Let me start by apologizing. It’s my generation that ruined the Canadian student loan program back in the late ‘80’s and early 90’s. At that time, student loans were guaranteed by the government. Banks had no worries about default, as the government would pay it. For the student it was great, it didn’t show up on credit ratings, so why worry about repayment? Not surprisingly, an awful lot of student loans went to the land of unpaid debts.
In 1995, the Canada Student Loans Program dramatically changed things. No longer could the banks look to the government to fully pay a defaulted loan, so student loans now meant potential losses to the bank. I don’t have to tell you how banks feel about losing money.
Good news for the already stressed out student – it didn’t last too long. Since August 1, 2000, the Government of Canada has financed all new student loans. (Financial institutions issue revolving credit lines and credit cards for students.) Whether your student loans started before or after this change, there are programs available, both at federal and provincial/territory level, that can help the cash strapped former student from drowning in debt.
The popular answer is debt consolidation. Combine all loans, with only one payment to deal with, nice and simple. However, even that one payment can be impossible if you don’t have a full time job in your chosen field. So, today, I’ll fill you in on some of the help you can get through National Student Loans Service Centre.
Interest Relief: This is a biggie. Introduced in 1983, interest relief means you don’t have to make payments for up to 30 months. As an added bonus, interest won’t accrue while you’re on this program.
Revision of Terms: This is just what it sounds like. Typical student loans have 10-year repayment terms. You can make your amortization longer, to lower payments, or if you have extra cash coming in, make the amortization shorter, thereby increasing your payment and paying off your student loan quicker. You can customize the terms for your own situation.
Debt Reduction in Repayment: A lot happens in the years following post secondary education. There’s a good chance you’ll be married with children before you ever get your Canada Student Loan paid off. If you find it’s too crippling financially, and you’ve used up all your interest relief, you can apply to have the principle of your loan reduced. The reduction is based on your family income (if you have one), and you can have up to three reductions over time, to a maximum of $26 000. If you’re in that situation now, and your loan was issued by a bank (before August 2000) contact the bank to apply for DRR.
While these are the some of the options for federal student loans, you’ll find similar assistance with provincial/territorial student loans. So if you didn’t walk out of your graduation and straight into a six-figure salary, take heart, you won’t really be passing your student loans on to your children.