When do you have to start repaying your loans?
Although interest begins accumulating on the first day of the month proceeding the completion of studies, payments on BC and Canada Student Loans are not required until the last day of the seventh month after leaving full-time studies. For example, the end of studies is considered May 6th, 2005, for the UBC MD Class of 2005. Their first payment will be due on December 31st, 2005.
What will your payments be?
The amount of your monthly student loan payments will depend upon:
a) The amortization or the length of time that the repayment of your student loans is based.
The amortization period will be automatically determined by the BC and National Student Loan Service Centres based on the amount of your government student outstanding. Typically repayment of Canada Student Loans will be based on a 114 month amortization period although you can request a 174 month repayment schedule. Repayment of BC Student Loans is usually based on a 174 month period, although an amortization period of up to 234 months can be requested.
b) The rate of interest charged.
For BC Student Loans issued prior to August 1, 1995, the interest rate is a floating rate of prime +1%. For Canada Student Loans issued prior to August 1, 1995, the federal government sets maximum interest rates.
For Canada and BC Student Loans issued August 1, 1995, or later, there are two interest rate options available:
1. A maximum fixed rate equivalent to the prime rate at the time of consolidation + 5%; or
2. A maximum floating interest rate of prime + 2.5%.
To obtain an estimate of your expected monthly payments given the amount of your BC and Canada Student Loans and the repayment terms (amortization and interest rate) that you have negotiated or expect to negotiate visit the Edulinx Loan Calculator.
Lump sum payments can be made towards your loan at any time. Making lump sum payments, in addition to scheduled monthly payments, not only helps you pay your loan off faster, but also saves you money. Paying the principal faster will reduce the amount of interest that accrues on your loan over your repayment term.
What is the grace period?
The grace period is the 6-month period following a student's study end date where no payments are required on outstanding government student loans.
Students are responsible for the interest that accrues on their loan during the grace period, although payments during this period are not required. At the end of the grace period, when the student must begin repaying their loan, the interest that accumulated over the 6 months can either be paid off by the student or capitalized into principal. If a student chooses to have the interest capitalized into principal, the lump sum total of the interest is added to the student's outstanding loan balance. The student's repayment terms and monthly payment amount are then based on the new, higher outstanding loan balance.
How do you go about repaying your loans?
Students should receive loan consolidation agreements for all their outstanding government student loans approximately a month before their loans go into repayment. The loan consolidation agreements will detail the amounts outstanding, interest rates choices, amortization period and the amount of their monthly payments.
It is the student's responsibility to ensure that contact is made with all institutions with which they hold student loans. If a student does not receive loan consolidation agreements from all holders of their government student loans, it is their responsibility to contact these organizations.
For loans received prior to August 1, 2000, students must contact the banks that hold their government student loans to complete a Consolidation Agreement.
For Canada and BC Student Loans received August 1, 2000, or later, students have to contact the National Student Loans Service Centre for Canada Student Loans and the BC Student Loans Service Bureau for BC Student Loans to set the terms of their repayment schedules. These loans cannot be consolidated with loans negotiated prior to August 1, 2000, so separate payments will have to be made at each institution.
If you have provincial loans from provinces other than BC, contact the Provincial or Territorial Student Assistance Office to make arrangements for the repayment of these loans.
Are there tax credits you can receive for your government student loan payments?
A provincial and federal tax credit is provided for the interest paid on government student loans each year. Income tax receipts are sent each year along with Annual Loan statements, listing the amount of interest that has been paid during the taxation year. Payments applied to loan principal and payments made by the government on your behalf (e.g. Interest Relief) do not qualify for the income tax credit.
If you have any questions or concerns regarding your income tax receipt, please call the National Student Loans Service Centre.
NOTE: You will no longer receive a tax credit if you add any other personal loans to your government student loans when you are negotiating your consolidation agreement with a financial institution or if you refinance your government student loan into any other type of bank loan product.