Whatever Shannon’s Whatever Guide to: Repaying Your Student Loans!

OK, this is seriously the most boring blog post in the whole wide world, but I figured this would be the easiest way to share this.  I took notes from the talk on how to repay your student loans, and it was a really useful talk (well, mainly just to sign your consolidated agreement, but whatever).  Anyway, this is here, and keep in mind they are notes taken by an easily distracted moron with a hobby of getting hit in the head.  I promise I’ll update with a funny post later.  Oh, I have had shenanigans.

Anyway, here we go.

Whatever Shannon’s Whatever Guide to: Repaying Your Student Loans!

Six month grace period after graduation, so May graduation means:

Nov 1st: your loan enters repayment status

Nov 30th: your first payment is due

You can pay during your grace period.  This decreases the amount of interest you accrue.

Consolidation Agreement (CA) – extremely important!!!

Student loans office must have your current mailing address, so you will receive your CA.

The CA lets you choose all the options about paying your loan.

You have to pay the interest accrued during your six-month grace period.  You can choose to pay it all at once right after the grace period, or add it into the whole loan.  If you pay the interest right away, it’s tax-deductible.  If you add it to the loan, you’re charged interest on that amount, as well.  If you don’t choose, they add it to the loan.

You choose how you pay the loan.  They can take it directly out of your bank, pay online, by phone, cheque, whatever.  Not via credit card.  You can change your mind.  If you don’t choose a payment option, they just take the money directly out of your bank account.  They can do this because they have all the info from putting the money into your bank account.

You can choose a floating or a fixed interest rate (more on this later).  If you don’t choose, you get floating.

Finally, the CA lets you choose how much you pay per month.  If you don’t choose, I think it’s 9.5 years.  More on this later, too.

You sign the CA and mail it back into Student Loans.  Right now, they only receive about 30% of the CAs they mail out.  The CA is super-important, because if you don’t make these choices, Student Loans is forced to make the choices for you.  The other reason it’s really, really important is that if you get in trouble and need debt relief, and you call in to Student Loans and ask for help, they need a signed CA to change any of your repayment options.  If you have a signed CA on file, boom, they can change repayment stuff right there on the phone.  If you don’t, they need to mail it to you, you need to sign it, mail it back, then they can get to work helping out. So sign your damn CAs!

OK, floating vs. fixed interest rates.  I’m completely stupid about finance, but here goes.

The prime rate is currently low, because the economy is in a recovery period.  A floating interest rate (for Nova Scotia) is around 2.5% above whatever the current prime rate is.  A fixed rate is 5% above whatever the prime rate was at the time you chose it.

The important thing is: you can go from a floating rate to a fixed rate, but you can’t switch back to floating once you go to a fixed rate.  99% of student loan borrowers have a floating rate.

You have a maximum of 14.5 years to pay back your student loans.  Most borrowers take 9.5 years, but most borrowers haven’t read their CAs and don’t know they can pay faster.

The advantage of the shorter repayment term is: you pay less interest, you pay it off sooner, but you do have larger monthly payments.  You have to decide what is best for you.

canlearn.ca      There is a student loan calculator that lets you see how much you would pay per month, how long it would take, and how much interest you would pay.  It assumes a flat interest rate.

If you change your mind/lose your job/whatever/can’t afford the five year repayment track anymore, you can change it easily, just call Student Loans.  You can change it as much as you like.

There’s no penalty for making extra payments.

If you even suspect you’re going to have trouble making payments this month, let Student Loans know.  They’ll help.

Keep all the documents they send to you by mail.

Check your balance online regularly.

Make sure they always have your current contact info.

If you’re having repayment problems:

The #1 thing is the Repayment Assistance Plan.

You pay no more than what is considered affordable to you.  Say you lose your job, or someone gets sick, or whatever, you don’t have enough money.  You tell them what’s happened in your life, and if they approve it they calculate a new amount for you to pay for the next six months.

From a $300 payment, maybe now you pay $100, or $30, or even $0.  The government pays the interest.

You can reapply six months later, and six months later again.  Indefinitely.  You can pay off your student loans this way.

If you can’t get approved for Repayment Assistance, there are more options.

Revision of Terms extends the period you have to repay the loans.

You could also make interest-only payments for six months.

Programs that reduce student loans?  Look around on your province’s Student Assistance website.  This is the best place to start.

Consolidate with a bank?  It cuts the interest rate, but the interest is no longer tax deductible.  You can no longer change the terms of the loan so easily.

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7 Comments

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7 responses to “Whatever Shannon’s Whatever Guide to: Repaying Your Student Loans!

  1. Craig

    Shannon, this is very informative; thank you. Does this apply to federal or provincial loans?

    • In Nova Scotia the federal and provincial loans are consolidated, so I’m pretty sure this information applies to both. The speaker was from a company called Resolve, which administrates both the federal and most of the provinces’ student loans; what I took away was that this was for both student loans. The attendees of the talk were from all over Canada, and the speaker was giving us all basically the same information (some differences in interest rates).

      • Craig Olsvik

        Hmmm, I thought that would be the case, but I always get mail about my two loans separately. Perhaps once graduation has occurred, then they consolidate them. Do they send out the consolidation agreement automatically in May?

      • I’m not sure about the other stuff, but I can tell you that the consolidation agreement is sent out automatically. I didn’t write down when, but it would be soon after you finish school.

        I’m looking at the literature they gave us, and it looks like we could get two consolidation agreements (“depending on your situation”). The speaker pretty specifically only ever talked about one, though. It probably doesn’t make a big difference in the long term, if you sign one or two, I would just prefer it if my information is correct.

    • Maybe to be safe I’ll say this just applies to federal loans. The speaker was bringing the provincial stuff into it a lot, but the consolidated agreement stuff was primarily federal.

  2. Katherine

    You’ll continue to have both a federal and NS Student Loan. Consolidation refers to consolidating all of your loans for different years/programs into one, so you only have one payment to each level of government, not half a dozen.

    Selling your loans to a bank is very hard (because they know you can go bankrupt on debts to them, but you can’t to the government) and in the case of NS loans, a really bad idea. The floating rate on NS loans is only prime + 0.5%, which is virtually unbeatable. The federal loans are as expensive as bank loans unfortunately.

    Nova Scotia has good programs to reduce your principle balance after graduation if you meet certain conditions. The federal government has basically nothing unless you go into default.

    I have my loans on the 9.5 year repayment option, but I make significant extra payments every month. I feel this gives me enough budget flexibility without slowing down my overall repayment.

    • Katherine, that is awesome. Thank you! No matter how many notes I take, I still never manage to take enough/understand anything, ever. I pretty much constantly think you’re a wizard, so you know.

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