As the school year comes to a close, you’ll want to start thinking about handling your student loans. OSAP loan repayment is handled by the National Student Loans Service Centre (NSLSC).
Near the end of your studies, you’ll receive emails and a package from the NSLSC about repayment and your options. So here’s everything students need to know.
What is the six month non-repayment period?
For six months after finishing school, you do not have to make payments towards your loan. During the six month non-repayment period, there is no interest on the federal portion of loan but there is interest on the Ontario portion.
It is also known as the six month grace period. This gives you time to make preparations and work out future monthly payments.
When do I start to repay my loan?
The Government of Canada has a guide to get started. It is only after the six month non-repayment period that payments become mandatory and accumulate interest.
However, students can make additional payments of any amount during their studies, if they choose.
Cut back on take-out and have a little extra money this month? Consider putting it towards your loan’ every little bit helps!
If the loan is paid off before the repayment period begins, you will not have to pay any interest.
What is interest?
Interest is the money paid at a particular rate for using a loan. As stated, interest will accumulate on the Ontario portion of your OSAP loan during the six month non-repayment period.
However, currently between April 1, 2021 and March 31, 2023, Canada will not charge interest on the federal portion of your OSAP loan.
So what will the interest be after March 31, 2023?
Currently there are two interest rate options:
- a floating interest rate equal to the prime rate, or
- a fixed interest rate of the prime rate + 2%
A prime rate is the lowest amount of interest at which money can be borrowed. Canada considers the prime rates of the 5 largest banks, eliminates the highest and lowest, and then averages the three remaining to get the prime rate. Therefore the prime rate will change over time.
Floating means that the interest rate will change to be equal to the current prime rate, while a fixed rate is unchanging.
Not as complicated as it seems! And, part of the work is done for you. By default, your student loans have a floating interest rate. Our best advice is to consult with a financial advisor if you want to consider making a permanent switch to a fixed rate.
What happens during repayment?
During the six month non-repayment period, NSLSC will provide students with various options for repayment. This means selecting an interest rate option, payment frequency and when payments are made.
So, what does repayment look like? Is it some grand event with briefcases of money and godfather vibes?
Not quite! If you set up pre-authorized payments then typically once a month, a payment will be withdrawn from your bank account on file. Like a monthly subscription to the streaming service of education!
If you do not have pre-authorized payments set up then payments can be made through arrangements like online banking (similar to how you probably pay your tuition).
What is the repayment assistance plan?
Sometimes there are unexpected circumstances and OSAP loans can take a toll. In these situations, there are options to help.
If you have difficulty repaying your loans you can apply to a repayment assistance plan. There is the Repayment Assistance Plan (RAP) and the Repayment Assistance Plan for Borrowers with a Permanent Disability (RAP-PD).
You may be eligible for lowered payments and you may not be required to make payments that exceed 20% of your income. You can apply for RAP or RAP-PD at any time during the repayment period. Additionally, if accepted you must re-apply every 6 months.
You’ve got this! Keep researching about your OSAP loan and repayment! Log into the NSLSC site and explore how it works in advance to when you’ll have to start making payments.
Once you receive your NSLSC package, take the time to go through your loan information and call them if you have questions.
Loans might seem scary but you’ve already taken the first step in conquering the unknown!
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