Student loans are often an unavoidable expense that comes with attending post-secondary school in Canada. Post-secondary education programs can cost anywhere from a couple thousand to $50,000+ by the time you graduate.
It’s a large sum of money that most students don’t have on hand. In 2023, over 566,000 students in Canada received loans through their province’s student financial aid programs. It’s clear that most students in Canada depend on financial aid to fund their education.
However, accumulating up to $50,000+ in student debt is concerning. This brings up a very important question — what does this kind of debt actually mean for the student? How do student loans affect your credit score and ability to rent an apartment or apply for loans? We’ll be exploring just that in this article. Keep reading to learn more!
How Do My Student Loans Affect My Credit in Canada?
Yes, student loans can affect your credit the same way any debt would.
The Negative Effects
The main thing student loans will negatively affect is your debt-to-income ratio. Having student loan debt that is higher than your income will give you a poor debt-to-income ratio. Having a poor debt-to-income ratio will affect your ability to qualify for credit cards or loans, as well as your ability to rent.
Positive Effects
Making regular payments to your student loan debt can actually help your credit score in the long-run. It establishes a positive repayment history, which can gradually improve your score. Having a higher credit score will help you when it comes to rental applications and qualifying for additional loans and credit cards.
But if you aren’t able to make regular payments, it’s unlikely you’ll see a positive impact on your credit score.
Advice for Graduates Struggling to Pay Their Student Loans
Apply for Student Loan Repayment Assistance
If you have government student loans, the Repayment Assistance Plan (RAP) is available for borrowers who are having trouble making payments. If you qualify for an RAP, the government will either reduce the amount you have to pay or cover your student loan payments completely.
Your income will be the deciding factor in if you qualify for an RAP and how much will be covered by your RAP. Changes in your income will change whether you qualify and what coverage you qualify for. You need to reapply every 6 months.
You can apply for an RAP through your National Student Loans Service Centre (NSLSC) account. Learn more about the RAP here!
Consider Seeking Debt Relief
You can have an easier time repaying or be released from your student loan debts through select debt relief programs. Debt relief options for student loans include:
- Credit Counselling
- Consumer Proposals
- Bankruptcy
Speak to a debt relief specialist about what options are available to you. We offer free, on-obligation consultations to discuss your debt situation and what options you have for repaying or being released from the debts.
We will not make a decision on how to deal with your debts for you. Rather, our role is to inform you about how these debts work, how it might affect you, and what options are available for relief.
Ultimately, what path you choose will always be your choice. Upon making a decision, we’ll help connect you with the people and resources you need to start your debt recovery process.
