Are Student Loans Worth the Cost?
There is a misconception out there that student loans are free money. I know of countless students who went on elaborate shopping sprees with their student loan money (after paying for their tuition of course) buying things like stereos, Macbooks, you name it. What was the big deal? It was just a student loan, free money right? Wrong!
Unlike other forms of debt such as lines of credit or credit cards, the only way out of student loan debt is full repayment or death. Filing for bankruptcy does nothing to eliminate student loan debt. You are stuck with it until the day you pay it off or die. Not making payments will negatively affect your credit rating just like any other form of debt.
If you think you can get away with not paying, think again. Student loans are issued either through provincial governments or the federal government giving them the powers to make your life miserable if you decide it's a smart idea to miss a payment.
Are you still paying off your student loan?
Taking Out Full time and Part time Canada Student Loans
Full Time Canada Student Loans:
- You must be enrolled with a minimum 60% course load when you register for classes at university or college in order to qualify.
- You are not required to start making payments on your loan until you are out of school or have been away from school for longer than 6 months.
- Covers everything such as tuition, textbooks, living expenses and daycare costs or just tuition and books if you are living at home with your parents and not paying for your living expenses.
- Each province has a maximum amount of funding they can offer. This amount differs from province to province and is loosely based on the cost of living in that province. (For example, the maximum amount from Manitoba is going to be less than if you lived in Ontario).
- There is a limit to the funding that you can receive in order to complete your degree. If you run out of money before you are finished your degree, you cannot apply for more loan money!
- Full-time Canada student loans are handled through the National Student Loans Service Centre. This is branch of the federal government.
- Provincial student loans (which are included with your student loan funding) are dealt with through the provinces and not through the NSLSC.
Part Time Canada Student Loans:
- You are required to have a 20% course load minimum. You are also required to make payments on the interest while you are studying.
- Part time loans are designed to cover tuition, textbooks and a few other costs such as daycare if you are a single parent.
- You are expected to have a source of income while you are in school.
- You must apply for part time funding to the provincial loan office in the province you reside in.
Determining How Much Money You Will Receive
Canada Student Loans looks at whether you are considered an "independent" student (meaning your family has no money to help pay for your schooling or you are no longer living at home) and if not, then they look at how much they think your parents should be paying for your education. Your parents will have to provide information on their income.
They also want to know how much money you have saved up, if you have a car they want to know what it's worth, and any other assets you have.
They also want to know if you are a single parent or are responsible for any other dependents.
When you apply for Canada student loans you will automatically be assessed to see if you qualify for a Canada Study Grant. These study grants do not have to be paid back.
- How To Pay for Your University or College Education Without Student Loans
Happily, there are a few alternatives to paying for your education so that you can still obtain your university or college education, and you won't have a huge amount of debt hanging over your head when you're finished either.
Reading the Fine Print
There are a few goodies located in the fine print when it comes to a Canada student loan that you should be aware of:
- When you applied for the loan you had to estimate your income while in school. If your income turns out to be higher than what you told them it would be, you will be notified of an "overpayment" and will be forced to payback some of your loan money IMMEDIATELY, even if you don't have the actual money. This includes the income of your spouse as well if you are married or common-law.
- You have to wait for one full year if you recently moved to another province and NOT register for full time studies if you wish to receive funding from the province which you now reside. Otherwise you will have to apply for full time funding from the province that you moved from.
- If your course load drops below the level you indicated for your student loan, you will be notified of an "overpayment" and will be forced to immediately payback that amount, even if you had to drop the class and the deadline passed for you to receive a full refund from the university.
- If you are taking classes for the following school year, you must get your documentation in on time to NSLSC or they will begin sending you notices of when you are required to start making payments on your loan. They expect you send in your documentation via expresspost, courier or any other speedy method if you think you will miss the deadline.
- Canada Student Loans cares about your academic performance. If you have failed courses or demonstrated poor academic performance, they may decide to stop giving you loan money and will most likely decide that you did not complete the course load you specified in your application. You will be forced to immediately payback part of your loan money.
How Quickly to Pay Back Student Loans?
- A graduate’s $52,000 student loan repayment dilemma
The Toronto Star writer Ellen Roseman looks at a recent graduate with a good first job. She wonders whether to repay her student loan debt quickly or not.
- Average student debt difficult to pay off, delays life milestones - Canada - CBC News
Canada's average student debt for graduates hovers around $25,000. Meet one 2008 graduate who, like many in repayment assistance or default, is struggling to pay back her loans many years after graduation.
- The Impact of Student Debt
A Report by the Canadian Federation of Students
The Infamous National Student Loans Service Centre
If you haven't had the pleasure of dealing with the National Student Loans Service Centre here in Canada, you certainly will if you decide to pay for your university or college education with student loans.
As with any other department with the federal government of Canada, the NSLSC is staffed with bureaucrats. If you've ever had to deal with any government department, you'll know exactly what I'm talking about.
It is extremely important that you keep every single piece of paper that has anything to do with your loans. Be sure to keep them safely filed.
Stay on top of all deadlines for mailing in forms or documentation. They are not very forgiving if you are even a day late getting a form mailed to them.
Never assume that the NSLSC actually knows what it's doing. Stay on top of your loan situation. If they told you you would be receiving information from them, make sure you receive it and contact them immediately if you don't. The NSLSC is notorious for having a different story on your situation depending on who you talk to. Get names of who you spoke to and keep track of all phone conversations and correspondence with them. Your MP's office can help you if you require assistance in dealing with the NSLSC once you are finished school.
For more Information on repayment assistance:
- Repayment Assistance Plan - Canada.ca
The Repayment Assistance Plan (RAP) and the Repayment Assistance Plan for Borrowers with a Permanent Disability (RAP-PD) makes it easier for you to manage your student loan debt by reducing your monthly payment.
What To Do When You Can't Afford the Payments
Let's face it, life happens. There is a death in the family and you have to take time off school. You get pregnant, you get married, you get sick, or you get a great job offer before you finish school. You graduate only to struggle to get any job, let alone the career you wanted with your brand new University or College degree. Student loans don't care about any of those things, they want their money back. What do you do?
- Interest Relief - You can apply for something called "interest relief" or "repayment assistance." For 6 months at a time you can have the payments on your student loans frozen and the interest on the loans paid on your behalf. This is a huge life saver. The great thing about interest relief is that if you should come into some extra cash and want to put that towards your loan (and who doesn't when they have extra money, right?) that amount goes directly towards the principle, every cent.
- Reduced monthly payments - If your financial situation isn't quite that dire, but the monthly payments on your Canada and Provincial student loans are too high, you can have them reduced. Both the NSLSC and your province will want to know your gross income and based on that amount and how large your student loan is they can tell you what your monthly loan payments can be reduced to. You can increase the monthly payments at any time. Depending on how much you owe on your student loans, there is a limit on how much they can reduce your monthly payments.