What’s it going to cost? The lowdown on your Canada Student Loan

Student debt smarts


 

Let’s say you borrow $30,000 through the Canada Student Loans (CSL) program for your university studies. You plan to pay the loan back over the usual 10-year period. With prime at 4.5%, here is what you would have to pay*:

Interest option Your monthly payment The total you will repay
Fixed interest rate $400.50 (principal and interest) $45,657.54
($30,000 principal + $16,657.54 interest)
Floating interest rate $361.02
(principal and interest)
$41,156.77
($30,000 principal + $11,156.77 interest)

* Results based on the student loan repayment calculator provided by the National Student Loans Service. Assumes interest rates don’t change over 10 years.

Notice you’ll pay close to half of what you originally borrow again in interest. Of course, if you pay the loan back faster, you can save a pile of interest.

Now let’s say you paid the same $30,000 loan back in 5 years instead of 10. With prime at 4.5%, here’s what you would pay instead*:

Interest option Your monthly payment The total you will repay
Fixed interest rate $684.90 (principal and interest) $36,984.82
($30,000 principal + $6,984.82 interest)
Floating interest rate $649.25
(principal and interest)
$35,059.35
($30,000 principal + $5,059.35 interest)

* Results based on the student loan repayment calculator provided by the National Student Loans Service. Assumes interest rates don’t change over 5 years.

Cutting the payback time in half cuts the interest you pay more than 50 percent as well. In this example, you’d save anywhere from about $6,000 to $10,000 in interest. But you’d have to pay a lot more each month – about $300 more – to get those savings. That’s not easy money for a lot of new graduates.

Remember: how fast you pay off your student loans will depend on a number of factors, such as your income after you start to work.

NEXT: The Slippery Slope: How student debt adds up

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