Student lines of credit in Canada: how repayment works, and what one really costs
A student line of credit can fill the gap between tuition, rent and what government aid covers. It can also quietly become the most expensive part of school, because interest starts on the first dollar. Here is how it works, how it compares with Canada Student Loans, and a calculator that shows the real cost before you sign.
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Student line of credit calculator
What will your student line of credit cost?
Assumes the full amount is drawn at the start of each school year, interest-only payments are made every month in school and in the grace period, and the balance is then repaid in equal monthly payments. Interest uses the annual rate divided by 12 each month; lenders usually calculate it daily and many rates are variable, so treat results as estimates. The 7% default is illustrative, not a current rate.
How a student line of credit works
A line of credit lets you borrow up to a set limit, pay it back and borrow again. A student line of credit is built for post-secondary costs like tuition and books, and FCAC notes you can also use it for everyday costs like food and transportation.
- You pay interest only on what you draw. FCAC's example: on a $10,000 limit with $3,000 borrowed, you pay interest on the $3,000.
- You need proof you are a student. You will need to show you are a full-time or part-time student at a recognized Canadian post-secondary institution.
- Access is like any line of credit. Usually at a branch, an ATM or through online, mobile or telephone banking, and sometimes by cheque.
- The limit is the lender's call. It may depend on your program and school, your living costs, your credit history and your ability to repay.
Because it is revolving credit, how you use it shows up on your credit report. Our guide to building credit in Canada explains why paying on time from the first month matters.
Repayment: in school, grace, then principal
| Stage | What you pay | Source of the rule |
|---|---|---|
| While studying | At least the interest, every month; principal is optional | FCAC |
| Grace period after graduation | Interest only, usually for 6 to 12 months at most institutions | FCAC; your lender sets the exact length |
| Repayment | Principal and interest until the balance is gone | Your credit agreement |
The catch is that interest-only payments never shrink the balance. Graduate owing $32,000 and you still owe $32,000 a year later, after paying more than $2,000 in interest. Any principal you can pay while still in school, even small amounts from a part-time job, reduces every interest payment after it.
Line of credit vs Canada Student Loan
| Student line of credit | Canada Student Loan | |
|---|---|---|
| Interest | Charged from the first draw | No federal interest since April 1, 2023 (interest may apply to a provincial portion, depending on your province) |
| Payments in school | At least the interest | None while you are studying |
| After graduation | Often 6 to 12 months interest-only | 6-month non-repayment period with no payments |
| Help if you struggle | Talk to your lender | Repayment Assistance Plan |
FCAC's own suggestion is to look first at ways to pay for school without borrowing, such as savings, grants, bursaries, scholarships, part-time work or co-op, and to compare the interest you would pay across options. If someone saved for you in an RESP, our RESP grant guide explains that money.
Worked example: four years at $8,000
Jordan draws $8,000 at the start of each of four school years at an illustrative 7%, pays interest every month, gets a 12-month interest-only grace period, then repays over 10 years.
| Stage | Arithmetic | Interest |
|---|---|---|
| Year 1 (owes $8,000) | $8,000 × 7% | $560 |
| Year 2 (owes $16,000) | $16,000 × 7% | $1,120 |
| Year 3 (owes $24,000) | $24,000 × 7% | $1,680 |
| Year 4 (owes $32,000) | $32,000 × 7% | $2,240 |
| Grace year, interest only | $32,000 × 7% (that is $186.67 a month) | $2,240 |
| 10-year repayment at $371.55 a month | 120 × $371.55 − $32,000 | about $12,586 |
| Total interest | about $20,426 |
Jordan borrowed $32,000 and pays back about $52,400. During school alone, the monthly interest climbs from $46.67 in first year to $186.67 in fourth year, so those payments belong in the budget from day one. Our budget guide shows a simple way to fit them in.
Co-signers, insurance and limits
- Co-signers. You may need someone, like a parent, to co-sign. They are responsible for the debt if you cannot pay it back, so the decision is theirs too.
