Repaying Student Loans in Canada: What to Actually Expect

How repayment actually kicks in

Your loan doesn't come due the day you graduate. There's a six-month non-repayment period built into the Canada Student Loans Program (and most provincial programs) that starts once you're no longer enrolled full-time. During those six months you don't owe a payment, and the federal portion doesn't accrue interest either.

About a month or two before that grace period ends, you'll get a consolidation package — usually from the National Student Loans Service Centre (NSLSC) if you have a federal loan, or from your provincial student aid office if it runs its own program (Quebec, for example, administers its loans separately through Aide financière aux études rather than through NSLSC). This is where your federal and provincial loans typically get bundled into one monthly payment with one interest rate structure.

• Confirm your loan type and servicer as soon as you graduate — federal and provincial loans can have different rules and different offices to deal with.
• Set up your NSLSC (or provincial) online account early; this is where you'll see your real balance, interest terms, and payment options.

Interest: what's free and what isn't

Since April 1, 2023, the federal government permanently eliminated interest on the federal portion of Canada Student Loans (Canada Apprentice Loans too). That's a stable, well-documented policy change, not a temporary freeze — but always confirm current terms with the NSLSC or CRA, since program details can be updated.

Provincial loans are a different story. Some provinces have matched Ottawa and gone interest-free on their portion; others still charge interest, and the rate structure (fixed vs. floating, tied to prime) varies by province and can change. Don't assume your whole loan is interest-free just because the federal part is — check your provincial loan terms specifically.

If you do pay interest on a student loan, you may be eligible to claim it through the federal student loan interest tax credit when you file your return. This only applies to interest you actually paid on an eligible government student loan (not a line of credit you used to cover school costs), so keep your statements.

If you can't afford the payments

Canada's Repayment Assistance Plan (RAP) is the safety valve most borrowers don't know about until they need it. If your income is low relative to your loan balance and family size, RAP can reduce your required payment — sometimes to zero — and the government covers the interest that would otherwise accrue on the federal portion during that period.

You have to apply for RAP; it's not automatic, and you typically need to reapply roughly every six months as your income and situation are reassessed. The exact income thresholds and formulas are updated periodically, so check the current numbers directly with the NSLSC rather than relying on a figure from a friend or an old article.

This matters because the alternative — missing payments without applying for help — leads to default, which damages your credit and can trigger collections or tax refund garnishment. If money is tight, RAP is almost always a better move than silence.

Paying it down with a plan

Once you know your interest situation, decide where the loan fits among your other financial priorities. If your federal loan is interest-free and your provincial portion has a low rate, there's a real argument for making only minimum payments and directing extra cash toward higher-interest debt (credit cards, an auto loan) or toward a registered account like a TFSA or RRSP where contribution room doesn't come back once missed.

• List every loan by interest rate, not by balance size — the interest-bearing portions are where extra payments actually save you money.
• Automate at least the minimum payment so you never accidentally slide into default while juggling other bills.
• If you get a windfall (tax refund, bonus), put it against the highest-interest tranche first rather than splitting it evenly.

There's no prepayment penalty on Canada Student Loans, so extra payments always reduce your balance faster with no downside — the only question is whether that's the best use of the dollar compared to other goals like an FHSA for a first home or an emergency fund.

Frequently asked