Canadian Student Loans Compared

[crosfan]

If you're a full-time student and you're going to get a loan, know your options to make the best choice for your needs.

How do they work?
A government-sponsored student loan in Ontario is provincially (40 per cent) and federally (60 per cent) funded. A student must demonstrate financial need; a parent's income may be a factor. A line of credit is a revolving loan offered by a financial institution. You must apply to qualify. In some cases, a parent or guardian may have to co-sign the loan. This person will be responsible for the full amount of the loan if you default.

Which is more flexible?
A government loan will offer a fixed loan amount. You will not need to repay your loan (principal an interest) while you are in school. Generally, you can delay payments for six months, or up to 30 months depending on your situation.
A line of credit allows you to borrow the amount you need. In many cases, but certainly not all, you will be required to pay the interest on your loan monthly while you are in school. You will begin repaying the principal plus interest six months to one year after graduation.

What will I pay in interest?
You will be charged interest no matter which option you choose. Government loans charge interest separately.
Provincially, you will be charged the prime interest rate plus 1 per cent. Federally, you will be charged the prime interest rate plus 2.5 per cent. Interest begins to accrue once you graduate.
Each financial institution offers its own interest rates. In many cases, the rate may be lower than those offered through government loans. It's important to note, the interest you pay on a government loan will generate an income tax credit, while loans from a bank do not.

from Toronto Star on August 17, 2013