How to Manage Debt. They’ll help you understand interest rates, amortization (repayment period), and monthly payments using a variety of options.

What if I can't make the required payments?

There are programs to assist you if you are unable to make the required monthly payments. The best way to determine what programs are available and how to apply is to contact each of your lenders directly about your current financial situation.

Check out CanLearn for more about repayment assistance tools.

Repayment of U.S. loans

Your Direct PLUS loan enters repayment once your loan is fully disbursed (paid out).

However, if you are a graduate or professional student, your loan will be placed into deferment while you are enrolled at least half-time and for an additional six months after you cease to be enrolled at least half-time. If you are a parent borrower, you may contact your loan servicer to request a deferment while you or your child are enrolled at least half time and for an additional six months after your child ceases to be enrolled at least half-time.

If your loan is deferred, interest will accrue on the loan during the deferment. You may choose to pay the accrued interest or allow the interest to capitalize when the deferment period ends. Your loan servicer will notify you when your first payment is due.

The date you leave studies is the date you last attend and not the date of your graduation ceremony.

If you withdraw part way through your study period, your repayment start date is based on the date of your withdrawal and not the original semester end date.

To prepare for repayment, you should review the repayment information provided by the U.S. Department of Education.

Students entering repayment must complete exit counselling.