Funding Education Costs
Once you have estimated your future education expenses, the next step is to determine how you can finance those expenses.
Funding for education expenses may be available from any or all of the following sources:
- your savings (regular savings (TSFA), RESP, RRSP accounts, etc.)
- scholarships, grants, or bursaries
- student loans, personal loans, or a loan under the RRSP Life Long Learning Program
- employment while attending school
- selling assets (such as a car, house, investments, etc.)
- contributions from family and friends
Remember: If you plan to create or use savings as a major funding source, you will find our Education Savings Plan calculator to be an invaluable tool. With this calculator, you can estimate the amount of regular monthly savings you will need to commit to achieve your desired savings goal. The calculator will also enable you to calculate the monthly saving amount if you are using an RESP account, receiving the accompanying government grants, or you are simply saving within a regular account.
Note: If you are unsure which account is best supports your savings efforts you can use our Taxable vs. Tax Advantaged calculator to compare how your savings would look if they were accumulated inside a Tax-Free Savings, Taxable, or RRSP accounts. You might be surprised at the results of the comparison!
Saving for education
The type of account the savings are held within – taxable account, Tax-Free Savings Account (TSFA), Registered Education Savings Plan (RESP) or a Registered Retirement Savings Plan (RRSP) – can influence funding education costs from savings. Each account type has its own unique administrative and income tax benefits and implications with regard to contributions and withdrawals. It would worthwhile to take the time to learn about each account type and their characteristics before they are used to fund your education costs.
Note: Visit our Classroom – Account Type for detailed information concerning contributions, withdrawals, and the administration of TFSA, RESP, and RRSP accounts.
Remember: As mentioned above, you can use the Education Savings Plan and Taxable vs. Tax Advantaged to help determine the amount you will need to save each month and the best account type to accumulate your education savings.
Scholarships, grants, and bursaries
In Canada, there are literally thousands of individual scholarships, grants, and bursaries available to students. You should try to take advantage of as many of these funding opportunities as possible.
To find information on the scholarships, grants, and bursaries available speak with your high school counselors or visit your local universities, colleges, trade schools and service organizations. Each will have information that will help you to pursue these options. In addition, there are websites such as the following that are set up to help you to identify and apply for these types of funding options:
- Funding Programs – Human Resources and Skill Development Canada
- Apprenticeship Incentive Grant – Service Canada
- Scholarship Search – CanLearn.ca
- International Scholarships – Government of Canada
- Scholarships – ScholarshipsCanada
Note: The websites above may require you to complete a questionnaire that requests information about your family background, interests, hobbies and your preferred areas of study. These questionnaires are used to filter and search for the available awards that you may qualify for so it is important to answer all of the questions as accurately and thoroughly as possible.
Student loans and borrowing money
According to the Canadian University Survey, about 50% of students report debt related to financing their university education, most often from government student loans (40%). The average debt among those reporting any debt is $26,819, with 29% of all students reporting debt of $20,000 or greater
More and more students are relying upon student loans to help finance their education costs. For example, in 1995, 17% of graduating students had outstanding student loan amounts. That compares with 27% in 2009 and 50% in 2015. Since the federal student loan program began in 1964, more than 4.7 million students have received almost $38 billion in student loans.
With the continual rise in education costs, you may need additional assistance in the form of student loans, personal loans and loans under the RRSP Life Long Learning Program to help you finance your education. Student loans are loans guaranteed by provincial and federal governments and granted to students attending qualifying education programs. Unlike scholarships, grants, and bursaries, funds received through a student loan must be repaid.
Under the student loan program, the respective governments pay the interest expenses for the loan until the student leaves school or graduates. From the time of departure onward the student becomes responsible for the loan’s interest and principal payments. See the chart below for a comparison of loan features.
| Government Student Loans | Non-governmental Student Loans | |
| Requirement of a guarantor | As a general rule, no guarantor is needed. Except to receive a BC Student Loan if your are under 19 years of age, you need a guarantor. | Possibly |
| Interest expense while in school | Full-time students do not pay the interest until they leave post secondary school or they have reached the lifetime limit for assistance. | Yes, students pay the interest expense while attending school. |
| Start date for the loan’s repayment | Interest expense begins to be accrued from the date the student leaves school, but payments are not required to begin until 6 months after leaving school. | Immediately upon receiving the loan. |
| Repayment help | Various forms of help are available, such as getting a temporary pass on paying principal and interest expense, are available. | Varies by loan provider, but typically very difficult to access. |
| Interest Rate | Varies from province to province. The interest rate for federal loans is “Prime” + 2.5% if you choose a floating interest rate or “Prime” + 5.0% if you choose a fixed rate.
(Prime – See description under this chart.) |
Varies by loan provider and the type of loan. |
| Maximum Loan Amount | Federal Student Loans have a lifetime limit of up to $210 per week of full-time study to a maximum of 340 weeks ($71,400); up to 400 weeks ($84,000) for Doctorial students and up to 520 weeks ($109,200) for permanently disabled students. | |
| Loan term | Maximum is 10 years. This may be extended under the Repayment Assistance Plan (RAP) to 15 years. | |
| In bankruptcy | Student debt is not wiped out unless bankruptcy is declared after seven years of leaving school and the student loans do not represent more than 50% of the student’s outstanding debt. | Forgiven once there is a bankruptcy discharge. |
| Missed payments | The interest expense is added to the loan’s outstanding principal and the loan’s repayment schedule. | |
| Loan administrator | Federal student loans are administered by the National Student Loan Services Centre (NSLSC). |
Note: Prime rate: According to CanLearn.ca, “The interest rate the Minister of Human Resources and Skills Development Canada uses as a base (the Prime rate) to calculate the interest rates of your student loan.
The variable reference rate of interest calculated by the Minister of Human Resources and Skills Development Canada is based upon the variable reference rates of interest declared by the 5 largest Canadian financial institutions as their prime rate. (These institutions are the Bank of Montreal, the Canadian Imperial Bank of Commerce, the Bank of Nova Scotia, the Royal Bank of Canada and the TD Canada Trust, formerly Toronto-Dominion Bank.) The prime rate will be calculated by ignoring both the highest and the lowest of those 5 rates and taking the average of the remaining 3 rates. Changes to the prime rate will take effect the following business day.”
Employment income, selling assets, and contributions from family and friends
Many students find that simply saving and borrowing is not sufficient to cover their education costs. Additional sources of funding must also be accessed such as working part-time while at school, possibly selling that beloved car, or simply relying upon the savings of others. Funding education costs can be difficult and students and parents should look at all of the funding options available.
