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How to Pay Back OSAP in 5 Easy Steps

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Graduating from your post-secondary studies is definitely worth celebrating, but for many, it also comes with a huge pile of student debt. Here, we cover how to pay back OSAP in 5 easy steps and provide answers to a few common questions about OSAP funding. 

Summary: how to pay back OSAP

  1. Graduate or leave your full-time education
  2. Estimate how much you’ll need to pay each month
  3. Log in to your NSLSC account
  4. Receive your repayment package 
  5. Repay your loan

What is OSAP?

OSAP, or Ontario Student Assistance Program, is a program designed to help students in Ontario with financing post-secondary education

OSAP offers two types of funding: 

  • Grants – money that doesn’t need to be paid back
  • Loans – money that needs to be paid back.

Your application will help calculate both your grant and loan portion, but you don’t need to take out the loan if you feel that the grant is sufficient. You can use OSAP funds to cover any of your expenses, such as tuition, school fees, housing, textbooks, and child care. 

What part of OSAP do you need to repay?

When you receive your OSAP funding, you have the option of taking out the loan portion – this is usually the only part you need to pay back. So if you received a total of $30,000 funding, but only $20,000 of it was a loan, you only owe $20,000 (plus interest). 

Wait, do you have to pay back grants from OSAP then?

There are a few cases in which you may need to pay back the grant portion of your OSAP funding. If you’ve been overpaid for your grant, you could be required to pay some or all of the overpayment back before you can apply for more OSAP funding. This could happen if you make a change to your study plans (e.g. drop a course) or inaccurately report your information (e.g. leave out your part-time job). 

It’s also possible for your grant to be converted into a loan, meaning you’ll need to pay back your entire funding amount. This could happen for the following reasons:

  • You withdraw from school or stop taking the minimum course load in the first 30 days, and you don’t go back full-time within 5 months of the same academic period 
  • You’re found to not qualify for the grant you originally received (e.g. you dropped a course, you didn’t report both parents’ income) from an OSAP reassessment
  • The income amount on your application can’t be verified within a year from when you started your studies 

When do you start paying back OSAP?

You need to start paying back your OSAP funding after 6 months from the end of your study period. So if you graduated in May, you’ll be making your first payment in November. 

Also, know your payments don’t actually go to OSAP because they are the government assistance program; instead, they go to the National Students Loan Service Center (NSLSC).

If you’re planning on going back to school for the following study term, you won’t need to start the payback process – as long as your school can confirm this enrollment and you’re either approved for full-time OSAP again or the Continuation of Interest-Free Status Program

For instance, if you’ve decided to pursue a Master’s degree after graduation, you can apply for OSAP again, instead of paying back your loans at the 6-month mark. If you decide to switch degrees, you also won’t need to start paying back your loans (granted you’re back for the following study term). 

However, if you take a gap year, your loans start to accrue interest once you leave your studies, and you’ll need to start paying your loans after 6 months. When you return to school and are approved for more OSAP funding, your loans will stop accumulating interest, and you also won’t need to pay anything until you or graduate or leave full-time studies again. In some cases, there could be ways around this (eg. leaving school for a severe permanent disability), so it’s always a good idea to reach out to your school’s financial advisor for more details. 

How to pay back OSAP

Paying back your OSAP funding can be a simple process, as long as you’re given all the information you need. Here’s a breakdown of the 5 steps you need to take to become student debt-free. 

Step 1: Graduate or leave your full-time education

Before you start paying back OSAP, you need to either graduate from your program or leave your full-time studies entirely. 

You still have 6 months after graduating or leaving until you need to make your first payment, but know that interest accrues on your loan, even during this grace period (see below for interest rate). 

If you aren’t doing so already, look for employment – a part-time job, a side hustle, any money you can bring in will be invaluable. That way, in 6 months, you won’t need to worry about where your money will come from.

Step 2: Estimate how much you’ll need to pay each month

The next step is to calculate how much money you’ll need to pay back each month. You can use the OSAP repayment calculator as a quick and easy tool to do so.

Your monthly repayment amount is calculated using the interest rate at the time you start paying back your student loans. The OSAP loan is divided into two parts (federal and provincial) with two different interest rates:

  • The federal portion of your loan follows has an interest rate of the prime rate
  • The provincial portion of your loan has an interest rate of the prime rate plus 1%

As of August 2021, the prime rate is 2.45%, and the Ontario rate is 3.45%. Assuming that 70% of your loans are federal and the remaining 30% are provincial, your OSAP interest rate will be an average of 2.75%. 

