If you went to college or university in Canada and took out student loans to pay for it, you are far from alone. Millions of Canadians graduate with student debt, and figuring out how the repayment system works can feel confusing — especially when you are juggling your first real job, rent, and all the other costs of adult life.
The good news is that Canada has made student loans significantly more affordable in recent years, including eliminating interest on federal student loans. Let us walk through everything you need to know about paying back your student loans.
When Do You Start Repaying?
Repayments on Canada Student Loans begin six months after you finish your studies. This six-month period is called the "non-repayment period" or "grace period." During this time, no payments are required and — thanks to the interest-free policy — no interest accumulates on the federal portion of your loan.
If you have provincial student loans as well, the grace period and interest rules vary by province. Some provinces charge interest during the grace period, others do not. Check with your provincial student aid office for the specific rules that apply to you.
After the grace period ends, your repayment schedule kicks in. You will start making monthly payments to the National Student Loans Service Centre (NSLSC), which administers federal student loans.
Federal Student Loans Are Interest-Free
This is the biggest change in recent years and a genuine lifeline for borrowers. As of April 2023, Canada Student Loans no longer accrue interest — at all. The federal government permanently eliminated interest on federal student loans, meaning you only repay the principal amount you borrowed.
This applies to all Canada Student Loans and Canada Apprentice Loans, regardless of when you took them out. If you are currently in repayment, your existing loan is now interest-free on the federal portion.
However, this only applies to the federal portion of your student loan. If you also have a provincial student loan, it may still accrue interest depending on your province. For example, Ontario eliminated interest on provincial student loans as well, but other provinces may still charge interest. Always check the rules for your specific province.
How Your Monthly Payment Is Calculated
When your repayment begins, the NSLSC sets up a standard repayment plan based on your total loan balance. The standard repayment period is 9.5 years (114 months), though you can request a shorter or longer term.
Since federal loans are interest-free, your monthly payment is simply your total federal loan balance divided by the number of months in your repayment period. For example, if you owe $30,000 and are on the standard 9.5-year plan, your monthly payment would be approximately $263.
You can make extra payments at any time without penalty. If you can afford to pay more than the minimum, doing so will pay off your loan faster and free up that cash flow sooner.
Our student loan calculator can show you exactly what your monthly payments will be based on your specific loan balance and repayment period.
The Repayment Assistance Plan (RAP)
If you are struggling to make your payments, the Repayment Assistance Plan is designed to help. RAP adjusts your monthly payment based on your family income and family size. There are two stages:
Stage 1 — Affordable Payments: Your monthly payment is set to no more than 20% of your family income. If your income is low enough, your required payment could be reduced to $0. You still owe the loan, but you are not required to make payments you cannot afford. Stage 1 lasts for up to 60 months.
Stage 2 — Debt Reduction: After 60 months on RAP (or after 10 years since you left school, whichever comes first), if you still have a remaining balance, the government begins paying down the principal on your behalf. Your payments remain affordable, and any remaining balance after 15 years of RAP is forgiven.
To qualify for RAP, you need to apply through the NSLSC. You will need to provide your income information, and you generally need to reapply every six months to confirm your continued eligibility.
How Student Loans Affect Your Take-Home Pay
Unlike the UK, where student loan repayments are automatically deducted from your paycheque, Canadian student loan payments are made separately. You make payments directly to the NSLSC by pre-authorised debit, online banking, or other payment methods.
This means student loan payments do not show up on your pay stub, but they are still a real monthly expense you need to budget for. When you are planning your finances, make sure to account for your loan payment alongside rent, groceries, and other necessities.
Our salary calculator shows you your take-home pay after taxes and deductions. Compare that with your monthly loan payment to understand how much disposable income you actually have.
Tax Benefits for Student Loan Borrowers
Even though federal student loans are now interest-free, there are still some tax benefits available to students and recent graduates:
- Tuition tax credit: If you paid tuition while in school, you can claim the tuition amount as a non-refundable tax credit. Unused amounts can be carried forward to future years or transferred to a parent or spouse (up to $5,000). Use our tax credits calculator to see how tuition credits reduce your tax.
- Student loan interest tax credit: If you have a provincial student loan that still charges interest, you can claim the interest paid as a non-refundable tax credit. This applies to interest on loans under the Canada Student Financial Assistance Act or equivalent provincial programmes.
- Moving expenses: If you moved at least 40 kilometres to start a job or attend post-secondary school, you can deduct qualifying moving expenses from your income.
Should You Pay Off Your Student Loan Faster?
With federal student loans being interest-free, the mathematics of early repayment have changed. Here are some things to consider:
Arguments for paying faster:
- Eliminating the monthly payment frees up cash flow
- Psychological benefit of being debt-free
- Reduces risk if interest is ever reintroduced
Arguments for paying the minimum:
- Since the loan is interest-free, there is no financial cost to stretching it out
- You could invest the extra money instead — even a basic savings account or TFSA would earn you a return, effectively making money on money that you owe interest-free
- Keeping cash available for emergencies is generally wise
Financially speaking, if your federal student loan is truly at 0% interest, you are better off investing any extra money rather than paying down the loan early. A TFSA earning even 3-4% in a high-interest savings account would generate more value than paying off a 0% loan. Our TFSA calculator can show you how investing that money instead could grow over time.
That said, personal finance is personal. If having debt hanging over you causes stress, there is nothing wrong with paying it off early for your own peace of mind.
What If You Cannot Pay at All?
If you are facing genuine financial hardship, do not ignore your loan. Contact the NSLSC and apply for the Repayment Assistance Plan. Ignoring payments can lead to your loan going into default, which damages your credit score and can result in the CRA withholding your tax refund to apply against the debt.
If your income is very low, RAP may reduce your payments to $0 per month. There is no shame in using a programme that was specifically designed to help people in your situation.
The Bottom Line
Canada Student Loans are more manageable than ever thanks to the interest-free policy. The key is to understand your repayment schedule, budget for the monthly payment, and take advantage of the Repayment Assistance Plan if you need it. And if you can afford the payments comfortably, consider whether investing the difference (rather than paying off early) might be the smarter financial move.
Use our student loan calculator to plan your repayment, and our salary calculator to see exactly how much you take home each month after all deductions.