Student loans in Canada
Encyclopedia
Student loans in Canada help post-secondary students pay for their education in Canada
. The federal government funds the Canada Student Loan Program (CSLP) and the provinces may fund their own programs or run in parallel with the CSLP. In addition, Canadian banks offer commercial loans targeted for students in professional programs.
, permanent residents of Canada living in any province for over a year, and protected persons are normally eligible for loans provided by the federal government
, through the CSLP, in addition to loans provided by their province of residence.
Loans issued to full-time students are interest free while a student is in full-time studies. Students receiving a Canada Student Loan (CSL) for the first time on or after August 1, 1995, are eligible for up to 340 weeks (~6.5 years) of interest-free assistance. Students in doctoral programs are eligible for an additional 60 weeks, up to 400 weeks (~7.5 years). Students with permanent disabilities and students who received their first CSL prior to August 1, 1995 are eligible for up to 520 weeks of assistance (10 years).
As the length of North American graduate degree programs often exceed this 400 week maximum, students considering graduate study are advised to think carefully before taking out student loans. For example, an honours BA from a Canadian University takes four years, assuming satisfactory progress. MA programs in Canada vary in length from 1-3 years, with two years being the average minimum. A PhD, takes on average, 5 years to complete, although many students take significantly longer than this. Assuming a graduate student completes an honours BA (5 years), an MA (2 years), and a PhD (5 years), one can expect to be in university for at least 12 years. This is significantly longer than the 400 weeks maximum allotted to complete a degree by the National student loan program, and graduate students
can easily find themselves in a position where they no longer qualify for student loans. Whether in receipt of student loans or not, students in full-time study are not required to repay their student loans, nor does interest accumulate. That said, a graduate student who has exceeded the 400 week maximum will be expected to repay their student loan while in school and interest will accumulate on their loan while they are a full time student.
Funding is available for part-time students through the CSLP (provincial student loans are not available). Part-time students must make interest payments while in study and begin payments of principal and interest when they cease to be a part-time student. Grants may supplement loans to aid students who face particular barriers to accessing post-secondary education, such as students with permanent disabilities or students from low-income families.
Students must apply for the Canadian and provincial loans through their provincial government. The rules for what determines your province of residence vary, but normally it is defined as where you have most recently lived for at least 12 consecutive months, not including any time you spent as a full-time student at a post-secondary institution. In most cases, the province of residence is the province one lived in before becoming a post-secondary student.
Canada Student Loans of up to $210 per week of full-time study or 60% of the student's assessed need (the lesser of these) can be issued per loan year (August 1–July 31). Loans issued through provincial programs will normally provide students with enough funding to cover the balance of their assessed need. Part-time loans can be made, but a student cannot be more than $10,000 in debt on part-time loans at any one time. All Canadian students were also eligible for the Canada Millennium Scholarship Foundation Bursary (CMS Grant) until the program ended in 2008. There are also other grants provided by students' province of residence.
For example, students in British Columbia may be eligible for a maximum of $14,300 combined loan and grant funding per year.
. This program was a matching grant partnership system between the federal and provincial governments. It was started in 1939 and ended with the start to the CSLP in 1964.
Some text from the Department of Human Resources and Social Development Canada:
Due to the close nature of the CSLP and the provincial student loan programs, the changes in 1995 and 2000 were largely mirrored by the provincial programs. As a result of these changes, students who attended school before and after these transition years may find that they have up to 6 different loans to manage (pre-1995 federal & provincial; 1995-2000 federal & provincial; and post-2000 federal & provincial). The extent to which this is possible depends largely on a student's province of residence.
A review of the CSLP was announced in Budget 2007
. Changes resulting from the Review are expected to be announced in Budget 2008.
The March 2011 federal budget announced a Canada Student Loan forgiveness programme for medical and nursing students to complement other health human resources
strategies to expand the provision of primary health services. The programme is meant to encourage and support new family physicians, nurse practitioners and nurses to practise in underserved rural or remote communities of the country, including communities that provide health services to First Nations
and Inuit
populations.
rate of prime interest rate
+ 5%, or a floating interest rate of prime interest rate + 2.5%. Newfoundland and Labrador is the only province where there is no interest on the provincial loan.
