Your guide to student loan repayment in Canada

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.

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.

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.

•  If you have a severe permanent disability which prevents you from working, you may be eligible to have your student debt cancelled through the Severe Permanent Disability Benefit (SPDB).
•  If you’re a family doctor, resident or nurse working in a rural area, you may qualify to have a portion of your student loans forgiven.
• If you’re a Canadian Force reservist on a designated operation, you’re not required to make payments on their student loans.

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.