If you’ve recently graduated, congratulations! With hard work and dedication, you’ve achieved a great feat. Now after celebrating, there are a few things you need to look into. This could be finding a job, moving out, and starting the next chapter of your life.
One of the most important things that you need to know and pay attention to after you graduate is repayment of your student loans. In this blog, we’ll go over crucial information about repaying your student loans, such as:
This information is relevant whether you have been a full-time student, a part-time student, or a mix of both at different time frames. Let’s get into it:
If you’ve taken out the Canada and provincial student loans, up to 60 percent may have been covered from the federal Canada Student Loan Program, with your province’s separate loan program helping you additionally.
You can start to repay your student loan as soon as you graduate from college, university, or other post-secondary institutions. Typically, you get a six-month period after graduation where you don’t have to repay your loan. So if you finished your classes in April, you would begin repaying your loan starting November of that year.
This goes for both the federal and provincial loans. However, you don’t have to wait six months to start repaying. You can repay during your grace period as well with one-time or lump sum payments even before you start making monthly payments.
If you graduated during the COVID-19 pandemic, the government of Canada is keeping loans interest free until March 31, 2023. It’s best to pay off your student loan as quickly as you can, if possible, so you can avoid accruing interest and unnecessarily paying more than you have to.
If you graduated prior to the pandemic, take advantage of the waived interest and use this time to make greater monthly payments so you can become debt-free faster.
Only the federal loan has made itself interest-free. If you have a provincial loan, you may still be accruing interest after the first six months. Check the student loan services from your province to see what interest rates and rules apply and whether there are any waivers or exemptions.
Consolidation is what happens at the time when you begin to repay your student loans. Everything is added to a single balance, including the student loan amount you have to repay (both provincial and federal) with the interest also added to that amount.
While consolidation can also mean that your federal and provincial loans merge, this is dependent on your jurisdiction. There are some provinces that consolidate, like Ontario, but there are also some that do not consolidate their student loans with the federal loan, and Alberta is one of those provinces.
That means you have to make separate repayments to the national student loans service center and to student aid Alberta, if that is where you received your government loans from. However, if you received OSAP (Ontario Student Assistance Program), you can simply pay once. Other provinces that do not consolidate are British Columbia, Manitoba, Nova Scotia, and Prince Edward Island.
Consolidation can make your repayment plan easier and your finances more organized. Being concerned with just a single monthly payment instead of potentially multiple payments and interest calculations can save you a lot of time and stress.
The biggest responsibility that you have to take charge of your student loan repayment plan is to make sure that you are correctly set up for it. It’s easy, you simply need to log in or make an account with the National Student Loans Service Center (NSLSC), or your province, and on the website you can set up your direct deposit information for monthly pre-authorized payments that will be withdrawn from your account automatically at the end of each month.
There are other ways that you can repay your loan if you choose not to set up a pre-authorized payment. These include: telephone banking, Internet banking, cheques (monthly and post-dated) money orders, and bank drafts.
There is a lot that you can do on your accounts, such as making changes to your repayment plan, learning about more options that you have, knowing how to deal with repayment issues when you may be struggling financially, and more.
If you need additional help or are having trouble repaying your loan, you can always contact a representative from NSLSC or your province to help you figure out a plan that works best for you, minimizing any negative impact it may have on you.
If you miss payments this can impact and lower your credit score, just like missing any other thing you need to pay. Other ways it can negatively impact you include putting your loans in default, the government taking legal action against you, sending your loans to collections, and making you ineligible for future student loans.
Do not worry though, as these are only for extreme cases. If you do your due diligence or take action to the best of your knowledge, you will be able to easily avoid any of these circumstances.
Interest rates vary for both the federal and provincial loans. In Alberta, interest rates on loans depend on the prime rate set by CIBC while for the Canada Student Loan, it depends on the prime rates set by the five largest Canadian banks.
You can have a fixed or floating rate. If you have a floating interest rate, you can request to make it a fixed rate, but you can only make this change once and it is permanent. For Alberta loans, the floating rate is CIBC prime rate plus 1% and the fixed rate is CIBC prime rate plus 2%. For the federal loan, the floating rate is the prime rate of Canadian banks and the fixed rate is the prime rate of Canadian banks plus 2%.
The CIBC prime rate is currently at 3.20% until November 20, 2022, as is the case with the rest of the Canadian banks. In order to choose whether a fixed or floating rate is best for you and to compare the cost, you can use the loan repayment estimator to find what suits you and how long it will take.
You could be eligible to claim a tax credit amount for interest that you paid in 2021 or five years prior for your post-secondary education. You can claim for an amount of interest that you or a person related to you paid during this time period. If you claimed an amount once, you cannot claim it again. It might also be better for you not to claim. From the government’s website:
“If you have no tax payable for the year the interest is paid, it is to your advantage not to claim it on your return. You can carry the interest forward and apply it on your return for any of the next 5 years.”
There are some additional things to consider depending on your circumstances. If you have a disability, you can look into the Repayment Assistance Plan, which can lower or eliminate your student loan if you’re eligible. You can have reduced or no monthly payments for up to six months at a time.
The online portals give you access to many different options such as checking your student loan status and balance, updating your mailing address and personal information, reviewing payment and transaction history, changing your monthly payment amount, and more. It gives you ease of access to almost anything you need to do regarding your loans.
We hope this blog was helpful in allowing you to navigate how to repay your student loan in 2022. Remember that your student loan repayment journey is unique to you so ensure that you make smart financial decisions for your repayment.
If you’re interested in getting a Canadian education, ABM College can help you get started. Browse our numerous courses in healthcare, business, and technology to find the right career for your future. Our courses are eligible for student loan aid and funding.