Based on the HRSDC student loan calculator , and assuming an average prime interest rate of 4.5%, a standard 10-year (114 month) repayment period, and a loan of $30,000:
- if the Floating Interest option is selected, monthly payments will be $361.02 (principal and interest), resulting in total payments of $41,156.77 ($30,000 principal + $11,156.77 interest) over the life of the repayment.
- if the Fixed Interest option is selected, monthly payments will be $400.50 (principal and interest), resulting in payments of $45,657.54 ($30,000 principal + $16,657.54 interest).
Interest Relief
Debt Reduction in Repayment
Revision of Terms
Permanent Disability Benefit
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
. The federal government funds the Canada Student Loan Program (CSLP) and the provinces may fund their own programs or run in parallel with the CSLP. In addition, Canadian banks offer commercial loans targeted for students in professional programs.
Government loans
Canadian citizensCanadian nationality law
Canadian citizenship is typically obtained by birth in Canada, birth abroad when at least one parent is a Canadian citizen and was born or naturalized in Canada, or by adoption abroad by at least one Canadian citizen. It can also be granted to a permanent resident who lives in Canada for three out...
, permanent residents of Canada living in any province for over a year, and protected persons are normally eligible for loans provided by the federal government
Politics of Canada
The politics of Canada function within a framework of parliamentary democracy and a federal system of parliamentary government with strong democratic traditions. Canada is a constitutional monarchy, in which the Monarch is head of state...
, through the CSLP, in addition to loans provided by their province of residence.
Loans issued to full-time students are interest free while a student is in full-time studies. Students receiving a Canada Student Loan (CSL) for the first time on or after August 1, 1995, are eligible for up to 340 weeks (~6.5 years) of interest-free assistance. Students in doctoral programs are eligible for an additional 60 weeks, up to 400 weeks (~7.5 years). Students with permanent disabilities and students who received their first CSL prior to August 1, 1995 are eligible for up to 520 weeks of assistance (10 years).
As the length of North American graduate degree programs often exceed this 400 week maximum, students considering graduate study are advised to think carefully before taking out student loans. For example, an honours BA from a Canadian University takes four years, assuming satisfactory progress. MA programs in Canada vary in length from 1-3 years, with two years being the average minimum. A PhD, takes on average, 5 years to complete, although many students take significantly longer than this. Assuming a graduate student completes an honours BA (5 years), an MA (2 years), and a PhD (5 years), one can expect to be in university for at least 12 years. This is significantly longer than the 400 weeks maximum allotted to complete a degree by the National student loan program, and graduate students
Graduate school
A graduate school is a school that awards advanced academic degrees with the general requirement that students must have earned a previous undergraduate degree...
can easily find themselves in a position where they no longer qualify for student loans. Whether in receipt of student loans or not, students in full-time study are not required to repay their student loans, nor does interest accumulate. That said, a graduate student who has exceeded the 400 week maximum will be expected to repay their student loan while in school and interest will accumulate on their loan while they are a full time student.
Funding is available for part-time students through the CSLP (provincial student loans are not available). Part-time students must make interest payments while in study and begin payments of principal and interest when they cease to be a part-time student. Grants may supplement loans to aid students who face particular barriers to accessing post-secondary education, such as students with permanent disabilities or students from low-income families.
Students must apply for the Canadian and provincial loans through their provincial government. The rules for what determines your province of residence vary, but normally it is defined as where you have most recently lived for at least 12 consecutive months, not including any time you spent as a full-time student at a post-secondary institution. In most cases, the province of residence is the province one lived in before becoming a post-secondary student.
Canada Student Loans of up to $210 per week of full-time study or 60% of the student's assessed need (the lesser of these) can be issued per loan year (August 1–July 31). Loans issued through provincial programs will normally provide students with enough funding to cover the balance of their assessed need. Part-time loans can be made, but a student cannot be more than $10,000 in debt on part-time loans at any one time. All Canadian students were also eligible for the Canada Millennium Scholarship Foundation Bursary (CMS Grant) until the program ended in 2008. There are also other grants provided by students' province of residence.