- Optional insurance. Your lender may offer credit insurance for illness, accident, death or job loss. It is optional, the lender cannot insist on it, and a federally regulated lender cannot add it without your permission. If it was added without your consent, ask for it to be removed and the charges reversed, and you can complain to your bank.
- Information box. With a federally regulated lender, key details such as the rate appear in an information box in your credit agreement or a document that comes with it. Read it before you draw.
- Borrow what you need. FCAC's advice is to borrow only what you need, and to think about whether you can make at least the interest payments while you study.
Options people compare
| Option | Cost while in school | Watch for |
|---|---|---|
| Grants, bursaries, scholarships | None to repay | Deadlines and eligibility |
| Government student aid | No payments while studying | Provincial portion rules vary |
| Student line of credit | Monthly interest | Variable rates, co-signer liability, grace period length |
| Part-time work or co-op | None | Time against your studies |
| Credit card | Interest if you do not pay in full | Compare your card rate with your line of credit rate |
These are options to understand, not recommendations. If you end up with more than one debt after school, our snowball vs avalanche guide compares payoff orders. More calculators are on the tools page.
How to plan a student line of credit before you borrow
- Apply first for grants, bursaries, scholarships and government student aid, which have different repayment terms.
- Estimate how much you need each school year and draw only that, not the full limit.
- Use the calculator to see the interest-only payment while you study and the total interest.
- Confirm your lender's rate, grace period after graduation and repayment terms in your credit agreement.
- Budget for the monthly interest from the first draw, and pay some principal early if you can.
- Decide on optional insurance separately; you do not need it to be approved.
Questions people ask
Do I have to make payments on a student line of credit while I am in school?
Yes. FCAC says you must pay at least the interest on your student line of credit, even while you are studying. You can also start paying back principal at any time.
When do I have to start paying back the principal?
Most institutions let you keep paying only interest for a grace period after you finish school, usually 6 to 12 months according to FCAC. After that you pay principal and interest until the balance is repaid. Check your own lender's terms.
Is a student line of credit better than a Canada Student Loan?
They work differently. Since April 1, 2023, the Government of Canada has eliminated interest on Canada Student Loans, and you get a 6-month non-repayment period after you graduate. The Repayment Assistance Plan applies to Canada Student Loans, not to a line of credit. A line of credit may give you access to more money, but it charges interest from the first dollar you draw.
Do I need a co-signer for a student line of credit?
You may. FCAC says you may need someone, like a parent, to co-sign, and that person is also responsible for the debt if you cannot pay it back.
Do I have to buy insurance on a student line of credit?
No. Insurance is optional, the lender cannot insist that you buy it, and a federally regulated lender cannot add it without your permission.
How much can I borrow on a student line of credit?
Your financial institution sets the limit. It may depend on your program, your school, your living expenses, your credit history and your ability to repay.
Do I pay interest on the whole limit?
No. You only pay interest on the money you actually borrow. On a $10,000 limit with $3,000 drawn, you pay interest on the $3,000.
Looni reads your statements and adds up the interest and fees you pay on every line of credit and card, so you can see the cost before it grows. Read-only, no advice.
Sources
Financial Consumer Agency of Canada, Student lines of credit (interest only on what you borrow, $10,000 and $3,000 example, proof of enrolment, co-signers, optional insurance, at least interest while studying, grace period usually 6 to 12 months, Canada Student Loan 6-month non-repayment period, no interest since April 1, 2023, Repayment Assistance Plan, information box); Government of Canada, Repaying your student loans. The rate and the example are illustrative; the arithmetic is ours.
Paying tuition this year? Our tuition tax credit guide shows how to use, transfer or carry forward the credit.
Studying in Ontario? See how OSAP counts your savings and RESP and what changed for 2026-27.
Asked to co-sign? Read what co-signing a loan really means first.