How to Stay on Top of Student Loan Debt

If you live in Ontario, you’ve probably heard about the provincial government’s student-aid reforms, designed to make university education “more affordable” and “more sustainable.” But for whom? When 85 per cent of Canadians believe students are taking on too much debt in order to pursue post-secondary education, it’s still undecided whether these reforms to OSAP will help the majority of students, or actually result in more student debt.

Ontario’s postsecondary educational reforms

Here are the most significant changes to OSAP for the 2019-20 school year:

  • Fewer grants will be given. The majority of grants (money you don’t have to pay back) will be given to students coming from households earning less than $50,000. The free tuition implemented by the previous government in 2017 is now over.
  • The repayment of student loans will be more like the federal portion of the student loan where interest starts accruing right after you finish university. However, there will still be a six-month period where you don’t have to start paying back your loan. The provincial portion (about 40 per cent of the loan) will now be more expensive, by six months’ worth of interest.
  • There will be a 10 per cent reduction in tuition fees for 2019-2020 and a tuition freeze for the following year. So even though more students will be getting loans and paying more interest, the size of the loans will be marginally less. The cost savings adds up to about $340 a year for the average college student and about $600-1,000 for the average university student.


You can read more about the changes to OSAP here on

To recap, there will be less OSAP funding for the average postsecondary student compared to 2017, and more interest on student loan payments. Some critics see the 10 per cent tuition cut as adding an extra blow to students: universities will have to make up for the loss of revenue on their own, but students will ultimately have to pay for this as well, with larger class sizes and higher tuition in 2021.  

Start thinking about interest before you pay it back

Given this recent news, how should current students approach the financing of their education? The real sticking point is interest. Sure, everyone knows that loans come with interest, but for many students, university is all about savouring the moment. Thinking about paying back your student debt and the amount of interest your education will cost you may be the last thing on your mind.

But it definitely doesn’t hurt to pay attention to your budget, look for opportunities to earn extra money and try to live as frugally as possible. These are lessons that are best learned young. But how much interest are we talking about?

One great tool that you can use to create a plan for repaying your student loans after university is the Government of Canada’s Loan Repayment Estimator. Here’s what we found using the average OSAP loan amount of $20,000 over a repayment period of ten years. Keep in mind, though, that the average cost of a four-year degree is about $60,000. For most students, an OSAP loan is one of many parts needed to finance a post-secondary education (student line of credit, summer jobs, parents’ RESPs, etc.).

The cost of a $20,000 loan is currently $11,716.18 over 10 years (prime rate + 2.5 per cent). But, remember, prime rate will likely increase with any future interest rate hikes.

If you’re having trouble repaying your loan, it’s helpful to know that there are programs available to assist you. The Repayment Assistance Plan from the government of Canada can reduce your monthly payment if your income falls below certain thresholds. It’s also possible to revise the terms of your loan and increase your repayment period to up to 174 months (14.5 years).

How to live frugally when you’re a student

Frugal living is something we promote across the board. And in retrospect, for most grads, frugal living may have actually been easier as a student: living in shared accommodations and enjoying fewer financial responsibilities. But the reality is frugal living may not be top of mind for all students, who are experiencing independence for the first time and have never had to live on a budget.

Frugal living is actually one of the 7 tips graduates would give to new students on how to reduce student loan debt. We compiled these pointers from an Ipsos poll we did on student debt in 2017. When three in four Canadian graduates under 40 regret taking on student debt, it’s important to promote more mindful borrowing and more financial literacy among university students.

Frugal living goes well beyond “pasta, tuna, grilled cheeses and baby carrots”, as one user put it. Indeed, students (and their parents) should educate themselves about reducing living expenses while also making the most of the experience. Remember that education is an investment, and that student debt should be good debt.

Do you have any budget tips for living a frugal, student life? Share your experiences with us on Twitter using #BudgetTips #LeaveDebtBehind or join our Facebook community.