The Cadre

Student Debt in Canada

There are different credit and loan options to finance your education in Canada, from government-sponsored financing and private student loans to lines of credit, student credit cards, peer to peer lending networks, and others.

Government Loans

If you fail to meet the requirements for a scholarship or grant, one option is to apply for a government student loan if you are enrolled at an accredited university or a certificate or diploma program. Only students who are able to demonstrate financial need qualify. If you are a permanent resident, Canadian citizen, or a protected person, then you can try your chances for government-sponsored financing. There are plenty of benefits, among which lower interest payments, fixed rate of interest, and the fact that repayment only begins 6 months after you graduate or leave school.

Private Loans

This is one alternative to government financing offered by local and major banks, online services, credit unions, and other providers. The interest rate is usually variable and higher than government assistance. Students are required to make regular monthly payments while at school, including principal and interest payments. Given that many students have limited or no exposure to credit, a supporting borrower, called cosigner, is usually required.

Student Credit Cards

Many Canadian unions and banks offer student credit cards, including TD Canada Trust, the Royal Bank of Canada, Scotiabank, and others. There is a wide selection of financial solutions to choose from, including cards with money back rewards, no annual fee, and perks such as free movies, music, and generous discounts. A student card allows holders to build good rating and payment history and then apply for other types of credit solutions. Many issuers advertise cards that go with affordable rates, cash advances, card checks, optional balance protection, car rental discounts, and other benefits and add-ons.

Repayment Problems and Repayment Assistance

Many students find themselves deep in debt after graduation because college fees can be as high as $6,000 - $7,000 a year. College costs are constantly on the rise, making it more difficult to meet daily and student-related expenses. Fortunately, there are repayment assistance programs and other ways to deal with debt and make payments more affordable. If you have a government loan and a large outstanding balance you are unable to repay, then you may want to look into different repayment assistance programs whereby borrowers benefit from no or reduced monthly payment. This depends on your current financial situation. Make sure you complete the online application and provide information such as your total outstanding balance, regular monthly payment, gross family income, name of financial institution, and so on. If you have a loan with a private provider, then there are several options to look into, including credit counseling, debt consolidation, debt restructuring, formal proposal to creditors, and negotiating a lower monthly payment with your creditors. Another option is to apply for an individual voluntary arrangement or try self money management. If you have excessive student card debt, then one option is to consolidate your outstanding balances using a low-interest credit card. Transfer all high-interest balances to a single card with a long promotional period, say 18 months. Shop around for cards with a zero interest during the promotional period to save on interest charges and repay your balances. There are many issuers that offer long grace periods of 25 days which is basically an interest-free period. To repay your debt faster, one option is to find a second, part-time, or seasonal job to increase your income. Think of ways to reduce your expenses, including dining out, grocery shopping, and utility bills.

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