For example, students in British Columbia may be eligible for a maximum of $14,300 combined loan and grant funding per year.
History
Prior to 1964, the national student loan program was known as the Dominion-Provincial Student Loan ProgramDominion-Provincial Student Loan Program
The Dominion-Provincial Student Loan Program was the first federally funded student loan program accessible to university students in Canada.Originally, only five provinces joined the initiative, but by 1944 all nine provinces were participating...
. This program was a matching grant partnership system between the federal and provincial governments. It was started in 1939 and ended with the start to the CSLP in 1964.
Some text from the Department of Human Resources and Social Development Canada:
The CSLP was created in 1964. Since its inception, the Program has supplemented the financial resources available to eligible students from other sources to assist in their pursuit of post-secondary education. Between 1964 and 1995 , loans were provided by financial institutions to post-secondary students who were approved to receive financial assistance. The financial institutions also administered the loan repayment process. In return, the Government of Canada guaranteed each Canada Student Loan that was issued, by reimbursing the financial institution the full amount of loans that went into default.
In 1995, several important changes were made to Canada Student Loans. First, the Canada Student Financial Assistance Act was proclaimed, replacing the existing Canada Student Loans Act (which still remains in force to this day) reflecting the changing needs of the parties involved in the loan process, including the conferred responsibility of the collection of defaulted loans to the banks themselves. The Government of Canada developed a formalized "risk-shared" agreement with several financial institutions, whereby the institution would assume responsibility for the possible risk of defaulted loans in return for a fixed payment from the Government which correlated with the amount of loans that were expected to be, or were, in default in each calendar year. During this period, the weekly federal loan amount was increased to a maximum of $165.
On July 31, 2000, the risk-shared arrangement between the Government of Canada and participating financial institutions came to an end. The Government of Canada now directly finances all new loans issued on or after August 1, 2000. The administration of Canada Student Loans has become the responsibility of the National Student Loans Service Centre (NSLSC). There are two divisions of the NSLSC, one to manage loans for students attending public institutions and the other to administer loans for students attending private institutions. Defaulted Canada Student Loans disbursed under this new regime are now collected by the Canada Revenue AgencyCanada Revenue AgencyThe Canada Revenue Agency is a federal agency that administers tax laws for the Government of Canada and for most provinces and territories, international trade legislation, and various social and economic benefit and incentive programs delivered through the tax system...
which, by Order in Council dated August 1, 2005, became responsible for the collection of all debts due under programs administered by Human Resources and Social Development Canada.
Due to the close nature of the CSLP and the provincial student loan programs, the changes in 1995 and 2000 were largely mirrored by the provincial programs. As a result of these changes, students who attended school before and after these transition years may find that they have up to 6 different loans to manage (pre-1995 federal & provincial; 1995-2000 federal & provincial; and post-2000 federal & provincial). The extent to which this is possible depends largely on a student's province of residence.
A review of the CSLP was announced in Budget 2007
2007 Canadian federal budget
The Canadian federal budget for the 2007-2008 fiscal year was presented to the Canadian House of Commons by Finance Minister Jim Flaherty on March 19, 2007. The federal budget included $14 billion in new spending and $5.7 billion in tax cuts...
. Changes resulting from the Review are expected to be announced in Budget 2008.
Students in professional programs
Most charter banks in Canada have specific programs for students in professional programs (e.g., medicine) that can provide more funds than usual in the form of a line of credit, sometimes with lower interest rates as well. Students may also be eligible for government loans that are interest free while in school on top of this line of credit, as private loans do not count against government loans/grants.The March 2011 federal budget announced a Canada Student Loan forgiveness programme for medical and nursing students to complement other health human resources
Health Human Resources
Health human resources — also known as “human resources for health” or “health workforce” — is defined as “all people engaged in actions whose primary intent is to enhance health”, according to the World Health Organization's World Health Report 2006. Human resources for health are identified as...
strategies to expand the provision of primary health services. The programme is meant to encourage and support new family physicians, nurse practitioners and nurses to practise in underserved rural or remote communities of the country, including communities that provide health services to First Nations
First Nations
First Nations is a term that collectively refers to various Aboriginal peoples in Canada who are neither Inuit nor Métis. There are currently over 630 recognised First Nations governments or bands spread across Canada, roughly half of which are in the provinces of Ontario and British Columbia. The...
and Inuit
Inuit
The Inuit are a group of culturally similar indigenous peoples inhabiting the Arctic regions of Canada , Denmark , Russia and the United States . Inuit means “the people” in the Inuktitut language...
populations.
