2Six things you need to know Repaying your loan:Six things you need to knowWelcome!This session will offer you six “must-knows”:What are the benefits of Government Sponsored Student Loans?What is grace period?Understanding your Consolidation Agreement.How can you save money?Avoiding repayment difficulties.Maintaining your student loan.
3Must-know # 1: The benefits of your government sponsored student loan With one application to the Provincial Government, you are assessed for both Provincial and Federal funding.With that application you are assessed for Loans and Grants.The loan is interest free while you are in full-time studies.You do not have to repay the grants*.You do not have to make payments for six months after you end full-time studies.You can make payments at any time without penalty.There are programs designed to assist you if you have difficulty repaying your loan.* Provided you maintain eligibility
4Must-know # 2: What is Grace Period? Grace period is the six month period after you end full-time studies and before repayment begins.No payments are required, however, interest can accumulate during this period.During this period you can make voluntary payments towards your student loan.No interest is charged if you return to full-time studies and notify the Service Provider during Grace Period.Marie is completing her undergraduate program in April. She has $25,000 in government sponsored student loan debt.Just before she completed her studies, she received a letter from the NSLSC which advised her that if she does not return to full-time studies she will begin repayment in November and what her estimated monthly payment will be.
5Must-know #3: Understanding Your Consolidation Agreement Consolidation is the term used to describe when your loan repayment begins.Your loan Consolidates on the first day of the 7th month after you end full time studies.A month before your loan consolidates you will receive a Consolidation Agreement which outlines the details of your student loan.Marie accepted a contract position and decided not to pursue graduate studies. In September, she received a consolidation agreement which outlined all of her responsibilities for repaying her student loan.
6Must-know #3 :Understanding Your Consolidation Agreement Your Consolidation Agreement presents you with a number of decisions:how you wish to submit monthly paymentswhether to pay off the interest that accumulated during your grace period, or add it to your loanthe type of interest rate to apply to your loan andhow long you will take to repay your loanAfter you have made your choices, it is important to return a signed copy of the Consolidation Agreement.
7Must-know # 3: Understanding Your Consolidation Agreement Payment OptionsYour first payment is due on the last day of the month of Consolidation.Your Consolidation Agreement allows you to set-up, confirm, change or cancel your pre-authorized payments.If you do not wish to have preauthorized payments deducted from your account you can make your payments by:Telephone bankingOnline bankingCheque or Money Order
8Must-know # 3: Understanding your Consolidation Agreement Dealing with grace-period interestOption 1: Capitalize the interest (add it to your loan)Advantage: You will not have to pay off the interest if you do not have the money available.Disadvantage: This will increase the total amount of your loan, so you will pay more interest over time.Option 2: Pay it offAdvantage: Grace-period interest won’t be added to the amount of your loan so your payments will be lower.Advantage: You will be able to claim the interest you pay on your income tax return.Disadvantage: You will have to make a lump sum payment before repayment begins.The consolidation agreement had presented her with a few decision. The first decision she was what to do with her grace-period interest. As she had just started her position, she was unable to pay the grace-period interest and decided to capitalize it on her student loan.
9Must-know # 3: Understanding Your Consolidation Agreement Interest Rate OptionsOn the Ontario portion of your student loan your interest rate will be set at a floating rate of prime plus 1%.On the Canada portion of your student loan you can choose to have a floating or a fixed interest rate.Choosing a Floating interest rate means:Your interest rate will be set at prime plus 2.5%.+ You will pay a lower interest rate initially.- Your rate will fluctuate with prime.Choosing a Fixed interest rate means:Your interest rate will be set at prime plus 5%.+ The rate will not change during your repayment period.- If prime rate remains low, you will pay more in interest.Marie’s also had to consider whether she wanted the floating interest which although may rise and fall with the economy is initially lower than the fixed rate, or the fixed rate. As she wanted to take advantage of the lower interest rate, she decided to take the floating rate knowing that she can lock it into the fixed rate at any time.
10Must-know # 3: Understanding your Consolidation Agreement Setting Repayment TermsYou can choose any length of time to repay your student loan, up to a maximum of 14.5 years. (Most borrowers take 9.5 years.)You can adjust your terms any time during your repayment.Shorter Repayment TermChoosing a shorter repayment term means:You will pay less interest overall.Your monthly payments will be larger.Longer Repayment TermChoosing a longer repayment term means:Your monthly payments will be smaller.You will pay more interest overall.
