Student lines of credit
How student lines of credit work
A line of credit is a credit product that lets you borrow money repeatedly up to a pre-set limit. You can borrow money, pay it back and then borrow again, up to your credit limit.
A student line of credit is a product for students. It helps you pay for expenses related to post-secondary education, like tuition or books. You can also use it to help cover everyday expenses, like food and transportation.
With a line of credit, you only have to pay back the money you borrow. You also only have to pay interest on the money you borrow. For example, suppose your line of credit has a $10,000 limit. You borrow $3,000. This means that you’ll pay interest on the $3,000.
With a student loan, as opposed to a line of credit, you receive a set amount of money and have to pay it all back.
Applying for a student line of credit
You may need someone, like a parent, to co-sign your line of credit application. This person will also be responsible for the debt if you can’t pay it back.
Your financial institution will set the maximum amount of money you’ll be able to borrow. The amount you can borrow may depend on the program you’re studying and the school offering the program. It may also depend on your living expenses, credit history and ability to repay the money you borrow.
You can apply for a student line of credit at any time. Usually, you apply online, over the phone or in person. Contact your financial institution to find out how to apply for a student line of credit.
You’ll need to provide proof that you’re either a full-time or part-time student at a recognized Canadian post-secondary institution.
Insurance on a student line of credit
Your lender may offer you optional credit insurance on your student line of credit.. It may help cover your payments in cases of serious illness, accident, death or if you lose your job.
You don’t have to take loan insurance to be approved for a student line of credit. The lender can't insist that you buy insurance.
If you decide to get insurance, make sure that the product meets your needs in terms of protection. If your lender is a federally regulated bank they must offer and sell you products and services that are appropriate for you. The offer must be based on your circumstances and financial needs. They also must tell you if they’ve assessed that a product or service isn’t appropriate for you.
Take the time to describe your financial situation to ensure you get the right product. Don't hesitate to ask questions and make sure you understand the insurance product you have or want.
Learn more about credit and loan insurance.
Federally regulated lenders, such as banks, can’t add optional loan insurance without your permission. If your bank adds it without your permission, file a complaint with the Financial Consumer Agency of Canada. You should also ask your lender to remove the optional service and reverse the charges.
Learn more about giving express consent for optional products and services.
Accessing money from your student line of credit
You should be able to access the available credit in your student line of credit soon after:
- you’ve signed all the necessary documents
- your application is approved
You can usually access the available credit from your student line of credit:
- at a branch of your financial institution
- at an ATM
- through online, mobile or telephone banking
With some lines of credit, you may also access the money by writing a cheque.
Financial institutions each have their own terms and conditions for the lines of credit they offer. Speak with your financial institution for more information about the student borrowing options they offer.
Borrow only as much money as you need to cover your needs while studying. Think about whether you’ll be able to make at least the interest payments while you’re studying. Also think about whether you’ll be able to repay your line of credit debt when you graduate.
Paying back your student line of credit
You must pay at least the interest on your line of credit, even while you're studying. Once you finish school, most financial institutions allow you to continue to pay only the interest for a period. That grace period is usually 6 to 12 months after you graduate.
After that period, you must start to pay back both the money you borrowed (the principal) and the interest. You'll continue to pay interest until you repay your balance. You can start paying back the principal at any time, even while you're still studying.
Speak with your financial institution to find out their student line of credit repayment terms and conditions.
If you have a Canada Student Loan instead of a student line of credit, the repayment terms are different. For a student loan, you’ll have a 6-month non-repayment period after you graduate. During that period, you won’t have to make payments.
Find out more about the repayment schedule and options for your Canada Student Loan.
Comparing student lines of credit with government student loans
There are pros and cons to government student loans and student lines of credit. With a line of credit, you’ll have to pay back the money that you withdrew from your available credit. You may also get more money from a student line of credit.
When choosing between options to borrow money, it’s also important to compare the amount of interest you’ll pay. Since April 1, 2023, the Government of Canada eliminated the accumulation of interest on all Canada Student Loans. This includes the loans that are currently being repaid. Students still have to pay any interest that may have accrued before April 1, 2023. Depending on your province, interest may also accrue on the provincial portion of your loan.
Learn more about the Canada portion and the provincial portion of your student loan.
If you have a Canada Student Loan instead of a student line of credit, you have access to the Repayment Assistance Plan (RAP). This plan helps students who are having trouble paying back their government student loan. This plan is not applicable to the money you borrow through a student line of credit.
Learn more about the Repayment Assistance Plan (RAP).
Before borrowing from a student line of credit
You may be able to pay for your education without having to borrow any money at all. For example, you may use savings or grants, bursaries or scholarships. A part-time job or co-op program can also help you cover the costs of your education.
Find out if you're eligible for scholarships, bursaries and grants from the Government of Canada:
Provinces and territories also offer grant and bursary programs for their permanent residents. You may be eligible for their programs even if you don’t have a Canada Student Loan.
To learn about grant and bursary programs in your province or territory, check with your student financial aid office.
Find your provincial or territorial student financial aid office.
Know your rights before you borrow
When you get a loan or line of credit with a federally regulated financial institution like a bank, you have the right to receive key details. These details will usually appear in an information box on your credit agreement. They can also be part of a separate document they provide to you when they approve your application.
Know your rights when you get a line of credit.
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