Student Loans Repayment Assistance: What it is and how to get it

Struggling to afford those student loan payments for that degree you got last year? I've been there as have many many people before you. It's a sad reality for a lot of people not earning a huge salary or even no salary at all if you're unlucky enough post-graduation.

Luckily for me and for lots of other people, the Canadian and provincial governments do have a program in place for those in such financial situations to help relieve the pressure of federal student loans (this assistance unfortunately doesn't extend to money privately borrowed).

It is called the Repayment Assistance Plan (RAP) and this program is how at the end of my grace period in 2013 (of which at the time my loans were more like out of sight out of mind, tragically) I was able to get my loan under $40,000 owed without accruing a cent of interest for six months. Not too shabby.

But wait. How did I not accrue interest on my loans? Because based on my salary in the previous month before applying to repayment assistance, the government paid my interest for me (or rather "forgave" my interest) while also allowing me to make my own loan payments that would be used entirely on the principle.

Sounds swell right? But not so fast. There's a catch, because when it comes to free money/government support, there is always a catch.

1. You need to apply for Repayment Assistance. 

There's no waving your hands and magically the government will pay off your interest for you. Nope, you have to do the legwork to prove to the government that the money you earn is not enough to also realistically pay for your student loans.

And you have to do it every six months.

Now how you apply is different for each province. Prior to 2012 in Ontario, the only way you could apply for Repayment Assistance was for them to SNAIL MAIL the application to you, and for you to SNAIL MAIL the filled in application with pay stubs and proof back, which back in my precocious 2012 days, was a giant HASSLE. Which meant in 2012, I failed spectacularly at the whole thing and didn't get approved due to insufficient proof, even though I was earning probably less than $1000 a month at the time at three or four different part-time jobs. Go me.

The above reality may still apply for some provinces. Thankfully in 2013, Ontario had set up a method in which borrowers can apply for repayment assistance through canlearn.ca. And with only one real income stream (and not 20) to keep track of, the process turned out to be far less painful for me.

2. You need to be out of school for at least 6 months and a resident of Canada. 

So no applying during the grace period, even if the grace period is still accruing interest on it. Which I don't completely agree with but I guess the government needs to make some profit off your free-but-not-so-free education somehow. Besides you paying your taxes because they also require you to live in Canada to apply. (Exceptions to the resident of Canada rule is you're on an international internship or a deployed reservist)

3. RAP/The government looks only at your gross income when calculating whether or not you are eligible for assistance. 

Have a car loan/mortgage/credit card debt also putting a drain on your cash flow? Sorry (not sorry)! The government only looks at the total amount you earn and if your loan repayment is less than 20% of your gross family income (NOT the net, which I was kinda, sorta hoping was the case when I reapplied at the beginning of the 2014 year) then all you're going to get from the government is a rejection letter (something I had the pleasure of receiving to start 2014. Happy New Year!)

Additionally, there are degrees in which the government can assist you financially. In my case, I had my interest forgiven and could make my own payments anywhere between $0 to the full amount during those six months and all my costs would come off the principle. But there are also situations where the government would partially pay your monthly interest and reduce your monthly payments.

And then there's the situation where you're SOL.

4. Your loan must NOT be in default nor can you have any missed payments on it.

Meaning that if you ignored your student loans and consequently those collection calls for two years and then went "Oh I should apply for RAP because I make a low income"... You're out of luck.

How out of luck? Apparently once your government student loans go into default in Ontario you will NEVER be able to enter RAP. (A fate which I narrowly avoided in 2012 when I was 60 days late on interest payments for those two failed attempts to apply for RAP)


Note how none of this assistance by the (Ontario) government actually sees your student loan debt shrink. All they do is pay down your interest but the loan is still there for you to deal with. And even then, the government will only continue to pay off your interest completely for 60 months (5 years) before the interest start accruing again on the account. Paying down that loan is still your responsibility and it is up to you to decrease it and at least pay off the principle.

But say after a long 10 years, five of which you maxed out your RAP interest assistance and you still have a low income and still have that massive student loan hanging over your head that is hurting your bottom line even under a 15-year repayment plan (the max number of years the government allows for people to pay down their loans).

There apparently is a second stage to repayment assistance that will see the government start to pay a portion of your principle as well as your interest so that by the end of the 15 years out of school, you won't be in student loan debt.

Of course, I don't know what that would do to your credit score (or if such activity would be reported to any bureau) as I'm only about two years out of school and at this point, can't and won't ever hit that odious milestone to experience it.

And that's it. My experience in RAP and how I both dealt and did not deal with it. There are a couple of things that you really should not have done that I did, particularly in 2012, but I can say I learned from it.

In 2013, when my loan went into repayment again after college, I did probably the smartest thing I'd ever done money-wise. Even though I didn't need to make payments to my loans, I behaved as if I did. I made what was supposed to be my minimum payments every month in that six month time and it prepared me for when I actually did have to make payments in 2014. It allowed me to adjust my spending accordingly and developed a habit of paying down that loan when I can.

Which really was a big and important step in my loan repayment journey.