On Campus

Why borrow from the government?

Student debt smarts

If you’re like many students, the first place you may turn to borrow is the Canada Student Loans (CSL) program. For full-time students, the program provides 60% of your assessed need, up to $210 per week of study. You can borrow the remaining 40% through provincial or territorial student loans.Government loans can be one of the cheapest ways to borrow. You don’t have to pay back a cent until six months after you graduate. Try to find that a deal like that anywhere else!

But the program has its critics, including those who claim the government is “profiting” unfairly by charging higher interest rates. Compare the interest you pay through CSL to the rate you cam get at a bank today:

Lender Fixed interest rate Floating interest rate
Canada Student Loans About 10% today (prime plus 5%) About 7% today (prime plus 2.5%)
Regular bank loans About 7% (home equity loan) About 8.5% (unsecured line of credit)
About 7% (secured line of credit)

Just remember: with a regular bank loan, you have to start paying it back while you’re still in school. That’s not always easy for starving students. Also, it might be harder to qualify for a loan outside CSL.

You may also find you have fewer options from the bank if you have trouble paying back what you owe. The CSL program has special provisions to help students get out of debt. These include Interest Relief and Debt Reduction in Repayment. Learn more now.

So before you take out a loan for school – from any source – size up your options, read up on interest rates, and get smart about student debt.

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

Content provided by InvestorED.ca, an independent non-profit created by the Ontario Securities Commission to help people make effective use of financial information.

Looking for more?

Get the best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.