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Canadian Student Loans: NSLSC, RAP, and Repayment Strategies

Federal student loans in Canada are administered by the National Student Loans Service Centre (NSLSC). Since 2023, the federal portion of Canada Student Loans charges a floating interest rate equal to the prime rate with no additional margin, a significant improvement from the previous prime + 2.5% structure. Provincial student loans have separate terms — some provinces (like Ontario) have eliminated interest on their portion, while others still charge interest. After completing studies, there is a 6-month non-repayment period during which no payments are required on the federal portion, though interest may accrue on provincial loans depending on the jurisdiction.

The Repayment Assistance Plan (RAP) provides crucial support for borrowers struggling to make payments. Under RAP Stage 1, monthly payments are capped at 20% of family income, with the government covering remaining interest charges. After 60 months of RAP, Stage 2 begins where the government pays both interest and a portion of principal. Total loan forgiveness occurs after 15 years of repayment (10 years for borrowers with a permanent disability). Interest paid on federal and provincial student loans also qualifies for a 15% non-refundable tax credit, and unused interest can be carried forward for up to 5 years.

Average Student Debt at Graduation (Canada, 2024)

To accelerate repayment, consider making lump-sum payments whenever possible — there are no prepayment penalties on government student loans. Targeting the highest-interest loan first (typically the provincial portion, if it carries interest) minimizes total cost. Consolidating through a personal line of credit may offer a lower rate for high-income borrowers, but doing so forfeits RAP eligibility and the student loan interest tax credit, so weigh these trade-offs carefully before refinancing.