The six-month period between finishing school and the first loan payment often passes more quickly than students and recent graduates expect. While obtaining funding for education typically requires considerable effort, whether through student loans, scholarships or other non-repayable sources, the transition to repayment is usually much less structured. As a result, many students and their families find themselves unprepared when the time to begin repayment arrives.
Key Timing Detail Often Overlooked
One of the most important details parents and students often miss is that the six-month repayment grace period begins whenever a student stops studying full time, not just when they graduate. The clock starts ticking the moment a student drops out, switches to part-time studies below the required threshold, takes a medical leave or transitions into a program such as an apprenticeship that falls outside the scope of the loan agreement.
Students who leave a degree program and enroll in a college diploma program a semester later may not realize their repayment clock has already started. Without notifying the National Student Loans Service Centre (NSLSC) of any change in enrolment status, a borrower can find themselves in repayment standing without knowing it. Students should report any status change right away to protect both their loan standing and their credit rating.
What Repayment Actually Looks Like
Repayment starts seven months after leaving school, with a standard term of 10 years. Since April 2023, federal Canada Student Loans no longer accrue interest, making them unsuitable for debt consolidation loans that add interest and shorten amortization.
Whether interest applies on the provincial portion of a student loan depends on the province. Most have eliminated ongoing interest charges and students make one payment each month to repay their integrated federal and provincial student loans. However, interest accrues on Ontario and Saskatchewan student loans. And for those with loans from Alberta, Nova Scotia and P.E.I., payments are made separately from their federal student loan payments.
Monthly Payment Examples
Monthly student loan obligations can escalate quickly once repayment begins, the terms of which are reported to the credit bureaus. For example, a student loan of $25,000 paid back over nine and a half years results in monthly payments of about $220. Yet many students face a much heavier debt load when credit cards or a student line of credit are factored in, pushing total monthly payments to $650 or more. Obligations at that level can make it difficult for students to pursue other goals, especially when their income does not stretch far enough to cover significant amounts of debt.
The Repayment Assistance Plan: A Safety Net Most Grads Do Not Know About
The federal government offers a program called the Repayment Assistance Plan (RAP) that caps monthly payments based on income and family size. If income is low enough and the loan is currently up to date, payments can be reduced to zero. RAP is not based on someone’s credit score and covers the federal portion of a loan. Grads or former students must reapply every six months and any remaining federal balance may be forgiven after 15 years.