11Must-know # 3:Understanding Your Consolidation Agreement On-line Tools The Canlearn.ca website has tools, such as, the Loan Repayment Estimator that you can use to assist you in your decision making.The Loan Repayment Estimator will show you how your decisions regarding grace period interest, the repayment term, and the interest rate affect your loan.Note: Interest rate and grace period interest are calculated at the Federal rates (Floating, prime + 2.5% and Fixed: prime + 5%) and should be used for budgeting purposes only. Your Consolidation Agreement will outline your repayment details.
12Must-know #3: Understanding Your Consolidation Agreement Three examples of the effects of the decisions you can make on your loan. Based on a $25, 000 student loan and a prime rate of 3%. 1: Capitalize Grace Period Interest, Fixed Interest Rate and 9.5 year term. Monthly Payment: $ Total Interest: $11, : Pay Grace Period Interest, Floating Interest Rate and 9.5 year term. Monthly Payment: $ Total Interest: $ : Capitalize Grace Period Interest, Floating interest and 14.5 year term. Monthly Payment: $ Total Interest: $11,645.03
13Must-know # 4: Saving Money To save money in interest charges, borrowers can repay their loan before the end of their repayment term without penalty by:Making payments while in school.Making payments during grace period.Paying an amount larger than the minimum monthly payment calculated for their term.Making weekly or bi-weekly payments.Making lump sum payments..
14Must-know # 4: Saving Money Based on a $25,000 loan, a prime rate of 3% and you have chosen the floating interest rate. The chart below demonstrates potential savings utilizing common repayment strategies.Do NothingIncreasing Minimum Payments by 20.00/monthMaking $ lump sum payments once a yearMaking biweekly paymentsNumber of months you will need to repay your loan114106105102Payment Amount$289.80monthly$309.80$289.90$ every two weeksTotal interest payable over the life of your loan$7,350.13$6,506.74$6,410.00$6,195.32Total interest savings$0.00$843.39$940.13$
15Must-know # 5: Repayment Assistance Missing payments on your loan can have serious and long-lastingconsequences.Avoiding the consequences of missing paymentsBefore you miss a payment, the best thing you can do is contact the Service Provider, who can provide you with options such as:Repayment Assistance PlanRevision of Terms
16Must-know # 5: Repayment Assistance Repayment Assistance PlanThe Repayment Assistance Plan applies to both the Canada and Ontario portions of your student loan.If you qualify for the Repayment Assistance Plan, you will not be required to make a student loan payment above an affordable level.An Affordable Payment is calculated based on your income and family size. As a result the payment could be lowered or put on hold until you can afford them.You must apply for the Repayment Assistance Plan through the Service Provider every six months—enrolment is not automatic.
17Must-know # 5: Repayment Assistance Using the Repayment Assistance Estimator on the Canlearn.ca website you can approximate your Affordable Payment based on your loan, income and family size.Example: A single borrower with no dependents who has a $25000 student loan and a gross income of $2000/month.
18Must-know # 5: Repayment Assistance Revision of TermsAllows borrowers to adjust their monthly payment temporarily or for the remaining term of the loan.Options:Lower payment by making interest-only payments (6-month terms).Lower payments by adjusting the term up to the maximum 174 months (14.5 years).How Revision of Terms differs from the Repayment Assistance PlanAll borrowers are eligible for Revision of Terms regardless of debt and income level.Payments are required each month.Marie was concerned that her contract would not be renewed. Since she was worried about missing her student loan payment he called the call-centre at the NSLSC to find out what her options were. She was advise that the programs that are available for her loans are RAP/IR or she could revise the terms of her loan.
19Must-know # 5: Repayment Assistance Ontario Student Opportunity Grant When you apply for the Ontario Student Assistance Program (OSAP) you are automatically assessed for the Ontario Student Opportunity Grant.The grant assists you by limiting your repayable loan.After the completion of the loan year the Ontario Ministry of Training, Colleges and Universities determines your eligibility and will send payments directly to the National Student Loans Service Centre.
20Must-know # 6: Maintaining your student loan To keep your loans in good status make sure that you:Let the Service Provider know if you return to school full-time to return your loan to interest free status.Sign and return your Consolidation Agreement.Keep your contact information current with the Service Provider.Let the Service Provider know if you are having difficulty making your loan payments.5. Check your loan balances regularly.6. Keep all the documents that you receive by mail..
21Thank you for your time and attention. Stay in touch!