Loan administration and repayment
The Canada Student Loan (sometimes referred to as the National Student Loan) is administered by National Student Loan Service Centre under contract to Human Resources and Social Development Canada (HRSDC). Students have the choice of opting for a fixed interestFixed interest
A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to accurately predict their future payments...
rate of prime interest rate
Prime rate
Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility, though this is no longer always the case...
+ 5%, or a floating interest rate of prime interest rate + 2.5%. Newfoundland and Labrador is the only province where there is no interest on the provincial loan.
Based on the HRSDC student loan calculator , and assuming an average prime interest rate of 4.5%, a standard 10-year (114 month) repayment period, and a loan of $30,000:
- if the Floating Interest option is selected, monthly payments will be $361.02 (principal and interest), resulting in total payments of $41,156.77 ($30,000 principal + $11,156.77 interest) over the life of the repayment.
- if the Fixed Interest option is selected, monthly payments will be $400.50 (principal and interest), resulting in payments of $45,657.54 ($30,000 principal + $16,657.54 interest).
Repayment assistance
CSLP offers a number of programs to assist students who find themselves facing financial difficulty during repayment. Among these programs are:Interest Relief
- Interest Relief is designed to help students meet repayment obligations if they are temporarily unable to make payments on their government student loans because of unemployment or low income. Interest Relief is granted for periods of six months, up to a maximum of 30 months. Some exceptions, such as Canadian residency, may apply. Students may also be eligible for a further 24 months of Extended Interest Relief. Once approved for Interest Relief, students are not required to make payments on either the monthly interest or the outstanding principal of their loan(s) (the federal and/or provincial government will pay the interest on a student's behalf).
Debt Reduction in Repayment
- Debt Reduction in Repayment is designed to help students facing long-term financial difficulties manage the repayment of their Student Loan(s). DRR lowers the principal amount of a loan, thereby reducing the monthly loan payment to an affordable level based on family incomeFamily incomeFamily income is generally considered a primary measure of a nation's financial prosperity.In the United States, political parties perennially disagree over which economic policies are more likely to increase family income. The party in power often takes the credit for any significant changes in...
. A student can receive up to three reductions (totalling up to $26,000) on their Canada Student Loan principal during their lifetime, depending on financial circumstances.
Revision of Terms
- Revision of Terms is a feature that provides students with the flexibility to manage loan repayment in a way that is responsive to individual situations. It can be used to decrease the monthly payments by increasing the repayment period (from the standard 10 years up to 15 years) should a student find the standard terms difficult to maintain. It can also be used to increase loan payments by reducing the repayment period, allowing more rapid repayment of a loan.
Permanent Disability Benefit
- Permanent Disability Benefit allows for the reduction of loans for students who are experiencing exceptional financial hardship due to a permanent disability. The eligibility criteria varies based on date of loan negotiation and lender. A recent Access to Information request indicated that over 60% of applicants to this program were denied loan forgiveness.
- These programs are currently under revision and will gradually be replaced by the Repayment Assistance Program beginning in August 2009.
- To qualify for these programs one must be a resident of Canada. Graduate students who are studying abroad and have exceeded their maximum allowable weeks of study do not qualify for any assistance in repaying their loans. Neither do other Canadians who no longer reside in Canada.
External links
- CanLearn.ca
- Canada Student Loans Program (federal)
- Provincial/Territorial Student Loan Offices
- Canadian Alliance of Student Associations
- Canadian Federation of Students
- Ontario Undergraduate Student Alliance Issue Briefing
- StudentAid BC - Ministry of Advanced Education - Province of British Columbia