Repaying Student Loans
Once you graduate or leave full-time studies, you have a six-month grace period before having to start making loan payments.
Negotiate with your lending institution to ensure that you have a repayment plan that works for you. Remember that you have some options when it comes to repaying your student loans.
Let's take a look at different approaches to paying back your student loan with the following examples:
Danielle and Gordon just graduated in the same class with a degree in engineering. They've both found jobs in their field with about the same salaries - just over $40,000. Each of them has approximately $16,000 in student loans, but they're managing their loan repayments in totally different ways.
Danielle plans to pay off the entire loan in four years, which means hefty monthly payments of $400. To fit these payments in her budget, she'll be living with a roommate in a small apartment and hold off any big purchases, like a car.
"To me, it's worth it to get the loan paid off as quickly as possible. By doing it in four years, I'll pay way less in interest - I have the rest of my life to buy the other stuff I eventually want."
Gordon is in a different situation. He's married and has a two-year old baby. In addition to managing his student loan, he and his wife just bought a house. Because he'll be making mortgage payments too, he has chosen to spread his student loan repayment over 8 years - his payments will be about $235 a month.
"I know I'll pay more in interest, but it's worth it to me. My family made a lot of sacrifices while I was in school - I don't want to put the good things in life on hold any longer."
Repaying Student Loans with help from the government
Repaying your Government Sponsored Student Loans for those that are graduated, transferred, withdrawn, or taking time off will enter the loan repayment stage.
Canada Student Loans received before August 1, 2000 are repaid to your financial institution. Canada Student Loans received after August 1, 2000, are repaid to the Government of Canada through the National Student Loans Service Centre.
Each provincial Student Loan Program has similar arrangements - click on Canlearn for the applicable provincial Web site.
The Canada Student Loans Program understands that loan repayment can be challenging. The following are Debt Management Tools to assist you in repayment for those who qualify:
- Revision of Terms: You can request an extension of the loan repayment period upto 15 years. This would help to reduce the amount of your monthly loan payment by almost 25% at current interest rates.
- Interest Relief: During a period in which you qualify for Interest Relief, the Government of Canada pays the interest on your loan for six-month periods up to a maximum of 30 months throughout the lifetime of the loan.
Students with Canada Student Loans in repayment before December 1, 2000 can access RBC's Interest Relief application. Please read the instructions carefully and complete all areas of the form, then submit the form to the applicable Student Loan Service Centre.
- Extended Interest Relief (Interest Relief Bridging): After extending the repayment period to 15 years, you remain in financial hardship, Interest Relief may be extended during the five years after leaving school.
- Debt Reduction in Repayment: In the event that you remain in financial difficulty, the government will reduce your loan principal if your annual payments exceed a given percentage of your income. The maximum amount of debt reduction will be $10,000 or 50 percent of the principal of your loan, whichever is less. To qualify, five years must have passed since you completed your studies and you must have exhausted all available Interest Relief.
The Provincial Programs offer similar Debt Management Tools. However, they vary from province to province.
Negotiate with your RBC Customer Service Representative or contact National Student Loan Service Centre to ensure that you have a repayment plan that works for you. We can discuss your options.
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