COVID-19 and student loans: What are your options?
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The ongoing COVID-19 pandemic is revealing that many Canadians are dealing with unusual financial circumstances for the first time in their lives. This statement is especially true for students or graduates with monthly student loan payments.
For Canadians with student loans, a recent initiative announced by the National Student Loan Service Centre (NSLSC) details a six-month freeze on student loan interest and monthly payment in response to COVID-19. It provides financial relief for students and graduates for approximately six months.
You can learn more about COVID-19 and your student loans or student lines of credit in this article. You can also view a few options for using the time in between effectively.
Check out the Ratehub.ca guide to COVID-19 – Personal finance during COVID-19
- Students and graduates with national student loans are not required to make monthly payments until September 30, 2020, with no interest accruing for approximately six months.
- There is no application process required; any student or graduate with an outstanding loan is already considered.
- The NSLSC policy extends itself to students and graduates with provincial loans in Newfoundland, New Brunswick, Ontario, Saskatchewan, or British Colombia.
- Students or graduates with provincial loans in Prince Edward Island, Nova Scotia, Alberta, or Manitoba offer different policies, though these individual policies mirror the ones set by the NSLSC.
- Students and graduates with loans in Quebec also have six months to repay their loans, interest-free.
- Students or graduates with personal lines of credit must contact the financial institution issuing the loan for more information.
Read our blog: The best student bank accounts in Canada
COVID-19 and student loans: national and provincial
The situation involving student loans is quite different than other financial situations that many Canadians experiencing.
Whether you’ve graduated from post-secondary or are currently enrolled as a student, or, have a provincial or national student loan, you can find brief details concerning COVID-19 and your loans below.
The National Student Loans Service Centre (NSLSC) recently detailed the policy concerning loan repayment for all 10 provinces.
National student loans
- The National Student Loans are offering a temporary payment and interest freeze for six months until September 30th, 2020.
- Students or graduates with provincial loans in Newfoundland, New Brunswick, Ontario, Saskatchewan, or British Colombia need not verify or apply for their repayment assistance. The NSLSC policy extends to these provinces. Students and graduates are not required to pay anything until September 30, 2020.
Provincial student loans
- Students or graduates in Prince Edward Island, Nova Scotia, Alberta, or Manitoba are subject to different policies, depending on the province.
- Prince Edward Island: Student loans for post-secondary students or graduates in PEI are not required to pay their student loans, nor will they accrue interest until September 30, 2020.
- Nova Scotia: Student loans for post-secondary students or graduates in Nova Scotia will have their interest paused until September 30, 2020.
- Alberta: Students or graduates in Alberta with student loans in Alberta can utilize an additional six months with no interest, starting March 30, 2020, until September 30, 2020.
- Manitoba: Students in Manitoba with a provincial loan are not currently being charged interest, though no end date is currently disclosed on their website.
- Quebec: Students and graduates with an education loan from the province of Quebec are not required to pay the loan back for six months, interest-free.
Read our blog: The best high-interest savings accounts in Canada
COVID-19 and student lines of credit
- While the NSLSC has initiated a plan to assist Canadian students, student lines of credit work differently.
- If you have a personal student line of credit with a bank or other financial institution, cases for repayment during the COVID-19 pandemic vary depending on the financial institution.
- Students that have a personal student line of credit should contact their financial institution immediately to seek more information.
- This is possible through online banking or financial institution that the student has a loan with or via telephone. However, financial institutions are experiencing a higher volume of calls and subsequential wait-times.
- It’s best to submit an online application before calling via telephone.
- Several banks offer online claims to ease the influx of customers calling in to sort out their personal financial inquires.
What are your options?
There are two approaches to paying your student loans over the next six months.
- If you’re currently earning income, EI, or the Canada Emergency Response Benefit (CERB) during the COVID-19 pandemic, you can keep paying your student loans without interest for the next six months or pause your payments for the next six months.
- If you decide to pause your payments for the time being, it might be beneficial to place your funds in a high-interest savings account for the time being. Interest in a high-interest savings account is higher but taxable.
- You can also use a Tax-Free Savings Account (TFSA) to earn interest. Interest rates tend to be lower in a TFSA, but are tax-free.
- Both accounts offer penalty-free withdrawals, but come with their respective conditions.
- Earning interest on your deposits in the meantime could see you earning more money through interest until you’re ready to make payments again.
The bottom line
If money is stressing you out during these times of uncertainty, rest assured that various programs are in place to help Canadians through difficult times.
Understanding how you can maximize the benefits of these plans is a sound method to scope out your spending and saving goals over the next few months. There are several resources listed below to help you along the way.