4.4.6 The time and cost to repay student loans

From: Financial Consumer Agency of Canada

The answers depend on how large a loan you have borrowed and how quickly you repay it.

Here is an example showing two different payment plans. In both cases, assume that you graduate with a total student debt of $25,000 and that you start repaying your loan right away.

  • In Option 1, you choose a fixed interest rate (8.0 percent) and repay the loan within five years.
  • In Option 2, you choose a variable interest rate (averaging 5.5 percent) and repay the loan within 10 years.

$25,000 student loan

Option 1
Fixed rate of 8.0% for 5 years

Option 2
Variable rate averaging 5.5% for 10 years

Interest rate

8.0%

5.5%

Amount of each monthly payment

$506.91

$271.32

Total interest payable over the life of your loan

$5,414.59

$7,557.88

Total cost of your loan

$30,414.59

$32,557.88

If you find that you have trouble repaying your student loan, contact your loan officer as early as possible. Student loans in Canada are not automatically discharged in a bankruptcy or consumer proposal unless they are over seven years old.

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