The Canada Student Loans Program (CSLP)

Canada Student Loans Program: How it Works and Who is Eligible

Like many countries in the Western world, Canada has several programs in place which are designed to encourage low-income students, and even those who are middle earners, to go to a university and complete a degree program. These programs include both student loan programs and a series of helpful grants which do not need to be paid back. Student loans do not accrue interest while the student is participating in their program of study, and payments toward the balance of these loans do not need to be made until after the student has graduated with a degree or left their program of study for a prolonged period of time without completion. With help from Canadian provinces, the application process for Canadian student loans and tuition grant programs is easy, straightforward, and recommended for all students who have demonstrable financial need.

Eligibility and Lending Limits for Canadian Student Loans

Like most student loan programs around the world, the Canada Student Loans Program comes with some built-in limits that concern just how long a student is eligible for loans and grants made on behalf of the government itself. For those in a traditional undergraduate program, loans can only be received for a maximum of 340 weeks of study (or roughly 6.5 years). Those students enrolled in professional, doctoral, or master’s degree programs can extend their eligibility for student loan programs to a total of 400 weeks, or just over 7.5 years.

In addition to limits on the length of student loan programs and the limitations in borrowing money from the government, students should be aware of basic eligibility requirements to receive a loan at all. These include being either a citizen or permanent resident of Canada, as well as being a resident of a province or territory which issues loans or grants. Students should be enrolled in a degree program which operates for 12 out of every fifteen weeks (the typical university semester in Canada) and, if they’re a full-time student, they should be taking at least 60 percent of what is considered a full course load for the year. Those students who attend on a part-time basis face a slightly reduced requirement, as they’ll need to be enrolled in between 20 and 59 percent of a full, typical course load. Students applying will need to be able to demonstrate financial need, and those over 22 years of age will be subjected to a credit check in order to further determine their eligibility for the program.

Applying for the CSLP: Application Process is Relatively Easy

There is no single “centralized” way to apply for student loan or grant programs in Canada, as the country’s system is instead setup to run each application through the government agencies of a student’s province or territory. For this reason, Canadian students applying for loans will need to complete a province-specific application either online or in paper, and submit it to the appropriate agency, in order to begin the process of determining their financial need.

Income and tax documents will be required of the student and, in some cases, their parents, in order to prove that they are unable to attend a university without assistance in the form of either loans or grants. It should be noted that a single application is filed when qualified for both the student loan program and any grants that province might bestow upon the student if they demonstrate sufficient qualifications and financial need.

Interest and Repayment on Student Loans

Interest on student loans is paid by the government on behalf of the student while they’re enrolled in a degree program. After they have graduated, they will need to begin paying back the balance of their student loans in addition to the interest which will begin to accrue. At the time of loan disbursement, students can pick between either a fixed rate or a floating interest rate, and these two rates vary in terms of how they treat the current prime interest rate. Those students who elect to take out student loans based on a fixed rate will agree to a consistent interest rate for the lifetime of the loan which equates to the current prime rate plus 5 percent. Those students who opt for a floating rate will notice that their rate fluctuates on a month-to-month basis as the prime rate changes; this rate will be the current prime rate plus a smaller 2.5 percent additional. These rates apply only to loans issued after 1995; those issued in the period before 1995 are subject to different terms of repayment.

Consequences for Nonpayment of a Student Loan

Like most every traditional and student loan around the world, a loan will report its payment history on a consumer’s credit file. When payments are missed, that information will negatively affect the borrower’s credit rating for up to seven years after the delinquency. Those student loans which go without payment for several months will enter what is known as “default,” and the government will treat them as a collection rather than a student loan. This means that a student forfeits their right to things like interest deferment and principal deferment, and instead is on the hook for the entire balance of the loan.

It should also be noted that Canadian student loans are very difficult to discharge in bankruptcy; a borrower will need to demonstrate especially tough financial hardship in order to get these loans forgiven. In most cases, they remain on a credit report even after all other debts have been discharged. Nonpayment, therefore, is considered a very serious issue and one which can significantly damage a consumer’s financial future.