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.