Talking Cash: Repaying OSAP - What you need to know, Part I
We're past the halfway mark
of this school year. Many of us
will be graduating this spring.
Even if you have a year or more
left of school, it's a great idea to
understand OSAP's repayment
terms. The more you understand
about what is expected of you
upon entering repayment, the
easier it will be to manage your
debt and eventually pay it off
completely.
You start paying your loan six months after you graduate or leave school, so even if you quit school before graduating, you still have six months before repayment begins. Interest doesn't accumulate while you are in school. However, OSAP loans are divided into federal and provincial portions, and interest begins to accumulate on the federal portion of your loan beginning when you graduate, although you don't need to pay that interest until the six-month grace period is over. At that point, you can opt to pay off that interest owing in one payment, or recapitalize it (meaning just roll it into what you already owe) and start making regular payments.
OSAP is capped at $7,300 per year. This means that if you were loaned more than $7,300 for this year, you don't have to pay back more than $7,300. This is the cap for each year of study. Thus, if you have above $7,300 in loans for each year and you are in school for four years, the amount you have to pay back is $29,200.
During the six-month grace period, you have to contact the National Student Loans Service Centre (NSLC) to consolidate your loan. What this basically means is that you are contacting them to arrange repayment of the loan. At that point you will be told how much you owe, your expected monthly payment, and your interest rate.
OSAP loans are amortized over nine and a half years. This means that you are expected to pay the entire amount off over nine and a half years. This can be changed, though. If you're having trouble paying off the loan, you can stretch the amortization period to 15 years, which reduces the amount you pay monthly. You'll pay more overall, though, because you'll be paying interest on the loan for a longer period of time, but this can be helpful if you are having difficulties making monthly payments. The nine and a half years can also be shortened if you want to pay your loan off quicker.
If you don't repay your loan over a period of 90 days, it goes into default and gets turned over to a collection agency. Interest continues to accumulate on what you owe, and this severely damages your credit rating. Whatever you do, don't stop paying your loan. Amortizing the loan over 15 years isn't the only help you can get in repaying your loan. In fact, OSAP has fairly generous repayment assistance plans, particularly in comparison to bank student loans. Next week I'll be writing about OSAP's Repayment Assistance Plan, how you qualify, and how it can help you avoid defaulting on your loan if you are unable to make payments.
For more info, check out canlearn.ca and osap.gov.on.ca. Both sites feature repayment calculators so you can plug in your own numbers and figure out how much you'll owe and what you'll be paying each month.
Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honour's Bachelor of Arts from the University of Western Ontario.
You start paying your loan six months after you graduate or leave school, so even if you quit school before graduating, you still have six months before repayment begins. Interest doesn't accumulate while you are in school. However, OSAP loans are divided into federal and provincial portions, and interest begins to accumulate on the federal portion of your loan beginning when you graduate, although you don't need to pay that interest until the six-month grace period is over. At that point, you can opt to pay off that interest owing in one payment, or recapitalize it (meaning just roll it into what you already owe) and start making regular payments.
OSAP is capped at $7,300 per year. This means that if you were loaned more than $7,300 for this year, you don't have to pay back more than $7,300. This is the cap for each year of study. Thus, if you have above $7,300 in loans for each year and you are in school for four years, the amount you have to pay back is $29,200.
During the six-month grace period, you have to contact the National Student Loans Service Centre (NSLC) to consolidate your loan. What this basically means is that you are contacting them to arrange repayment of the loan. At that point you will be told how much you owe, your expected monthly payment, and your interest rate.
OSAP loans are amortized over nine and a half years. This means that you are expected to pay the entire amount off over nine and a half years. This can be changed, though. If you're having trouble paying off the loan, you can stretch the amortization period to 15 years, which reduces the amount you pay monthly. You'll pay more overall, though, because you'll be paying interest on the loan for a longer period of time, but this can be helpful if you are having difficulties making monthly payments. The nine and a half years can also be shortened if you want to pay your loan off quicker.
If you don't repay your loan over a period of 90 days, it goes into default and gets turned over to a collection agency. Interest continues to accumulate on what you owe, and this severely damages your credit rating. Whatever you do, don't stop paying your loan. Amortizing the loan over 15 years isn't the only help you can get in repaying your loan. In fact, OSAP has fairly generous repayment assistance plans, particularly in comparison to bank student loans. Next week I'll be writing about OSAP's Repayment Assistance Plan, how you qualify, and how it can help you avoid defaulting on your loan if you are unable to make payments.
For more info, check out canlearn.ca and osap.gov.on.ca. Both sites feature repayment calculators so you can plug in your own numbers and figure out how much you'll owe and what you'll be paying each month.
Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honour's Bachelor of Arts from the University of Western Ontario.
