Canada Debt Loan Student
Canada Debt Loan Student
Student loans in Canada help post-secondary students pay for their education in Canada. The federal government funds the Canada Student Loan Program (CSLP) and the provinces may fund their own programs or run in parallel with the CSLP. In addition, Canadian banks offer commercial loans targeted for students in professional programs.
Government loans
Canadian citizens, permanent residents of Canada living in any province for over a year, and protected persons are normally eligible for loans provided by the federal government, through the CSLP, in addition to loans provided by their province of residence.
Loans issued to full-time students are interest free while a student is in full-time studies. Students receiving a Canada Student Loan (CSL) for the first time on or after August 1, 1995, are eligible for up to 340 weeks (~6.5 years) of interest-free assistance. Students in doctoral programs are eligible for an additional 60 weeks, up to 400 weeks (~7.5 years). Students with permanent disabilities and students who received their first CSL prior to August 1, 1995 are eligible for up to 520 weeks of assistance (10 years).
As the length of North American graduate degree programs often exceed this 400 week maximum, students considering graduate study are advised to think carefully before taking out student loans. For example, an honours BA from a Canadian University takes four years, assuming satisfactory progress. MA programs in Canada vary in length from 1-3 years, with two years being the average minimum. A PhD, takes on average, 5 years to complete, although many students take significantly longer than this. Assuming a graduate student completes an honours BA (4 years), an MA (2 years), and a PhD (5 years), one can expect to be in university for at least 11 years. This is significantly longer than the 400 weeks maximum allotted to complete a degree by the National student loan program, and graduate students can easily find themselves in a position where they no longer qualify for student loans. Whether in receipt of student loans or not, students in full-time study are not required to repay their student loans, nor does interest accumulate. That said, a graduate student who has exceeded the 400 week maximum will be expected to repay their student loan while in school and interest will accumulate on their loan while they are a full time student.
Funding is available for part-time students through the CSLP (provincial student loans are not available). Part-time students must make interest payments while in study and begin payments of principal and interest when they cease to be a part-time student. Grants may supplement loans to aid students who face particular barriers to accessing post-secondary education, such as students with permanent disabilities or students from low-income families.
Students must apply for the Canadian and provincial loans through their provincial government. The rules for what determines your province of residence vary, but normally it is defined as where you have most recently lived for at least 12 consecutive months, not including any time you spent as a full-time student at a post-secondary institution. In most cases, the province of residence is the province one lived in before becoming a post-secondary student.
Canada Student Loans of up to $210 per week of full-time study or 60% of the student's assessed need (the lesser of these) can be issued per loan year (August 1–July 31). Loans issued through provincial programs will normally provide students with enough funding to cover the balance of their assessed need. Part-time loans of up to $4,000 can be made, but a student cannot be more than $4,000 in debt on part-time loans at any one time. All Canadian students may also be eligible for the Canada Millennium Scholarship Foundation Bursary (CMS Grant), and other grants provided by their province of residence.
For example, students in British Columbia may be eligible for a maximum of $14,300 combined loan and grant funding per year.
History
Prior to 1964, the national student loan program was known as the Dominion-Provincial Student Loan Program. This program was a matching grant partnership system between the federal and provincial governments. It was started in 1939 and ended with the start to the CSLP in 1964.
Some text from the Department of Human Resources and Social Development Canada:
The CSLP was created in 1964. Since its inception, the Program has supplemented the financial resources available to eligible students from other sources to assist in their pursuit of post-secondary education. Between 1964 and 1995 , loans were provided by financial institutions to post-secondary students who were approved to receive financial assistance. The financial institutions also administered the loan repayment process. In return, the Government of Canada guaranteed each Canada Student Loan that was issued, by reimbursing the financial institution the full amount of loans that went into default.
In 1995, several important changes were made to Canada Student Loans. First, the Canada Student Financial Assistance Act was proclaimed, replacing the existing Canada Student Loans Act (which still remains in force to this day) reflecting the changing needs of the parties involved in the loan process, including the conferred responsibility of the collection of defaulted loans to the banks themselves. The Government of Canada developed a formalized "risk-shared" agreement with several financial institutions, whereby the institution would assume responsibility for the possible risk of defaulted loans in return for a fixed payment from the Government which correlated with the amount of loans that were expected to be, or were, in default in each calendar year. During this period, the weekly federal loan amount was increased to a maximum of $165.
On July 31, 2000, the risk-shared arrangement between the Government of Canada and participating financial institutions came to an end. The Government of Canada now directly finances all new loans issued on or after August 1, 2000. The administration of Canada Student Loans has become the responsibility of the National Student Loans Service Centre (NSLSC). There are two divisions of the NSLSC, one to manage loans for students attending public institutions and the other to administer loans for students attending private institutions. Defaulted Canada Student Loans disbursed under this new regime are now collected by the Canada Revenue Agency which, by Order in Council dated August 1, 2005, became responsible for the collection of all debts due under programs administered by Human Resources and Social Development Canada.
Due to the close nature of the CSLP and the provincial student loan programs, the changes in 1995 and 2000 were largely mirrored by the provincial programs. As a result of these changes, students who attended school before and after these transition years may find that they have up to 6 different loans to manage (pre-1995 federal & provincial; 1995-2000 federal & provincial; and post-2000 federal & provincial). The extent to which this is possible depends largely on a student's province of residence.
A review of the CSLP was announced in Budget 2007. Changes resulting from the Review are expected to be announced in Budget 2008.
Students in professional programs
Most charter banks in Canada have specific programs for students in professional programs (e.g., medicine) that can provide more funds than usual in the form of a line of credit, sometimes with lower interest rates as well. Students may also be eligible for government loans that are interest free while in school on top of this line of credit, as private loans do not count against government loans/grants.
Loan administration and repayment
The Canada Student Loan (sometimes referred to as the National Student Loan) is administered by National Student Loan Service Centre under contract to Human Resources and Social Development Canada (HRSDC). Students have the choice of opting for a fixed interest rate of prime interest rate + 5%, or a floating interest rate of prime interest rate + 2.5%. Newfoundland and Labrador is the only province where there is no interest on the provincial loan.
Based on the HRSDC student loan calculator , and assuming an average prime interest rate of 4.5%, a standard 10-year (114 month) repayment period, and a loan of $30,000:
- if the Floating Interest option is selected, monthly payments will be $361.02 (principal and interest), resulting in total payments of $41,156.77 ($30,000 principal + $11,156.77 interest) over the life of the repayment.
- if the Fixed Interest option is selected, monthly payments will be $400.50 (principal and interest), resulting in payments of $45,657.54 ($30,000 principal + $16,657.54 interest).
Repayment assistance
CSLP offers a number of programs to assist students who find themselves facing financial difficulty during repayment. Among these programs are:
- These programs are currently under revision and will gradually be replaced by the Repayment Assistance Program beginning in August 2009.
- To qualify for these programs one must be a resident of Canada. Graduate students who are studying abroad and have exceeded their maximum allowable weeks of study do not qualify for any assistance in repaying their loans. Neither do other Canadians who no longer reside in Canada.
References
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"Determining Eligibility
STUDENT LOAN CONSOLIDATION; www.students.net
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