Student Loans: Covering the cost of a higher education

Though it’s a solid investment, a higher education does not come cheap in this country. According to Employment and Social Development Canada, Canadian post-secondary students (or their parents) paid an average of $16,600 for schooling in 2014–15. Over four years, that’s a price tag of nearly $70,000. For many Canadians, that reality means they will have to figure out how to apply for a student loan. But worry not—with a little help, it’s not as intimidating as it might appear.

Know Your Loans

The first thing you’ll need to know is what sources of funding are out there. The most common type is the government student loan. Through the Canada Student Loans Program (CSLP), the federal government covers up to 60 percent of a student’s financial need. The rest is provided by the provincial and territorial governments. How these governments work with the feds varies across the country. Here in Alberta, the Ministry of Advanced Education offers provincial assistance alongside federal loans. This streamlined process means that Alberta students need only apply once—to Student Aid Alberta—to get both provincial and federal loans.

Many private financial institutions also offer funds in the form of a student line of credit (LOC). These are flexible, allowing students to borrow money as they need it and to repay it at any time. However, the student will probably need a co-signer. And unlike with government loans, LOC interest rates can fluctuate and students may have to make monthly interest payments while they are in school. Another thing to consider is that you get tax credits for paying interest on a government loan, but not on an LOC. Even so, LOCs can be a good source of additional funding, especially for students in professional programs. Check with your bank to see what it can offer.

Are You Eligible?

So let’s say you’ve decided to apply for a government loan, as most people do. What are the eligibility criteria you’ll have to meet? Broadly speaking, you’ll have to be a Canadian citizen, permanent resident or have protected person status. You’ll also have to be a resident of the province or territory where you are applying. Furthermore, the school and program you wish to attend must be designated, and you’ll need to be registered in a minimum number of courses. You will need to demonstrate your financial need, as well. Finally, there are annual and lifetime loan limits that can affect your eligibility.

Keep in mind, however, that there are many fine points and exemptions to each of these criteria. For example, Student Aid Alberta and the CSLP each determine financial need slightly differently. And given that we’re talking about bureaucracies here, the rules can and do change from one year to the next. Make sure to check the appropriate agencies and their websites for the most accurate info.

The Application

Now for the fun part—the part where you get all the money. As mentioned, you apply for both federal and provincial loans through Student Aid Alberta. This is done online (except in some rare situations). If you applied to school online through ApplyAlberta, then you’ll be using the same account. Otherwise, you’ll be prompted to create a new account. If this is your first time applying, be sure to do so at least two months before the start of school, as there will be further steps before your money will be disbursed.

After signing in to your account, you will start an application for the upcoming school year by filling in information about yourself, your program of study and your finances. It’s fast and easy, but here’s a pro-tip anyway: before starting your application, have a few things at hand. You’ll be asked for your Social Insurance Number, your Alberta Student Number and the total income from line 150 of your last tax return. You’ll be prompted to provide contact details for an emergency contact, as well. It’s also a good idea to have a breakdown of expenses from your school for the upcoming year. That’s because you’ll be asked to request separate amounts for tuition, fees, books and supplies, and computer costs. You’ll save yourself some hassle if you already know how much you need.

Submit your application, and your eligibility amount will be automatically calculated. To finish, enter how much of this amount you wish to request. If you want to be awarded the full amount, just leave the space blank.

Getting Your Money

If this is your first application in Alberta
(or your first in several years), a student award letter and the Master Student Financial Assistance Agreements (MSFAAs) will be sent to you. There will be two MSFAAs—one for your Alberta loan and one for your Canada loan. These one-time legal documents set out the terms and conditions for your loans. You must confirm your personal details and provide banking information before signing the agreements and returning them, along with copies of your ID, through Canada Post. After that, you mostly sit back and wait, and your funds will be disbursed to you at the start of each semester you plan to attend.

Down the Road

You can keep your loans interest-free for the duration of your studies either by receiving more loans or by notifying Student Aid Alberta and the National Student Loans Service Centre that you are still in school. Once your studies are finished, you will have a six-month grace period before repayment begins. During this time, interest will
accumulate on your federal loans, but not
on your provincial ones.

When your grace period ends, you will be asked to agree on a repayment schedule, including the method of payment, the size and frequency of payments and other similar details. Stick with your payments, and you will be debt-free again faster than you expect—and all the wiser for it, too. t8n

How We Compare

Currency services provider FairFX compiled this list of the most expensive places for a post-secondary education in 2016. The total includes average annual tuition and living cost, in Canadian dollars.

U.S.: $77,200

Australia: $52,800

New Zealand: $48,800

Canada: $40,800

Hong Kong: $32,000

Tips for Repaying Your Loan

Here are some helpful tips for paying off your student loans, courtesy of Student Aid Alberta.

1. Make your payments on time.
2. Increase your payment amount.
3. Make payments every two weeks instead of every month.
4. Make extra payments whenever possible.