Student Loan Repayment in Canada: Grace Period, Interest and the Repayment Assistance Plan

In Canada, you start repaying student loans six months after you leave full-time studies, and the federal Canada Student Loan portion charges no interest, as of 1 October 2026. The provincial portion can be different: Ontario and Saskatchewan are the only provinces still charging interest on their share, and Ontario's rate is prime plus 1%, which starts building during the grace period, according to CBC News on 25 August 2026. If your income is low after graduating, the Repayment Assistance Plan (RAP) can lower your monthly payment or reduce it to $0, six months at a time. Interest you pay on government student loans can be claimed for a non-refundable tax credit.

What Ontario’s provincial interest costs at today’s prime (checked Oct 2026)

The federal portion of a Canada Student Loan charges no interest. Ontario’s portion charges prime plus 1%. TD Bank’s posted prime rate is 4.45%, so the Ontario rate works out to 5.45% a year while prime stays there.

If you can afford it, paying the Ontario portion’s grace-period interest as it builds stops it from being added to the balance you repay. Interest paid on government student loans also counts for the non-refundable student loan interest tax credit.

How Canada Student Loans are structured

Most students in provinces that run integrated programs, such as Ontario, receive one loan from the National Student Loans Service Centre (NSLSC) with two parts: a federal Canada Student Loan and a provincial loan. You make one combined payment, but the parts have different rules. Federal interest on Canada Student Loans was permanently eliminated in 2023. Provinces set their own rules for their portion, and most no longer charge interest.

Bank student lines of credit are a different product. They charge interest from the day you borrow, have their own repayment terms, and their interest does not qualify for the student loan interest tax credit.

The six-month grace period

The grace period starts the month after you stop being a full-time student, whether you graduated, dropped to part time or left school. During those six months no payments are required. In Ontario, interest on the provincial portion builds during the grace period; you can pay it as it accrues or let it be added to your balance. Before the grace period ends, the NSLSC sends a repayment schedule showing your monthly payment and repayment term. Log in to your NSLSC account to confirm your contact information, banking details and the date your first payment is due.

• Use the grace period to build a small cushion and set up the payment from the account your pay goes into.
• If you are going back to school full time, confirm your enrolment so repayment stays paused.
• If you expect low income, apply for RAP before the first payment rather than missing it.
• In Ontario, consider paying the provincial interest during the grace period if you can, so it does not grow your balance.

The Repayment Assistance Plan

RAP reduces your monthly payment to an amount based on your family income and family size, and can make it $0. You apply through your NSLSC account, and approval lasts six months; you must reapply for each new period. To qualify, your loans must be in repayment, meaning at least 6 months have passed since you left school, and your payments must be up to date. While you are on RAP, the government pays any interest on the federal part of your loan that your reduced payment does not cover, and it starts paying down principal and remaining interest after 60 months of RAP or 10 years after you finish school. As of 1 Oct 2026, canada.ca says that if your monthly gross family income is below these thresholds, you may not need to make payments for 6 months; above them, you may still qualify for a reduced payment. Thresholds may be different for the provincial part of your loan.

Canada.ca notes that income thresholds may be different for the provincial part of your loan and that provincial restrictions may apply, so check with your province's student aid office about your provincial portion. Borrowers with disabilities have a separate plan, the Repayment Assistance Plan for Borrowers with Disabilities (RAP-D); on RAP-D, the government pays down both principal and any interest your reduced payments do not cover. Ask the NSLSC if it applies to you.

Choosing your repayment approach

With interest-free federal loans, there is less pressure to pay off the federal portion early. If you also have credit card debt or a bank line of credit, paying those first usually saves more. In Ontario, the provincial portion charges interest, so extra payments are often best directed there. You can make lump-sum payments at any time without penalty and ask the NSLSC to apply them to a particular portion. You can also ask to change your monthly payment and repayment term within the limits the NSLSC allows.

• High-interest debt first: credit cards and lines of credit usually cost more than student loans. See snowball versus avalanche.
• Then the interest-bearing provincial portion (Ontario or Saskatchewan).
• Then the interest-free federal portion, on schedule.
• Keep an emergency fund so a job loss does not cause missed payments.

The student loan interest tax credit

Interest you paid during the year on loans received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act or similar provincial programs can be claimed on line 31900. The credit is worth the interest multiplied by the lowest federal tax rate (14% for 2026), plus any provincial credit. Only the student can claim it, and if you do not need it this year you can carry it forward for up to five years. Since federal loans charge no interest, the credit now mostly matters for Ontario and Saskatchewan borrowers. Your NSLSC account shows the interest paid for the year.