For example, if you owe $20,000 in student loans with an interest rate of 2.75%, you’ll be making monthly payments of $204 to pay it off in 9.5 years. 

Although the interest rate can change during your repayment period because the prime rate fluctuates, your monthly payment amounts won’t change. Instead, your loan balance (how much you have left to pay) will change accordingly.

Now that you have an estimation of your monthly payment, budget accordingly and set this amount aside with every paycheque. Learning to automate your finances will pay dividends once your loan is paid off. 

NOTE: You don’t need to start paying anything back until the 6-month mark, but if you have the funds ready, you can save on interest charges by doing so. 

Step 3: Log in to your NSLSC account

You should already have an account with the National Student Loans Service Centre (NSLSC) because you were required to set up this account in order to receive funding in the first place. Either sign in to your account using a sign-in partner (your bank) or your username and password. 

In your account, you’ll be able to check the status of your student loans and update any contact information needed. You can use it to apply for repayment assistance and request changes to your repayment terms (eg. extend your payback period). 

Step 4: Recieve your repayment package

Within your 6-month grace period, you will also receive a package from the NSLSC. This package will inform you of the total number of payments you’ll be making, when you’ll need to make your first payment, and the interest rates on your loan. 

Step 5: Repay the loan

After the 6-month period ends, it’s time to actually start repaying your loan. Remember, your OSAP loan payments are made through your NSLSC account, and not your OSAP account. 

Log into your NSLSC account and choose your payment method. A great way to ensure that all your payments will be made on time is by using pre-authorized debit. Having your pre-authorized debit set up means that each month, your payment will be withdrawn from your bank account automatically.

On the other hand, you can also log into your account each time and make lump-sum payments with your banking information. That way, you’ll be able to pay off your loan faster by giving more money each time. The NSLSC also accepts payments through online banking, telephone banking, cheques, money orders, cashier’s cheques, and bank drafts. 

Your payments are based on a scheduled time frame of 9.5 years because that’s the average length of time it takes to repay an entire OSAP loan. You can, however, make your payments at any time if you wish to pay off your loan faster. You can also extend this period in your NSLSC account to up to 14.5 years if needed. And after you’ve completed all your payments, you’ll receive a notice from the NSLSC and be officially student debt-free. 

Can you extend your OSAP grace period?

You can extend your 6-month grace period to a year if you either own (or co-own) an Ontario business or you work or volunteer at a non-profit. To be approved, submit an application with one of the following forms to the NSLSC within the original 6-month period:

OSAP repayment assistance 

If you’re having trouble meeting your OSAP loan repayments, you can apply for the Repayment Assistance Plan (RAP) through your NSLSC account or by completing the paper application

If you’re eligible for the plan, you’ll get a new amount to pay back based on your family’s income, family size, and what’s leftover OSAP of your loan. The provincial and federal governments will also help with your payments. As your income grows, your payments will gradually increase with it, but it won’t be over 20% of your family’s income. In some cases, you might not need to make a payment at all.

To find out if you qualify for the Repayment Assistance Plan, you can fill out the Repayment Assistance Estimator. Also, keep in mind that the plan only lasts for 6 months, so you’ll need to keep re-applying if you would like to continue with further assistance. 

Visit our student personal finance guide.

Financial literacy early in life will pay dividends in your future. Learn more with Ratehub's guide to managing your money as a student.

What happens if you don’t repay OSAP?

If you don’t make your required OSAP payments for 270 days, you’ll be in default. Having your student loans in default means that you’ve failed to repay your debt and it comes with the following consequences:

  • The student debt is turned to a collection agency and reported to a credit bureau
  • You can’t get more OSAP funding until you’re out of default
  • It can be difficult to get a car loan, credit card, or mortgage
  • You might not get your income tax refund or HST rebate 
  • Your unpaid loan will continue to build interest

Your debt won’t be erased until you've paid off what you owe completely. To get out of default, you can visit Ontario’s page for useful resources

READ: What happens to your credit score if you default on student loans

The bottom line

When it comes to paying back OSAP, the most important thing is to figure out how much you owe and budget accordingly ahead of time. That way, you’ll be able to pay off your student debt as seamlessly as possible and avoid defaulting. If you’re having trouble with making your payments, you can also apply for the Repayment Assistance Program. Of course, paying it off as fast as you can is best. When you’re done, start investing the money using a robo advisor. Investing early will set you up for life. 

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