The Canada Student Loan (sometimes referred to as the National Student Loan) is administered by National Student Loan Service Centre under contract to Human Resources and Social (Skills) Development Canada (HRSDC). Students have the choice of opting for a fixed interest rate of prime interest rate + 5%, or a floating interest rate of prime interest rate + 2.5%. Newfoundland and Labrador and Prince Edward Island were the only provinces where there was no interest on the provincial loan, but as of March 28, 2014, the government of Nova Scotia also eliminated interest for all graduates who entered repayment after Nov. 1, 2007.
Based on the HRSDC student loan calculator, and assuming an average prime interest rate of 4.5%, (as of December 2011, the rate is 5.5%) a standard 10-year (114 month) repayment period, and a loan of $30,000:
- if the Floating Interest option is selected, monthly payments will be $361.02 (principal and interest), resulting in total payments of $41,156.77 ($30,000 principal + $11,156.77 interest) over the life of the repayment.
- if the Fixed Interest option is selected, monthly payments will be $400.50 (principal and interest), resulting in payments of $45,657.54 ($30,000 principal + $16,657.54 interest).
Fixed Rate: Fixed rate is a stable rate of interest. If you negotiate a fixed rate with your loan providers, you will be charged the same interest rate throughout your repayment period. The Loan Repayment Estimator uses a fixed rate of prime + 5%. For example, if the prime rate is 4.5%, fixed rate on the Loan Repayment Estimator will be 9.5% (4.5% + 5% = 9.5%). See also prime rate and floating rate.
Floating rate: Floating rate is a rate of interest that varies over time with the prime rate. If you negotiate a floating rate with your loan providers, the interest you are charged during repayment of your loan will increase and decrease along with the prime rate. The Loan Repayment Estimator uses a floating rate of prime + 2.5%. For example, if the prime rate is 4.5%, floating rate on the Loan Repayment Estimator will be 7% (4.5% + 2.5% = 7%).
Prime rate: The rate used as a base to calculate the interest applied to a Canada Student Loan. This prime rate is calculated using the interest rates declared by the five largest Canadian financial institutions as their prime rate. The Canada Student Loans Program calculates its prime rate by eliminating both the highest and the lowest of those five rates and taking the average of the remaining three. The five institutions include the Bank of Montreal, the Canadian Imperial Bank of Commerce, the Bank of Nova Scotia, the Royal Bank of Canada and TD Canada Trust.