Before you borrow: Navigating back-to-school financial aid in Canada

Each year, more than half a million Canadians take out student loans to cover tuition, books and living costs. But many students are unprepared for how these loans work and how to manage repayment.

Understanding your options now can help you graduate with a much stronger financial foundation.

Student loans in Canada

In Canada, you generally have two paths for borrowing: government programs or private financial institutions. It's common for students to rely on two or more sources to pay for school, including government loans, scholarships, family support, credit cards and student lines of credit.

The government route: Canada Student Financial Assistance Program

With the Canada Student Financial Assistance Program (CSFA Program), the federal government partners with provinces and territories to provide two types of aid: 

• Loans: Borrowed money that you must repay, typically starting six months after you finish your studies 
• Grants: Money you don't have to repay that’s based on financial need

There’s zero interest on the federal portion of Canada Student Loans; however, interest may apply to provincial or territorial portions. Some regions even offer loan forgiveness programs for eligible students.

Eligibility for these programs varies by province or territory of residence. It’s important to check with your school’s financial aid office first.

The private route: banks and financial institutions

If you reach the limit or don’t qualify for government funding, you may need to turn to a bank. Interest rates on bank loans are typically higher than government loans. 

Unlike the government options, private loans often require repayment almost immediately (usually on a 30-day cycle). Unfortunately, private loans generally do not offer interest-free periods or loan forgiveness.

Other ways to fund your studies

Loans aren’t your only option. With non-repayable funds, you don’t have to repay money you receive. These include: 

• Bursaries, which are awarded based on demonstrated financial need. You can ask your school’s financial aid office for a list.
• Grants, which are often based on need, although other factors, such as academic merit, may also be considered. They can also be tied to specific groups (e.g., mature students, students with disabilities or those studying in specific sectors).
• Scholarships, which are awarded to students based on academic merit, such as having a certain grade point average (GPA). Some scholarships are reserved for specific groups, such as women in STEM or students from a certain region. 
• Registered Education Savings Plans (RESPs), which require advance planning but can help ensure you have money for post-secondary school while also offering tax benefits. Any adult can open an RESP to save money for a child’s post-secondary education, and in some cases get additional government funds through the Canada Learning Bond (CLB) and the Canada Education Savings Grant (CESG). 

If you receive repayable funds, you’ll need to pay back the money with interest. These options include: 

• Student lines of credit, which allow you to borrow what you need (up to a limit) and pay interest only on the amount you actually use. A line of credit can come in handy as a backup if you have access to other funds, such as from a job.
• Credit cards, which are convenient and widely accepted, but due to their extremely high interest rates, should be used only as a last resort.  
• Between tuition and books, housing and living expenses, costs add up fast. Luckily, there are numerous options available to Canadian students and some are even free. A little planning can go a long way, so consider this your first homework assignment.

This article was written by Keph Senett from MoneySense and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.