With all the costs of post-secondary education, it can become very difficult to find the money to pay for it. Luckily, with student loans, students can more easily pay for university/college. There are two forms of student loans: government loans and private loans (i.e. personal loans and student lines of credit). Depending on eligibility, students have the option to receive either. So, how do you choose which loan is best for you? Here are a few factors that can help you differentiate and choose between the two:
|Interest rate||Fixed interest rate and often lower than private loans.||Variable interest rate that can substantially increase your debt if rates increase.|
|Loan repayment||Repayment starts six months after graduation. Repayment assistance programs are made available for students who may need it.||Monthly interest payments while in school and regular repayment (principal and interest) starts a few months after graduation. Repayment assistance is dependent on the institution.|
|Reapplying for loans||Must reapply every year and takes approximately four to six weeks for applications to be assessed. Usually, half the loan is given during the first term and the other half is given during the second.||No need to reapply each year. Typically, only Proof of Enrollment is necessary and funds will be available shortly afterwards.|
|Parental involvement||Your parents’ incomes will affect the amount of your loan. The higher their income, the less financial aid you receive and vice versa.||Usually need a parent to be a cosigner/supporting borrower.|
|Extra Perks||You will be automatically assessed for Canada Student Grants when you apply for a Canada Student Loan. Also, government loans differ province to province and territory to territory. Some offer both federal and provincial/territorial loans, while others only offer one or the other. More information and applications to each province/territory’s respective financial aid websites can be found below.||Depending on the institution, a lot of aid can be made available to students; much more than that offered by government loans. Here are some options available for Canadian students:|
Here are some options for American students:
With all the perks of a government loan, why doesn’t everyone just apply for them as opposed to private loans? Simply, it is because not everyone qualifies for these loans or receives enough from them. Government loans are given on a financial need basis and have a limit. Use the Student Financial Assistance Estimator to see how much money you can receive from the Canada Student Loans Program. In the end, those who do not qualify and those who do not receive enough sign up for private loans.
With that being said, student loans are a great resource for your education, but try not to rely too heavily on them. Depending on how much you borrowed and the interest rate, it can take several years to completely pay off the debt. This can make it very difficult for you to achieve other financial goals. Remember to be smart with your money and good luck!