Average tuition fees in Canada for the 2014/2015 academic year increased by 3.3 percent, compared to the previous school year. Canadian students pay an average of $5,959 per year in tuition, although students in some provinces pay as much as $7,539, so it's unsurprising that so many people turn to student loans to get them through higher education. A student loan is an effective way to finance your education, but it's important to understand your responsibilities when it comes to paying off the debt. If you currently hold a student loan, learn more about your legal responsibilities and what to do if you cannot repay the funds.
Types of student loan
The Government of Canada works with many provincial or territorial governments to manage student loan and grant programs. The type of student loan available to you differs according to where you want to study. In some places, you can get an integrated student loan that the provincial and national governments jointly fund. In other places, you can apply for a Canada Student Loan that the Government of Canada solely funds.
Some provinces fund loans and grants without national government assistance, but you may need to meet special requirements. For example, in Yukon, loans and grants are only available to permanent residents.
Eligibility for student loans
The lending criteria for student loans vary according to the provider. For national government-funded Canada Student Loans, you must:
Part-time students can only apply for Canada Student Loans, and they must also meet other criteria. You must also not exceed lifetime requirements for financial help, which cap funding at 340, 400 or 520 weeks, according to your chosen study and personal circumstances.
Check the eligibility criteria for your funding carefully. You will have to sign a Master Student Financial Assistance Agreement (or similar), which is a legally binding document.
Changes in your personal situation
You must tell the provincial or territorial student financial assistance office if your circumstances change. For example, if you abandon your studies, or fail to meet certain grades, you are probably no longer entitled to some or all the funding. If you make a false statement or misrepresentation, you could face a fine of $1000 up to six years after you give the incorrect information.
When repayments and interest start
You have to start paying back your loan six months after you graduate, but interest on the loan starts as soon as you leave school. The National Student Loans Service Center will write to you and tell you when your repayments start. You normally have nine and a half years to repay the loan. Of course, the longer it takes you to pay off the loan, the more interest you will pay.
Financial help with loan repayments
If you're having problems paying your loan, you can ask for help through the Repayment Assistance Plan. This allows you to make more affordable payments based on your family's income, which could mean that you don't need to pay anything at all for a fixed time. The plan can only assist you for six months at a time, and you must still pay back the loan within fifteen years, but you can reapply.
Some professions also offer a loan forgiveness program, if you agree to work in a certain part of the province. This normally applies only to family doctors or nurses who work in a rural or remote community. Loan forgiveness applies only for one year, but you can reapply every year until your loan balance is zero.
Student loans and bankruptcy
A change to the law in 1998 made it harder for students to declare bankruptcy. The non-dischargeable period (the time after which you don't have to pay back your loan) increased from two to ten years. A further change in 2008 cut this time to seven years. As such, even if you declare bankruptcy after graduating, you will still have to pay back your loan if you did so less than seven years after you stopped studying.
After five years, you can now apply for special consideration, which means that, if you can prove financial hardship, the authorities will now discharge the loan after five years. That aside, bankruptcy is not a simple solution, and you need to carefully consider the implications on your credit history and general finances. Talk to a debt consolidation lawyer for more advice.
Student loans help thousands of Canadian students graduate every year, but they can also lead to long-term financial problems. Consider your financial options carefully during study, and make sure you understand your obligations under a student loan agreement.
Share15 September 2014
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