February 8, 2019

Paying for post-secondary education: What are your options?

A man swipes on his mobile phone while holding what looks like a credit card. A man swipes on his mobile phone while holding what looks like a credit card.

Going off to post-secondary education can be an exciting time for students and parents alike. It’s an opportunity to explore different interests and create great memories. 

However, it can be quite costly. Tuition alone for Canadian full-time students was, on average, $6,838 in 2018/2019.1

Fortunately, there are many tools designed to help you save, plan and pay for post-secondary education. Some of these tools include student loans, student lines of credit, grants, scholarships and education savings.

Student loans

In Canada, the federal government offers Canada Student Loans to help students pay for post-secondary education at any identified college, university or other post-secondary institution. 

To be approved, you need to be a qualifying full- or part-time post-secondary student demonstrating financial need. To learn more about course load requirements and to determine if you qualify for the loan, visit the Government of Canada’s eligibility checklistOpens a new website in a new window.

Government loan providers ask you to start paying back the loan as early as 6 months after you’re done school. Make sure to contact your loan provider to check on the status of your loans and update your enrolment status. If you’re still in school, you’ll need to provide proof from your school. This is important so that you don’t have to pay back money while you’re still studying, and so that your loan remains interest-free. 

Student lines of credit

According to recent statistics, 34% of graduates with bachelor’s degrees paid off their student loans three years after graduation.2 In paying off your student loan, student lines of credit can come in handy by providing a more flexible way to start paying back some or all of what you owe.

A line of credit allows you to borrow money at different times up until you hit a pre-set limit. This type of credit lets students pay for expenses related to school like tuition, textbooks and housing. It can also be used to pay for regular things like grocery shopping and transit passes.

Unlike a student loan, you only pay the lender based on what you borrow with a student line of credit. For example, if your line of credit has a $15,000 limit and you borrow $3,000, you only have to pay back $3,000 plus interest. You may also be able to get more money from a line of credit than from a government student loan. 

A downside to this source of money is that you may not be qualified for some government assistance programs if you don’t have a student loan from the federal government. For example, you need a government student loan to be eligible for Canada Student Grants. These grants provide money to help you pay for your college or university and don’t have to be paid back, like scholarships and bursaries. 

Although interest rates on student lines of credit are lower than rates on government student loans, you have to pay the interest as soon as you borrow money from a student line of credit. On the other hand, with government loans, you only have to pay the interest after you finish school.

Scholarships, grants and bursaries

Scholarships are monetary awards usually based on merit, while grants and bursaries are usually given based on financial need. High academic achievement, athletic skill, extra-curricular involvement, or special abilities mayalso be considered.

It is possible to pay for your education without having to borrow any money if you use savings, grants, bursaries and scholarships. The Government of Canada’s websiteOpens a new website in a new window can help you find out if you’re qualified for scholarships, bursaries or grants.

RESPs

A RESP allows a person, like a parent or grandparent, to set aside money for someone who can use it to pay for an education. The money inside the account grows tax-free until the designated beneficiary withdraws it. As a saving tool, a RESP helps you prepare for the costs associated with post-secondary education to help avoid long-term debt. It’s important to make sure that the chosen post-secondary program qualifies for RESP withdrawals.  

An advantage of the RESP is that it can remain open for 35 years, which can help if a child decides to postpone or extend their post-secondary education. After enrolling in a qualifying post-secondary educational program, you can withdraw money from the RESP to pay for school. If, however, a child decides not to go at all, there are other options for you. You can transfer the plan to their sibling within the allowable timeframe or withdraw money from the plan, with some tax implications. 

Statistics Canada. Table 37-10-0003-01   Canadian undergraduate tuition fees by field of study

Statistics Canada. 2018. Back to school... by the numbers. https://www.statcan.gc.ca/eng/dai/smr08/2018/smr08_220_2018

Talk to an expert

Not feeling confident in your finances? You can talk to one of our financial security advisors who will work with you to craft a financial plan tailored to your needs.

Contact an advisor