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Your guide to student loan repayment in Canada

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When going to college or university, many students opt for various financial aids to manage their tuition and other expenses. That includes private student loans in Canada as well as government student loans, like OSAP. After graduating, you’ll be required to begin paying off your student loans. This is when things can become challenging.

Whether you’ve taken a government-assisted loan or a private student loan, you’ll receive a detailed letter from your bank or the government post-graduation. This letter will state your loan balance, interest rate, and provide a student loan repayment schedule that outlines the amount you need to pay back each month.

Understanding how to balance student loan debt while managing savings is crucial. This guide will delve into the strategies and options for paying off student loans in Canada, including the Canada student loan forgiveness program and government grants. These programs can be pivotal for those trying to pay back OSAP or other student loans efficiently.

Find out more about how to ease the process of settling student debts while also ensuring your financial stability and growth.

How quickly should you be paying off your student loans?

After you graduate, depending on which province or territory you live in, you’ll have a six- to 12-month grace period before you have to start making student loan payments.

As of April 2023, federal student loans aren’t subject to any new interest so students will only be required to pay back the money they borrowed. However, Alberta, Ontario, Nova Scotia, Nunavut, Quebec and Saskatchewan continue to charge interest on provincial loans, which will start to accrue interest after the grace period.

Although you’re not required to make monthly payments during the grace period, it doesn’t hurt to start if you live in a province or territory that charges interest on student loans. If you start paying off your loans during the grace period, all your money will go toward your principal rather than being split between your principal and interest.

When deciding whether you want to pay off your student debt early, look at your budget and consider how making higher loan payments will impact your current finances and long-term financial goals. Before tackling your monthly payments, you should:

  1. Build an emergency fund. Having an emergency fund with three to six months’ worth of expenses saved up will ensure that you don’t go into more debt if an unprecedented situation arises. Going into debt from an unexpected expense can cost you more than what you would save by paying off your student loan early.
  2. Pay off high-interest debt first. High-interest debt, like credit card debt, will accumulate interest at a higher rate than student loan interest. Therefore, you should prioritize paying off this kind of debt before paying off your student loans.
  3. Decide if you want to start saving for retirement. Although it might seem early to start saving for retirement right after graduation, your money will have more time to accumulate compound interest. Consider if this is more beneficial than paying off your student loans early.

Pros and cons of paying off student debt early

While paying off your student loans early can help you save on interest and give you peace of mind, you should consider how increasing your monthly payment on student loans may impact your lifestyle and other financial goals.


  • If you live in a province or territory that charges interest on student loans, paying off your student loans early will help you save on interest, so you pay less in the long run. You can use a loan repayment calculator to compare different loan repayment timelines.

  • The sooner you pay back your student loan, the sooner you can start working toward other financial goals, like buying a house, saving for retirement, or paying off a mortgage.

  • Paying off your debt can improve your credit score by lowering your debt-to-income ratio. This may help you qualify for a lower interest rate on a mortgage, or other forms of credit.


  • Paying off your student loans early could disqualify you from Canada’s student loan forgiveness programs. For example, if you’re a family doctor, you may qualify for loan forgiveness, but you won’t be eligible if you repay your loan early.

  • Although it may be a relief to pay off your student debt early, you should consider what sacrifices you’ll have to make to your lifestyle to do so, and whether those sacrifices are worth it.

  • Early repayment of your student loans could delay other financial goals, like building an emergency fund, paying off credit card debt, or saving for a house.

How to pay back government student loans vs. bank loans

When deciding between government student loans and private student loans in Canada, you should consider the interest rate, repayment schedule, whether your loans are tax-deductible and what options are available to help with repayment or loan forgiveness.

Generally, for bank loans you only need to borrow what you need, while government loans will give you a set amount of money each month. For both government and bank loans, you won’t be required to pay back the principal while you’re in school, but with bank loans, you’ll need to make interest-only payments while studying.

After graduation, bank loans and government loans are subject to different grace periods. Typically, you must start repaying government loans until six to 12 months after graduation. With a bank student loan, you may not need to start paying back the principal of your bank loan until one to two years after graduation, depending on the institution. Another consideration is that government loans are tax-deductible while bank loans are not.

After graduation, some students may have to pay back both government loans and bank loans. If you have more than one type of student loan, you should prioritize paying off whichever loan has the highest interest rate first. That way, you’ll lose less money to interest over time.

Repayment terms for provincial student loans vs. federal students loans

Each province/territory offers their own student loan repayment programs with different grace periods and interest rates. Some provincial loans are paid back together with federal student loans, while others are paid back separately.

Province/ Territory Interest Grace period Where to pay back federal loans Where to pay back provincial/ter ritorial loans
AB Floating rate: prime *One-time option to switch to a fixed rate, which is the prime rate at the time you make the switch 12 months NSLSC Alberta Student Aid
BC 0% 6 months NSLSC NSLSC
MB 0% 6 months NSLSC NSLSC
NB 0% 6 months NSLSC NSLSC
NL 0% 6 months NSLSC NSLSC
NT 0% for those who reside in Northwest Territories after graduation; prime – 1% for those living outside of the Northwest Territories after graduation 6 months Northwest Territories Student Financial Aid Northwest Territories Student Financial Aid
NS Floating rate: prime + 0.5% (0% interest for Nova Scotia residents who meet qualifying criteria 6 months NSLSC Resolve
NU Floating rate: prime – 1% 6 months Nunavut’s Student Aid Program Nunavut’s Student Aid Program
ON Floating rate: prime + 1% 6 months NSLSC NSLSC
PE 0% 12 months NSLSC Edulinx PEI
QC Floating rate: prime + 0.5% 6 months Quebec’s Student Aid Program Quebec’s Student Aid Program
SK Floating rate: prime *One-time option to switch to a fixed rate, which is the prime rate at the time you make the switch + 2% 6 months NSLSC NSLSC
YT 0% 6 months NSLSC NSLSC

See if you qualify for student loan forgiveness

If you have a severe disability or work in a certain occupation, you might qualify for repayment assistance. There are grants and programs available that can reduce or cancel your student debt.

For those who are unable to repay their Government of Canada student loans, you may qualify for reduced payments or no payments at all on the federal portion of your loan.

  • Government of Canada’s Repayment Assistance Plan (RAP): if you qualify, you may be subject to reduced payments or no payments for six months. However, you must reapply every six months to remain eligible. As long as you are on the repayment assistance plan, the balance on your loan will continue to decrease until it’s paid off in full.
  • Government of Canada’s RAP-D for persons with a disability: this plan is available on top of the normal repayment assistance plan to further reduce the payment amount for people with disabilities in order to help with expenses related to their disability. You must reapply every six months to remain eligible.

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