Everything you need to know about student line of credits

Post-secondary education is not cheap, especially if you pay for it all by yourself. It can be challenging to navigate the economic world and the numerous financial aid options available while attending school. A Student Line of Credit is a popular way for students to pay for tuition, rent, supplies, and more.

What is a Student Line of Credit?

A Student Line of Credit is a product offered by financial institutions to assist students in paying for post-secondary education-related expenses. These credit lines are a type of loan that allow you to borrow money up to a predetermined limit set by the bank.

The advantage of Student Lines of Credit is that the interest rates are typically lower than those on government student loans, and you only have to repay the interest during your time in school. Following graduation, each bank offers a grace period during which you will continue to pay only interest. After the grace period expires, you will begin repaying the line of credit’s initial balance and interest charges. Additionally, if payments are made on time, a Student Line of Credit can help you improve your credit score.

What is the difference between a Student Line of Credit and a Loan?

Typically with a loan, you must repay the entire amount borrowed plus interest, whereas with a Student Line of Credit, you repay only the amount spent plus interest. For instance, if you have a $5,000 line of credit and spend $2,000, you repay only the $2,000 plus interest.

Because each bank’s Student Line of Credit is unique, we’ve compiled a brief comparison of the five largest Canadian banks’ Student Lines of Credit for post-secondary education to assist you in your search. It is recommended that you begin with your current bank, as they will typically offer better terms to existing customers.

BMO

BMO’s Student Line of Credit offers students $15,000 in their first year, and $10,000 in each remaining year, for up to a maximum of $45,000 in four years.

Interest Rate:

The interest rate is calculated for individuals based on your program, degree, if you’re currently employed, etc.

Payment Plan:

Only pay interest on what you borrow, with no annual or monthly fees. Make interest-only payments while in school and for two years after graduation. After the two years, your repayment of your initial amount begins.

Eligibility:

To be eligible for a Student Line of credit, you must be enrolled at an eligible post-secondary school in either a diploma or certificate program. This program must be at least 12 weeks and is taught on a full-time basis (20 or more hours of instruction per week). You must also be a Canadian citizen or permanent resident.

Required Documentation:

• Proof of enrolment
• Government-issued photo ID
• Co-signer is required
  • co-signer’s government-issued photo ID
  • co-signer’s proof of employment such as a letter from an employer or recent paystubs
  • co-signer’s recent T4/T4A slips or RL1 if they’re a resident of Quebec, or T1 income tax return or Revenue Quebec TP1 with corresponding notice of assessment.

CIBC

CIBC’s Education Line of Credit offers a range of credit as low as $5,000 and up to $60,000.

Interest Rate:

CIBC Prime Rate

Payment Plan:

Pay interest only on the amounts you use while you are in school, and for 12 months after graduation (or 6 months if you leave your program before graduating).

Eligibility:

To be eligible for a Student Line of credit, you must be enrolled at a Canadian university or college. You must also be a Canadian resident and you have reached the age of majority in your province. Additionally, you haven’t been declined for credit by CIBC in the past 6 months and you haven’t declared bankruptcy in the past 7 years.

Required Documentation:

• Proof of enrolment
• Government photo ID
• Co-signer may be required

RBC

RBC’s Student Line of Credit offers a range of credit limits based on your program of study. These limits start at $5,000.

Interest Rates:

RBC Prime Rate* + 1.00%

Payment Plan:

During your education, you have full access to your credit line. After you graduate, you have two years to start repaying your line of credit.

Eligibility:

To be eligible for a Student Line of credit, you must be enrolled at a Canadian post-secondary educational institute. You must also be a Canadian citizen or a landed immigrant.

Required Documentation:

• Proof of enrolment
• An estimate of your education costs (including tuition, supplies, fees, accommodations, food, travel, etc.)
• A list of your financial resources (including RESPs, scholarships/bursaries, government funding, summer employment, etc.)
• Proof that you are a Canadian citizen or landed immigrant
• A co-signer may be required if your credit history is limited or are studying outside of Canada

Scotiabank

Scotiabank’s Personal Line of Credit for Students offers a range of credit limits based on your program of study.

• For full-time undergraduate programs, you can receive a minimum credit limit of $1,000 per year and a maximum credit limit of $15,000 per year. The maximum credit limit is $40,000.
• For part-time undergraduate programs, you can receive a minimum credit limit of $1,000 per year and a maximum of $7,500 per year. The maximum credit limit is $20,000.

Interest Rate:

The interest rate for the personal line of credit for students is calculated for individuals based on your program, degree, if you’re currently employed, etc.

Payment Plan:

Make interest-only payments while you’re in school and enjoy a 12-month grace period after graduation. After the grace period, you begin the process of repaying the initial amount borrowed.

Eligibility:

To be eligible for Scotiabank’s Personal Line of Credit for Students, you must be a Canadian citizen or permanent resident enrolled in a degree program at a Canadian or American post-secondary school.

Required Documents:

• Proof of enrolment
• Government photo id
• Co-signer may be required

TD Bank

TD Bank offers a Student Line of Credit for full-time and part-time undergraduate students.

• For full-time undergraduate students, TD Bank offers up to $20,000 per year, with a maximum of $80,000 over four years of study.
• For part-time undergraduate students, they can receive up to $20,000, with a maximum of $80,000.
• The maximum amount offered for a Student Line of Credit will vary depending on your program.

Interest Rates:

For a Post-Secondary Certificate Program, the interest rate is the TD Prime Rate* + 1.50%.

For an Undergraduate program, the interest rate is the TD Prime Rate* + 1.00%.

Payment Plan:

While you are studying in school, you must pay monthly interest-only payments. After your graduation, you will have 24 months to continue making the interest-only payments and once that time is over, then additional payments are required.

Eligibility:

To be eligible for a Student Line of credit, you must be enrolled in a full-time or part-time program in an accredited Canadian university or college.

Required Documentation:

• A co-signer (someone who can take on the payments when you cannot)
• Your current address and previous address (if your current address is less than three years old)
• Your monthly mortgage or rent amount
• Your monthly payments (loans, credit cards, lines of credit)
• Proof of enrolment at an accredited Canadian university or college

Final Thoughts

In general, one of the most critical things to keep in mind when applying for a Student Line of Credit is to compare the bank’s interest rates, as this is the amount of money you will be repaying monthly while enrolled in school. The interest rates charged by the majority of banks are typically the bank’s prime rate plus a percentage point, but keep in mind that prime rates vary by bank and are subject to change throughout the term of your line of credit contract. Another critical factor to consider when selecting a financial institution for your Student Line of Credit is the duration of the institution’s grace period. The longer the grace period, the more time you have until you are required to repay the original loan amount.