Getting a post-secondary education is expensive. While Canadians may not have it quite as bad as our neighbours in the USA, there’s no doubt that getting a college or university-level education comes with a hefty price tag.
Even if you work while attending classes, paying for your education in full will still be a struggle. There are plenty of options in place to help students out in these circumstances including student lines of credit. So, what is a student line of credit? And what else is out there in the form of student aid? Read on to find out.
What is a student line of credit?
So what is a student line of credit and how does it work? A student line of credit is a line of credit meant for student use. A line of credit is a loan that allows you to borrow money and pay it back repeatedly, up to a set limit. So, for example, if you have a line of credit with a spending limit of $10,000 and use $3,000 of that value, you only have to pay back the $3,000 (plus applicable interest). If you haven’t yet paid back the $3,000 used, you still have $7,000 in credit. But once you pay back the $3,000 you will once again have $10,000 credit.
Student lines of credit are meant to be used for any expenses that relate to your post-secondary education. This includes things like tuition and books as well as daily expenses including food and transportation. Student lines of credit do charge interest, but the rate you’re charged is typically lower than a standard line of credit.
Who can get a student line of credit?
Student lines of credit are meant for students, but there are several criteria that need to be met in order to qualify. These will differ from lender to lender, but common eligibility requirements include:
- Proof that you are a full or part-time student in a post-secondary educational institution.
- That post-secondary institution needs to be recognized by Canada as an eligible institution.
- You must be a citizen, resident, or landed immigrant in Canada
Some lenders will also have rules regarding the length of the program you are in. Again, the requirements for getting student lines of credit vary depending on lenders so if you don’t qualify for one, make sure to check out another.
How to apply for a student line of credit
Once you have found a lender you would like to apply for a line of credit with you can start the application process. This can usually be done either in person, over the phone, or online. You may need a parent or guardian to co-sign for you. Note that this person will be responsible for your student line of credit if you do not pay it back.
The lender will set out the maximum amount of money you are allowed to borrow. This could be a pre-set number or personalized based on your situation. If the loan amount is personalized, they will consider all applicable student expenses such as tuition, housing, and expenses as well as any credit history and your ability to repay the loan.
To apply for a student line of credit you will need:
- Proof of enrollment
- Government-issues ID
- Possibly a co-signer
- You may also be asked to provide bills and expenses related to rent & tuition
Note that you can apply for a student line of credit at any time as long as you meet the qualifications.
Who offers student lines of credit?
Student lines of credit are commonly offered by Canada’s big banks. Here are five of the most popular options for student lines of credit and some details about what they offer.
RBC Student Line of Credit
RBC offers student lines of credit starting at $5,000 but the total amount will vary based on your individual needs. You will need a co-signer for an RBC student line of credit along with estimates of your education costs and a list of your financial resources. RBC will allow students up to 2 years after graduation to start paying back the principal of their loan.
TD Student Line of Credit
TD bank offers student lines of credit of up to $20,000 per year (up to 4 years) for both full and part-time undergraduate students. They also have student lines of credit for graduate and professional student programs. On top of the main documents, you will also need to bring a list of expenses with you as well as any sources of income or other financial assistance. TD Student loans also allow a 24 month grace period after graduation before borrowers need to start paying back the principal.
CIBC Student Line of Credit
CIBC student lines of credit are offered for a maximum of $60,000 through both full or part time programs ($15,000/year for full time or $7,500 per year for part-time). There is no annual limit for graduate students but the same $60,000 maximum applies. Those who have student lines of credit with CIBC have up to 12 months after graduation to start paying back the principal.
BMO Student Line of Credit
Student lines of credit with BMO allow approved individuals to borrow up to $15,000 in the first year and then $10,000 in each remaining year up to a maximum loan of $45,000 spread over the course of 4 years. You must start repayment of the principal 2 years after graduation. A BMO student line of credit is available to both full time and part-time students so long as the program is at least 12 weeks long and hours per week and you will need a co-signer.
Scotiabank Student Line of Credit
The value of student lines of credit with Scotiabank vary depending on your studies. Undergraduates can get up to $40,000 maximum while graduate students can get up to $100,000. There are also options for individuals who are partaking in a certificate of apprenticeship programs as well as those pursuing a professional degree. Once you have graduated, you have a one-year grace period before you need to start paying back the principal amount on your Scotiabank student line of credit.
How to use and pay back a student line of credit
Once you have been approved you can access your student line of credit through the usual methods; visit a branch of the bank you borrowed from, withdraw money via an ATM, or use online banking. Make sure to follow the terms and conditions set out in your agreement and only borrow what you need.
As for paying back student lines of credit, you need to pay at least the interest while you are studying (although you can pay back more if you can). Once you have graduated, the majority of institutions will allow you a grace period of 6-24 months where you can continue the interest-only payments. However, after this point, you’ll need to start paying back the actual principal as well as the interest until the student loan is completely paid off.
Student aid & other options
Student lines of credit can be very helpful for Canadians getting an education, but they shouldn’t be your first resort. If your parents set up a Registered Education Savings Plan, you should use that first since it’s money already saved.
However, if you’re not fortunate enough to have funds from your parents, look to student aid instead. Student aid in Canada can come in the form of grants, scholarships, and government loans. Grants and scholarships do not need to be repaid. Government loans do, however, most only need to start being paid after you complete your education. The Government of Canada offers plenty of options for grants, scholarships, and loans so it’s worth doing your research and applying. You can learn more about student aid here.