What happens if you miss payments

As of 1 Oct 2026, canada.ca says that missing payments will affect your credit, and that when you miss 9 months of payments, the federal part of your loan goes to the Canada Revenue Agency for collections. Once in collections, you do not have access to student aid until you bring the loan back into good standing, which you arrange with the CRA: either pay any outstanding interest and make the equivalent of 4 monthly payments, or add unpaid interest to the balance (allowed only once) and make the equivalent of 4 monthly payments. RAP also requires your payments to be up to date. If money is tight, applying for RAP is almost always better than missing payments. The credit score guide explains how to check your report.

Example: the first two years after graduating

These numbers are an example. They are not real balances, interest rates or RAP results. Maya graduates in April with $24,000 of federal loans and $8,000 of Ontario loans.

Maya never misses a payment and never lets interest build. Once she has a steady income, she pays extra on the interest-bearing Ontario portion first, and claims the Ontario interest she paid on line 31900.

A repayment checklist

1. Log in to your NSLSC account and confirm your details before the grace period ends.
2. Check how much of your balance is federal and how much is provincial.
3. If your income is low, apply for RAP before your first payment and set a reminder to reapply every six months.
4. Set up automatic payments from the account your pay goes into.
5. Direct extra payments to interest-bearing debt first.
6. Download the interest statement each year for line 31900.

Common mistakes

• Missing the first payment because contact details at the NSLSC were out of date.
• Not reapplying for RAP after six months.
• Paying extra on the interest-free federal portion while carrying credit card debt.
• Forgetting to claim interest on line 31900, or trying to claim bank line of credit interest.
• Letting the loan go into default instead of asking for RAP.

How much you pay on RAP: the payment formula

Section 19 of the Canada Student Financial Assistance Regulations defines the monthly affordable payment. It is $0 if monthly family income is no more than the threshold for your family size. Otherwise it is monthly family income multiplied by the lesser of two amounts: 0.1A, and 1.5 × [(X − Y) ÷ 100Z + 0.01] × A.

Two things follow directly from the formula. Just above the threshold, X − Y is close to zero, so the bracket is about 0.01 and the payment is about 1.5% of family income. As income rises, the percentage climbs until it reaches the 0.1A cap, which for a borrower whose spouse has no student loans is 10% of family income. If your spouse also has student loans, A is less than 1, so your share of the payment is smaller.

Schedule 1 of the regulations prints a monthly increment for each family size, for example $250 for one person and $350 for two. The thresholds printed in that same schedule are lower than the current canada.ca figures, which suggests the published amounts are updated over time, so use the examples below to understand the shape of the formula, not to predict your exact payment. The NSLSC assessment decides the real amount.

RAP: two tests to qualify for stage one

The regulations also compare your affordable payment with your required payment. You qualify for stage one only if the affordable payment is less than the required payment. The required payment is your outstanding full-time principal amortized over 120 months minus the months that have passed since you left school, with credit for months on interest-free relief or RAP. In plain terms, if your normal payment is already affordable by the formula, RAP will not lower it.

RAP example: four incomes

These numbers are an example. A single borrower whose spouse has no loans, so A = 1, uses the canada.ca threshold of $3,866 and the Schedule 1 increment of $250 printed in the regulations. Their regular required payment is $310 a month. At $3,800 of monthly family income, the payment is $0. At $4,000, the excess is $134; 134 ÷ 25,000 = 0.00536, plus 0.01, times 1.5 gives 2.304%, or $92.16. At $4,500, the excess is $634, which works out to 5.304%, or $238.68. At $5,500, the formula exceeds 10%, so the cap applies and the payment would be $550, which is above the $310 required payment, so this borrower would not qualify for RAP at that income.

The RAP catch: no new aid after principal relief

Canada.ca warns that once the federal government has paid towards your principal while you are on RAP, you cannot receive more student grants or loans until you repay your unpaid loans. If you might go back to school, factor this in. The restriction does not apply to RAP-D, the Repayment Assistance Plan for Borrowers with Disabilities, under which the government pays down both principal and any interest your reduced payments do not cover.

How to apply for RAP

1. Wait until your loans are in repayment: at least six months after you leave school.
2. Have your family income details ready for the application.
3. Apply online through the National Student Loans Service Centre, signing in through My Service Canada Account, or mail the RAP application form to NSLSC, P.O. Box 4030, Mississauga ON L5A 4M4.
4. If you have provincial loans, check whether you also need to apply with the province; PEI borrowers must.
5. Keep making payments until you are approved.
6. Set a reminder to reapply before your six months end.

For grace periods and your first payment, see student loan repayment and the grace period. For aid amounts while you study, see Canada Student Grant 2026-27.

Related guides

• Student Loan Interest Tax Credit (Line 31900)Education
• Student Line of Credit vs Government Student Loan in CanadaEducation
• Alberta Student Aid 2026-27Education
• StudentAid BC 2026-27Education