Manage student loan debt

You can build a good credit rating by showing your ability to manage your loan in a responsible way. One of the best ways to manage your student loan is to pay it off as quickly as you can. Any time you have extra money, use it to pay down the principal amount of your loan.

When you start out in the workforce, you may have a car loan, rent and other expenses while paying back your student loan. You can revise the terms of your loan to lower the amount you pay back each month. There is also help available in the form of repayment assistance.

Make lump sum payments

This is one of the fastest ways to pay off your debt. Payments made while attending school or during the six month non-repayment period will be applied directly to the principal of your loan first.

Once you start repaying your loan, you can still make lump-sum payments at any time. These payments, however, will first be applied to the interest you owe from the date of your last payment. The rest will go toward the principal of your loan.

Increase monthly payment amounts

The amount you pay over and above your minimum monthly payment is applied directly toward the principal amount of your loan. This decreases the total loan amount and the total interest you will have to pay.

Example: If you have a $25,000 student loan, with a 5.5 percent interest rate, you will end up paying an extra $7,555.88 in interest over the life of your loan (total repayment period of 9.5 years).

If you increase your monthly payment by only $50, you will cut the overall interest you will pay by $1,579.65. If you pay $100 more a month, you will cut the interest by $2,617.84. That’s saving more than 1/3 of the interest you would have had to pay!

Government of Canada tax credits for student loans

You receive a 15% tax credit on the interest you pay on your government student loans each year. This credit applies to interest payments you make on both your federal and provincial or territorial student loans.

How do you get the tax credit? The appropriate documents will be sent to you before you file your taxes.

Note: The credit does not apply to interest payments you may make on any loans held with a private lender (such as a student line of credit with a bank).

You can:

• claim a full-time education credit in the amount of $400 for each whole or part month in the year in which you were enrolled in a qualifying program at a designated school;
• claim a part-time education credit in the amount of $120 for each whole or part month in the year in which you were enrolled in a qualifying program at a designated school;
• get a non-refundable textbook tax credit of $65 for each month you were enrolled in a course that entitles you to a full-time education tax credit; and
• get a full tax exemption for all post-secondary scholarships and bursaries. You will still receive a T4A tax slip. However, if the scholarship or bursary relates to enrolment in a program that entitles you to the Education Tax Credit, the amount does not have to be reported on your income tax return.

For student tax tips and information on tax returns, visit the Canada Revenue Agency.

Help paying back your student loan

Worried that you can’t make your loan payment? Help is just a phone call away. Even if you have already missed a loan payment, you still have options. Contact the National Student Loans Service Centre today to discuss options to help you get back on track.