Government Student Loans vs. Private Student Lines of Credit
So you know about government student loans, but do you know about private student lines of credit (LoC)? The former is provided by Canada’s provincial and federal governments, who make the debt interest-free while you’re studying; depending on your province, your provincial loan might remain interest-free for 6 months after you graduate, or interest might not accrue at all. Interest you do end up paying can be claimed as a tax credit, and having a government student loan may also help you qualify for additional subsidies or relief programs such as the Repayment Assistance Plan. However, the eligibility requirements for a government student loan can be tough to meet. For example, you might be disqualified if your parents have high income – even if your parents refuse to help pay for your education. It’s also important to note that if you’re forced into a worse-case scenario financially, a government student loan cannot normally be included in bankruptcy or a consumer proposal if you’ve been out of school for less than 7 years.
While a bank or credit union can also offer you a private student loan, they tend more towards offering students lines of credit – think a credit card with a limit in the tens of thousands that might offer interest-free periods similar to a government student loan. As with borrowing any money from any financial institution, you must research the specific conditions of the LoC you’re interested in. That said, student credit lines are an alternative option when you don’t qualify for government loans, might have better interest rates, and can be included in bankruptcy or a consumer proposal regardless of your time out of school. However, you won’t have access to any additional subsidies or relief programs that are for government student loan holders. If you could get either of these options, then government loans are the safer bet to fund your education.