{"id":72900,"date":"2024-09-16T11:00:16","date_gmt":"2024-09-16T18:00:16","guid":{"rendered":"https:\/\/www.nerdwallet.com\/ca\/?page_id=72900"},"modified":"2024-09-16T11:00:24","modified_gmt":"2024-09-16T18:00:24","slug":"dont-need-student-loan-apply-anyway","status":"publish","type":"page","link":"https:\/\/www.nerdwallet.com\/ca\/loans\/dont-need-student-loan-apply-anyway","title":{"rendered":"Don\u2019t Need (or Want) Student Loans? Here\u2019s Why You Should Apply Anyway"},"content":{"rendered":"\n

Before Dylan Bauer went to university, he took a gap year and worked three jobs to save up cash to pay for school. <\/p>\n\n\n\n

Bauer had heard horror stories about student loans and was understandably nervous about taking on any debt. But he soon realized that not applying for financial aid at all might leave free money on the table.<\/p>\n\n\n\n

By the time he started school at the University of Lethbridge in 2016, Bauer quickly found that student life was more expensive than he thought. <\/p>\n\n\n\n

Even with his gap-year income and money from the registered education savings plan<\/a> his parents opened for him, Bauer needed a part-time, on-campus job to cover costs.<\/p>\n\n\n\n

Applying for loans gives you a chance at free money<\/h2>\n\n\n\n

Despite his initial skepticism, Bauer revisited the idea of applying for student loans<\/a> to see what he might qualify for. He was pleasantly surprised when he was approved for federal grants as well as loans.<\/p>\n\n\n\n

\u201cIf I never applied, that would have been $9,000 I would have missed out on,\u201d says Bauer of the federal grant money he received. <\/p>\n\n\n\n

\ud83e\udd13 Nerdy Tip:<\/strong> Federal grants don\u2019t have to be repaid, but you have to fill out a student loan application in order to be eligible for them.<\/p>\n\n\n\n

Excess student aid can be saved or invested<\/h3>\n\n\n\n

Bauer, who today works as a resident stage technician in Calgary, says he took out about $46,500 in government student loans and grants, including the $9,000 grant, $24,000 in provincial loans and $13,500 in federal loans. In all, his tuition was $30,000 over five years.<\/p>\n\n\n\n

\u201cIt was really nice to have that cushion,\u201d Bauer, now 27, recalls. \u201cEverything that I didn’t need of the loans I was just putting into savings, so I had probably five or six months\u2019 worth of expenses. I knew that I could survive that long without having to worry.\u201d<\/p>\n\n\n\n

Because they carried a variable interest of 5% to 7%, Bauer prioritized knocking out the provincial loans first, paying them off in full a few months ago. All that\u2019s left, he says, is the interest-free federal loan.<\/p>\n\n\n\n

How to (responsibly) apply for and use student loans<\/strong><\/h2>\n\n\n\n

Student loan debt is a growing source of financial strife for Canadians, and soon-to-be students are rightfully cautious.<\/p>\n\n\n\n

According to the latest research<\/a> from Statistics Canada, Canadians who graduate with a bachelor\u2019s degree owe an average of $30,600 in student loan debt. That\u2019s up a staggering 50% in the past two decades. Meanwhile, as a whole, 1.9 million Canadian borrowers owe $23.5 billion in student loans as of 2022, according to government data.<\/p>\n\n\n\n

While Bauer was prudent about managing his student loans, not all borrowers are as disciplined. And that\u2019s when student loans can become problematic, says Doug Hoyes, co-owner of Hoyes, Michalos & Associates, a consumer proposal and licensed insolvency trustee firm based in Kitchener, Ontario.<\/p>\n\n\n\n

To avoid student loan debt from spiraling out of control<\/a>, here are some strategic steps to follow:

1. Exhaust other financing sources.<\/strong> Apply for as many scholarships, grants and bursaries as you can, work part-time while you\u2019re in school or see if your parents are in a financial position to help pay for your education. By exhausting all of these potential financial sources, you\u2019ll limit the amount of loans you need, he adds.<\/p>\n\n\n\n

\u201cYou want to make sure you have researched every possible grant and bursary that’s out there, because that chips away at what the cost is going to be,\u201d Hoyes says.<\/p>\n\n\n\n

2. Consider living at home. <\/strong>In some provinces and cities, living expenses outweigh tuition costs. Consider going to a local university to start and live at home to save money<\/a>, Hoyes advises. This can dramatically limit your reliance on student loans to fund living expenses.<\/p>\n\n\n\n

3. Borrow only what you need.<\/strong> While you might qualify for aid that exceeds your estimated expenses, avoid taking out more than you need for school, Hoyes advises. This is especially true if you tend to overspend, aren\u2019t disciplined with budgeting<\/a>, or if you\u2019re not 100% sure about your career path.<\/p>\n\n\n\n

4. Map out a repayment plan.<\/strong> Student loans have to be repaid no matter what, so it\u2019s crucial to make a clear plan for how you\u2019ll pay the money back. This involves understanding how much your industry pays for entry-level roles and what your living expenses will be after graduation. You might have to adjust your plans (i.e. get a roommate, choose a less expensive area, etc.) to afford your student loan payments and other day-to-day expenses.<\/p>\n\n\n\n

5. Understand how student loans impact your credit.<\/strong> If you have designs to buy a home<\/a> or take out a car loan soon after graduating, your student loan debt could be a barrier, Hoyes notes. Not only could student loans limit the amount you can borrow on other loans but your credit score could take a hard hit if you ever fall behind on payments, which might also disqualify you from other forms of lending.<\/p>\n\n\n\n

\u201cIf you have a credit card and you’re not able to pay it for whatever reason, you can go bankrupt and eliminate that debt,\u201d Hoyes points out. \u201cBut with a government student loan, you have to be out of school for seven years before you have any opportunity to apply for relief in bankruptcy. You\u2019ve got to really think hard and long before taking on that kind of debt because you are going to be stuck with it for a considerable period of time.\u201d<\/p>\n\n\n\n\n

What student financial aid is available in Canada?<\/h2>\n\n\n\n

The Canada Student Financial Assistance Program offers federal and provincial loans and grants to full- and part-time students. However, there\u2019s a limit of 340 weeks in which full-time students can receive student aid.

You must apply through your province or territory<\/a> to qualify for both federal and provincial student loans and grants. Here\u2019s a quick overview of your options so you don\u2019t leave any money on the table:

Canada Student Loans<\/strong>
These federal student loans can be used to cover tuition, fees, and living expenses. The best part? As of April 1, 2023, these loans come with 0% interest. Plus, if you encounter financial hardship and are struggling to make student loan payments, you might qualify for reduced payments or payment elimination by applying for the Repayment Assistance Plan (RAP). However, if you\u2019re approved for RAP, you must reapply for assistance every six months.

Canada Student Grants<\/strong>
Based on your family\u2019s income and household size, you might be eligible for multiple federal student grants<\/a> to pay for school. Grants don\u2019t have to be repaid so it\u2019s free money. For the 2024\/2025 school year, you can receive up to $4,200 per year (or up to $525 per month of study) in federal student grants.

Provincial student loans and grants<\/strong>
Each province and territory in Canada offers its own financial aid programs that may come with additional benefits, such as provincial grants, bursaries and scholarships. However, unlike federal loans, some provinces charge interest on their loans.

How much aid you can get
<\/strong>The exact amount you\u2019re eligible for in government student financial aid depends on several factors, such as:<\/p>\n\n\n\n