How Do Student Loans Work in Canada?

This article is part of our Finance Hub

Whether you’ve just finished high school, or are considering going back to school, applying for college is a huge step for both your career and life. As any recent high school graduate knows, it can be both an important and stressful process. Aside from choosing a major, campus, and extracurricular activities, you’re going to have to figure out how you are going to pay for it all.

With the costs of attending university averaging more than $6,600 per year, chances are that you’ll be looking to finance at least part of your tuition costs (if not all). But where do you apply for financial assistance? How do student loans even work in Canada?

Unfortunately, the answer to this isn’t always simple. Student loans in Canada have a unique structure and set of requirements, and it’s important to know exactly what you are getting into before you start applying to universities. See below for an overview of how student loans work in Canada, including the difference between loans that come from the government and loans that come from your province/territory.

Federal Student Loans In Canada

There are two ways to fund your university studies through the Canadian government: taking out a loan or applying for a grant.

Your first option is to take out a loan with the Canada Student Loans Program, which enables the Canadian government to provide funding for full-time and part-time students. How much funding you actually get is based on a percentage of your total education costs vs. how much you can reasonably be expected to contribute from your own finances. Your total education costs are largely going to be determined by your university of choice, total course load, and whether you plan to study full-time or part-time.

Full-time students can get up to 60 percent of their education funded with a federal student loan, whereas part-time students can receive up to $10,000. In order to be categorized as a full-time student, you have to have at least 60 percent of a full course load. For part-time students, you can clock in anywhere between 20–59 percent (though there are some exceptions in both full- and part-time requirements for students with permanent disabilities).

There are some additional requirements that you’ll have to meet, too, like:

• Being a Canadian citizen, permanent resident, or designated protected person (as determined by the Immigration and Refugee Board).
• Living in a province or territory that is enrolled in the Canada Student Loans Program.
• Maintaining a satisfactory academic standard in order to continue receiving financial assistance.

You’ll also be required to pass a credit check if you are applying for the first time at 22 years old (or older)—so if you fit into this category, you’re going to want to make sure that your credit score and lending history is in top shape before applying. All loans from the Canada Student Loans Program are disbursed by the National Student Loans Service Centre (NSLSC).

What happens if your loan amount isn’t enough? Let’s say that you’ve been approved for a full 60 percent of your university cost as a full-time student and don’t want to pay for the remaining 40 percent (or you aren’t financially able to do so). Your second option is to apply for a Canada Student Grant—and these grants are a great deal, since you will not have to pay these funds back (unlike the Canada Student Loans Program).

Eligibility is based on financial need, and there are seven categories of grants that you can apply to:

• Low-Income Families
• Middle-Income Families
• Persons with Dependants
• Part-Time Studies
• Part-Time Studies with Dependants
• Persons with Permanent Disabilities
• Service and Equipment for Persons with Permanent Disabilities

There’s a lot of fluctuation with Canada Student Grants. Each type of grant has its own requirements and the amount of funding that you can receive from each will differ, too (including whether you receive that money on a per-week or per-semester basis).

And here’s a bit of good news: if you are applying for financial assistance through your province, territory of residence, your application will automatically be considered for a grant, which gives you one less form to fill out (with any luck, you’ll also have a little less of a headache while applying for universities).

Provincial and Territory Student Loans in Canada

Let’s say that you aren’t eligible for grants, and you’ve taken out as much as you can through the Canadian government. If lack of financial funding is holding you back, you still have the option to finance your post-secondary education through provincial and territory student loans in Canada.

Whether you’ll be able to get both federal financial aid and provincial/territorial aid is the real question. To get maximum financial aid, your territory or province will have to participate in the Canada Student Loans program—and not all of them do. Here’s a quick overview of what you can expect from provincial and territory student loans in Canada:

• Ontario, British Columbia, Saskatchewan, New Brunswick, Newfoundland and Labrador—The provincial government works hand-in-hand with the Government of Canada to provide integrated student loans and grants.
  
• Alberta, Manitoba, Nova Scotia, Prince Edward Island—Provincial student aid is available, and so are Canada Student Loans and Grants.
  
• Nunavut, Northwest Territories, Quebec—Each government offers their own student aid program, meaning that you cannot take out a Canada Student Loan or Grant.
  
• Yukon—Territorial student loans are not available, but they do offer territory grants and participate in Canada Student Loans and Grants.
  

The process of applying to (and being eligible for) a territory or province student loan differs from one to the next, so it pays to do a little bit of research up front. And depending on where you are applying, some may even be able to offer additional financing through scholarships, bursaries, or even apprenticeship funding.

Private Student Loans in Canada

Of course, if all else fails, you can always choose to apply for a private student loan to help fill the gap between what the Canadian government can give you and what your province or territory can offer. It’s certainly not the cheapest route, as you’re likely to encounter high interest rates (or even be required to pay while you are studying) but a personal loan can be a valuable option nonetheless.

If you do decide to go this route, the best place to start is with a bank or credit union that you have an existing relationship with. They may be able to offer you a special rate or loan terms that apply only to members. Don’t be afraid to shop around at other financial institutions, either. Even if you’ve never taken out a loan from them before, it pays to take a competitive look and ensure you are getting the best deal (especially on a loan you’ll be paying off long term).

Keep in mind that a private lender will almost certainly require more financial information, regardless of your age. They’ll look at factors such as your credit score, income, and borrowing history to determine whether you are eligible—so you’ll definitely want to have a good picture of where your financial health stands before you send in that application. And if your credit history isn’t exactly up to snuff, they may require that you get a family member or close relative to act as a co-signer.

Getting everything in order for university is hard work, and there are tons of decisions you will have to make! Before you start stressing over your class schedule, living arrangements or meal plans, make sure you understand how that tuition bill is paid. No matter what type of lender you choose, student loans in Canada are definitely a long-term commitment. Make sure you are making smart financial decisions that set you up for success—both throughout your university years and beyond.