The Reality of Student Loans

Relying solely on student loans to pay for post secondary education is quite common due to the high costs of education. Tuition, books, and living expenses add up quickly and many people do not have the means to put themselves through school without some assistance. Fortunately student loans are available from the government to help students further their education. The Canada Student Loans Program is designed to promote accessibility to post secondary education for all individuals, regardless of their financial position. This government program was developed in 1964 as a statutory spending program under the Canada Student Loans Act. This was later revised to the Canada Student Financial Assistance act and now the loans are financed through the Government of Canada.
Although student loans are an important financial aid to those wanting to further their education, it is imperative to understand the realities of them. Lenders will start charging interest as soon as the schooling is completed. You can choose to start making payments immediately, pay the six months interest as a lump sum before starting to make regular payments, or ask the loan providers to add the interest amount in to the loan after the six month grace period. Each lender is individual but generally the first student loan repayment is due six months after graduating or six months following the student dropping out of school. Some provinces provide some form of “loan forgiveness”. There are only certain professions that may apply for the program and the applicant must have completed their education and be employed. These programs will forgive the outstanding student loan debt at a set rate for about three years but after the allotted period of time the loan must be paid in full. If you are not eligible for this program the payments on the loan(s) will have to be made immediately or additional fees may be charged. Many people assume that there is only one loan to pay back and this is not always the case. In some provinces loans are issued separately by the federal and provincial or territorial governments. This means that there may be more than one loan to pay back and each lender will need to be contacted to arrange payment. It is your responsibility to contact all loan providers to set up a repayment schedule and if you fail to do so within the allotted period of time they may start taking payments out of the same bank account that the money was deposited in. If there is no money in the account and the payments default it will affect your credit rating for years to come.

By keeping a budget and reducing expenses while in school you will reduce your reliance on student loans and save yourself interest fees. Being mindful of your duties to pay back the loans will ensure that you graduate in a better financial position and more able to start your new career.