Student Debt – What You Need To Know Before You Take that OSAP Loan

Posted on 23 January 2019

Written by Samantha Galea

Student Debt is a growing problem for many graduates, do you know what you’re agreeing to when you borrow?

A post-secondary education can open up many doors for your future – but how much is it really going to cost you? If you don’t have tuition fees up front, you probably need to borrow money and in Ontario that probably means applying for financial support from the Ontario Student Assistance Program (OSAP). Taking on student debt may not seem like a big deal right now, but when it comes time to repay it (with interest) you might not be ready and this could cause financial trouble.

Student Debt in Ontario – What has the government changed?

Recently, the Ontario government has made changes that are sure to have a major impact on the future of student debt in Ontario. You may have heard about the changes in the news but do you know what exactly has changed? Do you know how the changes may impact you or your children? Here is an overview of the changes that the Ford government has made:

  • A 10% reduction in tuition fees.
  • Subsidized education threshold is lowered from a family income of $175,000 to $140,000.
  • Families with income of $50,000 or below will receive 82% of available grant funding.
  • The annual threshold for OSAP repayment has been lowered to $25,000 (was $35,000).
  • Interest will now be charged on provincial loans immediately after graduation.

What does all of this really mean?

The 10% reduction in tuition sounds positive, but the government will allow schools to make increases in other areas to offset losses. You may not save 10% when adding up all of your costs at the end of the year. Lowering the threshold for family income means more repayable loans, less grant funding. Low income families (below $50,000) will be entitled to more of the available grant funding but will also be taking loans. After graduation repayment begins as soon as you gross $25,000 in annual income. To put this in perspective, you could be working part-time at a coffee shop. Eliminating the 6 month grace period after graduation (charging interest immediately) means paying additional interest while you owe the most. Students can exclude themselves from “non-essential” school fees. Opting out of non-essential fees (such as club memberships) also sounds like a positive change. But, it’s up to the school to determine what is non-essential – it won’t be up to your discretion.

Can you avoid student debt and still get a post-secondary education?

A post-secondary education is possible without student debt, but you’ll need a plan. The best way to avoid debt (or reduce how much you will owe) is to save money. If you’re in your final year of high school, meet with someone at the bank and discuss your options to save money for school. You can work during the summer months and save up everything you earn, invest wisely and try to afford your tuition at least. Parents with young kids can look into registered education savings programs and other investment vehicles to save for a child’s future studies. High school students can save up the money earned working summer/part-time jobs during your high school and apply for bursaries and awards to offset some of educational costs.

Will a bankruptcy help me if I can’t afford to pay off my student loans?

Student loan debt is unique and there are very specific rules. We can explain when and if you will be able to reduce or eliminate what you owe. After you graduate, you will not be eligible to clear up your student debt with a bankruptcy until at least 7 years have passed. For this reason, if you choose to borrow OSAP, be prepared.

If you’ve been struggling for a long time with student debt repayment, let’s chat about options. We can tell you more about bankruptcy, consumer proposals and more. Please call us to discuss 1-877-501-4321. We also offer online booking for your convenience.

Samantha Galea

Samantha Galea is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) who started working with Spergel as a summer student in 2010. With her socio-political background, Samantha is committed to breaking the stigma associated with bankruptcy so that individuals and families can properly understand all of their options on their path to debt freedom. She is also our resident expert on student debt and collection agencies, as well as the manager of our Brampton office. Outside of work, Samantha is an avid reader of historical non-fiction and world traveler.

Schedule a Free Consultation with Samantha Galea (or your local Spergel LIT) by:

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