Interest What?

In a previous post I mentioned that most students don’t know about interest relief on their student loans and therefore do not end up using it. On that post we got a comment confirming that problem. Here is all that you need to know to get the most out of the Student Loan System.

When you get a student loan through your provincial student loan program, a portion of that loan is from the federal government (Canada Student Loan Program) and a portion of it is from your provinces of residence (e.g. Nova Scotia Student Loan Program). To make it even more complicated, some provinces such as Ontario, New Brunswick, Saskatchewan and Newfoundland have an integrated loan that is fully administered by the National Student Loan Service Centre (NSLSC) once you enter the repayment period. If your loan is not integrated, the NSLSC only administers the Canada Student Loan portion of loan. All this means you really have to confirm any advice that I give in this post with the regulations for your province. You can do that be checking out the CanLearn website.

Interest relief allows you to defer the payments on your loan, six months at a time, for up to thirty-six months. During the interest relief period, the government pays the interest on your loan until you no longer qualify at which point you must start repaying your loan (interest and principle). To see you if qualify for interest relief contact the NSLSC at 1-888-815-4514. They will ask you a number of questions such as how much money you make and if you have any dependents and provide you with a preliminary assessment as to whether you qualify or not. If you do, they will send you some forms to fill out and you will have to provide proof of your income, dependents, ect. You can find all of the debt management measures for Nova Scotia here.

One of the biggest problems with the repayment period of student loans in Canada is that if you don't qualify for interest relief, or have used up your thirty six months of interest relief you have to start repaying your loan. It doesn't matter if you are not making enough money to start repaying your loan or even if you have a job or not. If your loan is $24,000 you will have to pay around $320 a month. Last January, the Nova Scotia Department of Education announced that they would be creating a program they called the Repayment Assistance Program (RAP) which would address this problem. This program would compliment the interest relief program, but only on the Nova Scotia portion of your student loan. Let's say that the threshold for a student with no dependents to qualify for interest relief is that they have to be making less than $1200 a month. If you made between $1200 and $2000 a month (again just hypothetical numbers) RAP would kick in. This means that between $1200 and $2000 a month the amount of money that you would have to repay would be calculated on a graduated scale depending on the amount of money that you make. The real bonus to this program is that during RAP, the government would still pay your interest, so any money that you pay would go towards decrease the principal of your loan. Of course, we have not been able to confirm the status of this program, or its start date.