4.4.5 Repaying your Canada Student Loan
You must start repaying your student loan six months after you have completed your studies or left school.
You can start making loan payments while you're still in school. For full-time students, these payments go directly toward the loan principal, which will reduce the overall debt more quickly.
You can select a fixed interest rate or a variable interest rate when it comes time to begin repaying your student loan. The maximum fixed rate is the prime rate plus five percent, while the maximum variable rate is the prime rate plus 2.5 percent. For example, in March 2011, the variable interest rate was 5.5 percent, and the fixed rate was 8.0 percent.
How to pay off your student loan faster:
- Make lump sum payments. Any payments you make while attending school are applied directly to the principal of your loan. This means that the total amount of your loan will decrease, resulting in less interest charged in the long run.
- Increase the size of your monthly payments. The amount you pay over and above your monthly minimum payment is applied directly to the principal of your loan. Again, this shrinks your total loan amount, which in turn reduces the amount of interest you will pay.
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