Student loan statistics in Canada
Student loan interest rates, credit requirements, repayments, defaults in Canada
Overview
The cost of post-secondary education in Canada is much more affordable when compared to other places like the USA, the UK and Australia. However, statistics shows that in Canada, student loan is opted for by around 50% of bachelor’s students, 44% of master’s students, and 41 % of doctorate students.
In Canada, as of 2018, Canadian students owed C$28 billion (US$20 billion) to all levels of government, including C$19 billion to the federal government. A 2015 survey found that each student owed C$26,819 on average.
Under the Canada Students Loans Program (CSLP), students can receive financial assistance to complete their education. These loans are usually available to Canadian citizens or permanent residents of Canada and residing in a province issuing Canada student loans.
A student loan is granted based on factors such as the borrower’s parents’ yearly income, the type of degree the borrower wants to pursue, and the time elapsed since the borrower completed high school.
Loans are granted by the National Student Loans Service Centre; besides federal loans, loans are available from provinces/territories.
About 60 percent of CSLP-assessed students’ need is financed by the federal government and the rest by provinces and territories. A full-time loan would require you to be enrolled in a minimum of nine credit hours (12 for Newfoundland). Those with lesser credit hours can apply for a part-time loan.
There’s a lifetime limit for the period you’d receive student aid which is 340 weeks for full-time students, 400 weeks for doctoral programs and 520 weeks for students with disabilities.
Students are required to fill out either the full-time or part-time loan application; just one application needs to be filled through your province’s provincial student loan office to apply for both the federal as well as provincial funding.
Repayment and default
In March 2020, the Canadian government suspended repayment of federal student loans and interest for six months till September 30, 2020, and the holiday may be extended.
In 2018, student debt contributed to 17.6 percent of insolvencies, and 22,000 former students filed for insolvencies that year. The main hurdle in borrowers not being able to repay loans is their low income.
But 50 percent of borrowers with low incomes never completed their programs in the first place and never acquired the skills required for high-income jobs, so repayment is difficult.
Borrowers don’t need to start repaying their loans in a six-month period after leaving school, but interest may be charged on provincial/territorial part of the loan.
The rest of the borrowers completed school but could find jobs that paid only C$2,400 or so. Some don’t make enough to make ends meet and depend on credit cards and survive on other debt.
The government’s Repayment Assistant Plan (RAP) lets such graduates pay less than they should or nothing; 300,000 borrowers received aid from the RAP in 2016-17.
You can apply for repayment delay of six months if your salary is below C$25,000 a year. You can reapply for up to 10 six-month periods. Every year, the government writes off loans it feels it cannot collect. In the three years till 2019, it wrote off C$710 million.
The share of student debt in consumer insolvencies increased from 9.7 percent in 2012 to 12.3 percent in 2018.
Experts say allowing students to stop loan repayment would stimulate economic activity by allowing them to purchase goods and services. It would also relieve stress on the borrowers.
Early repayments
Repayment of loan can be made any time, even before the end of the 6-month period after completing studies or even while studying if you’re keen on avoiding interest payment. You can opt to make a one-time payment which would bring down the total amount you need to repay.Interest rates
Two interest options are available to borrowers: a floating rate equal to the prime rate, and a fixed rate of the prime rate plus 2 percent. The provincial/territorial part of the loan attracts a different interest rate.
The prime rate is calculated based on the prime rates of the five largest Canadian banks, leaving out the highest and the lowest, and taking the average of the remaining three.
Private student loans
Loans can also be obtained from private lending institution or banks for students who need additional loan amount or for those who aren’t eligible for the government loans including international students. In case of these loans, the interest rates and repayment schedules are similar for Canadian and international students.
Also read:
– Guide to Education Loans to Study Abroad
– Graduate School Funding for Masters Degree Programs