On Nov. 19, 2013, a regional representative from National Student Loans Service Centre (NSLSC) held a presentation at UVic’s Clearihue building about tips on paying student loans back for those who are struggling to repay. During the presentation, the speaker gave useful information about basic student loan repayment.
The information covered basic principles related to loan repayment. Repayment begins when students graduate or cease to be full-time students. No interest is charged while students are still in the school.
Students are also granted a six-month non-repayment period, also known as grace period, after they leave school. During the grace period, the NSLSC intends to allow some opportunity for students to get jobs. For example, if a student graduated in April, their non-repayment period would last until October; however, during the grace period, interest does accrue.
During the six-month non-repayment period after students leave school, the NSLSC sends a Consolidation Agreement, and this agreement gives information about: the amount of loan; the interest rate; repayment term; amount of each loan payment; the first payment date; and the amount of interest in the grace period. In most cases, a student’s loan repayment period is around nine and half years.
Students are responsible for repaying the loan and all accrued capitalized interest and notifying the service provider if they move addresses or any personal information changes.
Students must choose between a floating interest rate and fixed interest rate: 2.5 per cent and five per cent respectively. The total amount of interest will be added to the current prime rate. Current prime rate, according to the speaker, is three per cent. She explained that it is always better to pick the floating rate, since students will be locked up with fixed rate of five per cent for the entire period of repayment. Moreover, she added that there was not much of a fluctuation in terms of floating interest rate. She said that it is beneficial to have an online account at Canlearn.ca, so students may notice how much of repayment is going toward the principle versus interest.
Especially, the speaker put a lot of emphasis on the NSLSC’s Repayment Assistance Plan (RAP). The RAP makes it easier for students to manage, by allowing them to pay back what they can reasonably afford. The RAP has a repayment assistance estimator for students to measure the amount of repayment they need to pay. Basically, under the RAP, students can make affordable payments that would not exceed 20 per cent of their gross family income; the monthly payment could either be reduced or increased. Students should make a good use of the RAP when they have trouble finding employment and suffer financial difficulty.
There are a number of ways that students can pay; through pre-authorized payment plans, telephone banking, Internet banking and monthly cheques. Pre-authorized debit is the easiest way, according to the speaker.
She gave some tips about how to save money while paying back the loan. Students may pay during the grace period, make lump-sum payments whenever they have extra money available, and increase their regular payment amount. For example, if a student saves their coffee money from Starbucks and pays an additional $20 on monthly payments over nine years, the amortization period is not only shortened, but the amount of overall interest that the student pays is also decreased.
One other important tip she gave was to make payments frequently, such as weekly or every two weeks. Students can pay the same amount of money, but divide it up. Mathematically speaking, the repayment period goes down by 12 months and interest goes down by $1 000 on average, compared to when students only pay once a month. It is a huge advantage for students, since they are still paying the same amount of money.
The NSLSC rep explained that the student loan is the only loan product on the market that gives tax credit. A student loan tax credit allows students to deduct the interest that they pay on student loans each year from the tax they would otherwise have to pay. According to the representative, the appropriate calculated document explaining the relationship between tax credit and interest payment arrives every February.
The presentation conveyed strong basic knowledge about how to deal with long-term debt. The UVic Student Ambassadors were behind the presentation. The UVic Student Ambassadors group is 15 years old, and its mission is to help promote school spirit and provide opportunities for current students to develop strong leadership skills and leave a legacy at UVic before they graduate.