About Me

Tuesday, October 20, 2009

Are You Interested...

In what you are spending in interest?
I cannot believe how much I have already spent in interest in just 17 months of having my OSAP loan. Imagine I took the 120 months (making only minimum payments) to actually pay it back...

When I first graduated I was paying the floating rate which I am pretty sure was 6% interest. Since then, actually only a few months after I graduated prime went down and I was paying 4.75% for the rest of the time. I am so glad I chose the floating rate instead of the fixed rate! Just so you know, "floating" is prime plus 2.5% where "fixed" is prime plus 5%! Currently prime is at 2.25%.

Consider this: if I took the full 10 years (including grace period) at the floating interest rate it is now I would have paid $8003.36 in interest. If I took the fixed rate at the rate it is now I would have paid $12673.19 just in interest!! Craziness!

One thing many people get "tricked" on is the "grace period" they give you. Many people believe that during these 6 months there is no interest accumulating. Unfortunately that is wrong, you need to read the fine print. Interest starts accumulating the day you graduate. However, you do not have to make any minimum payments or pay the interest during these 6 months. If you are able to though it is great to make lump sum payments anyway to get decrease that interest building up.

You may be wondering how much interest  I paid over the 17 months (including grace period) I have been done for. Well just a bit of background, when I graduated I owed $5.95 A DAY in interest!! Earlier this month I got down to $0.14 wow that felt nice. Currently it is probably at $0.02 but it takes several days to update on the NSLC website. So in total, after 17 months (drum roll please) I will have paid $1247.15 in interest. Not too bad considering what it COULD have been.

If you would like to calculate how much you are spending in interest I recommend the Canlearn site or this Loan Calculator site which will show you your interest accumulated once you click "show/recalculate amortization table." Good to figure out what you are paying in interest to student loans, mortgage, family loans, car loans etc. Fun to play with!

Main advice: make lump sum payments in addition to your minimum payments whenever you can. It could literally save you thousands!!


  1. I so agree, the interest that you can pay on student loans is ridiculous!! I just started on an OT project at work. My goal is to put in enough hours so that in a few months I can request a lump sum payment and put a big chunk of money on my smallest loan (I have an Alberta loan and a Canadian loan).

  2. The interest part of OSAP is gross. I had the $6 a day interest in the beginning. I know many people who just choose to take 10 years to pay off their loan. No, Thanks. I will continue to leave like a student for a bit more so I don't have to pay 17,000 worth of interest to the government.

  3. Jessie: good luck with your OT project, hope you can get your student loans paid off soon.

    Yummyfoodgal: I too don't mind living like a student either in order to get my loan paid off, it's so worth it in the long run!

  4. I am very impressed...I wish I had been so smart about paying back my loans. Thankfully they are all gone now. Now I am saving for my kids (ages 9, 5 and 4) in RESP's so that they will only have to borrow minimal amounts, or none at all. If they do have to borrow, I am hoping that I can instill some of your ideas for paying back the debt.

  5. That's great that you are starting to save for your kids. I do think it's important for the kids to also contribute. I feel much more accomplished knowing I basically put myself through school, and a lot of those people in first year who were on free-rides unfortunately did not make it to second.

  6. Oh, I completely agree about them contributing...they already get an allowance and are expected to save half of it for their piggy banks (which cannot be opened!). They will be expected to have part-time jobs once they are old enough. There is such a sense of pride in saying "I did it all by myself", isn't there? I did too...sometimes working 40 hours a week and pulling off a full class schedule.