Margaret Johnson

Credit Solutions

A column by Margaret H. Johnson. As featured on MyTelus.com and Shaw: Finance.

Margaret H. Johnson ACE, RQIC, has over 35 years of financial industry experience in both lending and collecting. She is an Accredited Insolvency Counsellor, Registered by Industry Canada.

 

Debt Management Tools for Student loans E-mail
Pay attention to details 

When it comes to any loan documents be sure to read all the fine print before signing them no matter how long it takes you. Your signature is your promise to pay – do not take this matter lightly - it could affect you for years to come.

Student loans can affect your credit rating

The manner in which you repay most creditors will be recorded on your credit bureau file. If you make your payments on time you will establish a good credit rating – something that should help you in the future to buy a car or even a house. However, if you make your monthly payments late or not at all your credit rating could be damaged and you may find it difficult to obtain certain types of loans in the future.

Repaying Student Loans

You can make payments on your loan at any point. You may also prepay or pay in full at any time with no penalty. If you repay your loan in full while you are a student no interest will be charged. However, if you cannot pay your loan while you are in school your scheduled monthly payments including interest will commence 6 months after school has ended.

Interest Relief

All student loan programs provide a 6-month grace period after you have completed your studies. During this time no payments are required, but all student loans start charging interest – even during the grace period. In some loan programs, the government will pay the interest that is being charged – as long as your loan status is current. In special circumstances you may qualify for interest relief for up to 54 months. Check with your provincial government for more information.

Students can choose a fixed or floating variable rate on their loans –

Floating Rates - Bank of Canada Prime lending rate + 2.5%
Fixed Rates - Bank of Canada Prime Lending rate + 5% - If you fix the rate it will remain at that interest rate for the life of the loan.

Federal Interest Relief

The Government of Canada will pay the interest on student loans on behalf of debtors who are experiencing financial hardship due to inability to find employment or due to temporary disability for a period of up to 30 months.

This program is administered by the bank or the National Student loan Service Centre – Debtors must apply every six months. During this time the debtor will not be required to make payments on the principal amount of the loans.

If the loan is in default the debtor is not eligible for Interest Relief.

Revision of Terms

You can request to have your monthly payments reduced for a short period of time. However, at the end of that period your monthly payments will be increased to ensure your loan is paid off according to the preset schedule.

Average Student Debt Load

The average debt load faced by (4 year) graduating students in 1999 was $25,000 – the approximate monthly payment on that debt is $330 for 120 payments - 10 years!

The longer it takes to repay the loan the higher the cost of interest. In most cases the loans are given the longest repayment term possible under the government loan program.

If you want to increase your monthly payments so you can save money in interest contact the service provider or your financial institution.

Federal Permanent Disability Benefit Program

In the event that a student with a permanent disability is unable to meet the repayment obligations for a Canada Student Loan – they may apply for the Permanent Disability Benefit – it is expected that students would have exhausted their eligibility under the Interest Relief Program first.

The student must submit a Federal Medical Certificate and a monthly budget, even if the student may have been approved for relief under one of the other student loan programs. Medical Certificates and budget forms are available from the bank, National Student loan Service or Canada Student loans offices.

Bankruptcy Involving Student loans

Under the current legislation, student loans are debts that are discharged by bankruptcy only if the date of bankruptcy is more than ten years after leaving school. If a bankruptcy occurs within ten years of leaving school, a Court can order the discharge from a student loan once the ten years has passed if the person has acted in good faith and the person will continue to experience financial difficulty in paying the student loans. http://money.mytelus.com/includes/MJohnson/www.bankruptcycanada.com

If you are thinking about borrowing money to finance your education – speak to a qualified professional before you take out a loan. Consider all your “credit solutions” before you sign on the dotted line.

Remember, if you are experiencing financial difficulties do not wait. Speak to a professional today.

Do you have a story that you would like to share about your experience with a debt collector? Email me – This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Margaret H. Johnson ACE. RQIC is president of Solutions Credit Counselling Service Inc. and Women and Money Inc. She can be reached by e-mail at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it  
Or call toll-free in Canada – 1-877-588-9491 
Phone: (604) 588-9491 Fax: (604) 588-9007 

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