Loan Payments

[doogs]

Hello all

 

I will be starting my residency in July. This question is for those residents that have paid of their Ontario student loans.

 

I am planning to pay off my loan from my line of credit since the interest rate for the line of credit is lower than what it is for OSAP. Since the Ontario Student Loan forgiveness amount for the year 2009-2010 will not be finalized until the end of the year, if I pay off the full amount do I lose the OSOG amount of $2500 to $4000 since this amount is usually applied to reduce your loan amount.

 

I tried calling the National Student Loan Center but the lady was not sure of the answer to this question.

 

Any advice would be helpful

 

Thanks

 

Josie

[Satsuma]

Ontario has in the works a plan so that residents don`t have to pay their OSAP back while in residency.

It got approved before I started residency last year, but the details have not been worked out yet.

What the government will do those, is retrospectively pay the interest that we end up paying until they get their details sorted out.

There are some conditions such as being required to work in Ontario for 5 years after finishing.

If you pay off your OSAP with your LOC then you will no longer be eligible for that program.

[FamilyGuy]

As Satsuma said, if you consolidate your NSLSC loan into a bank LOC, you will not be eligible for the government program to pay your interest for you while in residency (assuming you sign the 5-year stay-in-Ontario clause).

 

ALSO, any payments made towards your NSLSC loan are tax-deductible. The same is NOT true for any payments toward a bank LOC. Keep this in mind before consolidating.

[future_doc]

I guess what they are saying is sometimes "cheap can turn out to be expensive". The devil is always in the details.

[ubcredfox]

Hi,

 

I have looked into the tax "refundability" of your student loan payments. I think you ought to remember that you will only be refunded the interest at the marginal tax rate (which is around 16% I think). As it turns out, paying the government 2.5% extra on your student loans (i.e. prime + 2.5%) is still more expensive than paying the bank prime, regardless of these tax "savings".

 

You can do the calculations yourselves; it's simple enough.

 

Also, any accountant would be able to advise you likewise. Unless your province has interest loan relief that is decent (Alberta, Manitoba, Ontario, PEI) then the bank is best in this case.

 

Either way you are losing tons of cash. It's all a question of how much.

[Ollie]

As Satsuma said, if you consolidate your NSLSC loan into a bank LOC, you will not be eligible for the government program to pay your interest for you while in residency (assuming you sign the 5-year stay-in-Ontario clause).

 

ALSO, any payments made towards your NSLSC loan are tax-deductible. The same is NOT true for any payments toward a bank LOC. Keep this in mind before consolidating.

 

I'm pretty sure it's just your interest that is tax deductible, not the whole payment (big difference).

I consolidated my loans on to my LOC in R1, but I have a BC Student Loan so the interest-free residency does not apply.

[007]

Hi,

I investigated the original poster's question last year when I finished med school. I paid off all of my student loans before they started accumulating interest by putting the balance on my line of credit. I did still get my rebate in the fall from the Loan forgiveness program and then applied that to my line of credit. I still got a very decent tax return this year too.

 

Also, I found it a lot easier on my soul/peace of mind to pay the $150 interest each month on my consolidated LOC and putting chunks of money against it when I can to pay off the principal rather than covering two interest payments each month.

[jwp2000]

I'm pretty sure it's just your interest that is tax deductible, not the whole payment (big difference).

I consolidated my loans on to my LOC in R1, but I have a BC Student Loan so the interest-free residency does not apply.

 

My understanding is that the program applies to student loans from ANY province in Canada (not necessarily OSAP).

[Satsuma]

Hi,

I investigated the original poster's question last year when I finished med school. I paid off all of my student loans before they started accumulating interest by putting the balance on my line of credit. I did still get my rebate in the fall from the Loan forgiveness program and then applied that to my line of credit. I still got a very decent tax return this year too.

 

Also, I found it a lot easier on my soul/peace of mind to pay the $150 interest each month on my consolidated LOC and putting chunks of money against it when I can to pay off the principal rather than covering two interest payments each month.

 

Yes you will still qualify for loan forgiveness if you consolidate your government loan with your LOC.

 

What you do not qualify for is the program that Ontario has that pays for your interest on your government loans while in residency. with this program, you will not have to pay back principal until you are done residency and the government covers the interest during that time period as well.

We still do not have the details of this agreement but it seems the catch will be that you are required to work in Ontario for 5 years after being done.