Talking Cash: OSAP's Repayment Assistance Plan
This is the second of a two-part
article on repaying OSAP. In last
week's paper, I explained what is
expected of OSAP borrowers upon
graduation, went over details of
repayment terms and touched
briefly on what you can do to continue
to make payments even if
you're having financial trouble.
This week I'm going to expand on
that last topic by discussing the
repayment assistance plan.
Put simply, the repayment assistance plan helps borrowers pay back what they can reasonably afford. It is available to borrowers who are having a difficult time making the monthly payments on their OSAP debt. The way it works is that if you apply and are accepted to the repayment assistance plan, you will not have to make payments exceeding 20 per cent of your household's gross income. So, for example, if you earn $2,000 monthly before taxes, the maximum amount you would pay per month is $400 (20 per cent of $2,000). If your spouse also makes $2,000, then it would be $800.
Twenty per cent is the maximum, though. The monthly payment under the repayment assistance plan is calculated based on your outstanding debt, your household size and your monthly gross income. It's possible that you might not make any payments at all under the plan if your income is incredibly low.
You have to apply for the repayment assistance plan, as enrollment isn't automatic. The time you remain on the plan only lasts for six months, too. Once those six months are up and you feel you still need repayment help, you have to reapply for another six months. You can do this for up to 10 six-month periods (a total of five years).
These 10 six-month periods are known as Stage I of the repayment assistance plan. During these periods, the federal government pays the interest that is accumulating on the debt that the borrower's payment does not cover. Most, if not all, of the borrower's payment goes towards reducing the capital (the amount borrowed).
After a borrower has used up all 10 of these six-month periods, they can apply for Stage II of the repayment assistance plan (also, if you are still paying your loans 10 years after leaving school, you may be eligible for Stage II). At this stage, the government will continue to pay the interest, but will now pay down a portion of the capital. Your payments still go towards paying down the capital. The goal is that the balance of the loan should be paid off so that no student has OSAP debt remaining 15 years after leaving school.
The repayment assistance plan is an excellent way to avoid defaulting on your student loan and seems to be a generous advantage over that of bank student loans. On the canlearn.ca website, there is a repayment assistance estimator where you can punch in your numbers and get an estimate of how much you'll be paying per month under the repayment assistance plan. Considering the current state of the economy, particularly in southwestern Ontario, if you feel that understanding OSAP's Repayment Assistance Plan is something that will benefit you, I suggest contacting OSAP for more info to be clear about the terms of the repayment assistance plan. With all of these possible options for repayment, you should do everything possible to avoid defaulting on your student loan.
For more information on the repayment assistance plan, go to tinyurl.com/OSAPrap.
Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honour's Bachelor of Arts from the University of Western Ontario.
Put simply, the repayment assistance plan helps borrowers pay back what they can reasonably afford. It is available to borrowers who are having a difficult time making the monthly payments on their OSAP debt. The way it works is that if you apply and are accepted to the repayment assistance plan, you will not have to make payments exceeding 20 per cent of your household's gross income. So, for example, if you earn $2,000 monthly before taxes, the maximum amount you would pay per month is $400 (20 per cent of $2,000). If your spouse also makes $2,000, then it would be $800.
Twenty per cent is the maximum, though. The monthly payment under the repayment assistance plan is calculated based on your outstanding debt, your household size and your monthly gross income. It's possible that you might not make any payments at all under the plan if your income is incredibly low.
You have to apply for the repayment assistance plan, as enrollment isn't automatic. The time you remain on the plan only lasts for six months, too. Once those six months are up and you feel you still need repayment help, you have to reapply for another six months. You can do this for up to 10 six-month periods (a total of five years).
These 10 six-month periods are known as Stage I of the repayment assistance plan. During these periods, the federal government pays the interest that is accumulating on the debt that the borrower's payment does not cover. Most, if not all, of the borrower's payment goes towards reducing the capital (the amount borrowed).
After a borrower has used up all 10 of these six-month periods, they can apply for Stage II of the repayment assistance plan (also, if you are still paying your loans 10 years after leaving school, you may be eligible for Stage II). At this stage, the government will continue to pay the interest, but will now pay down a portion of the capital. Your payments still go towards paying down the capital. The goal is that the balance of the loan should be paid off so that no student has OSAP debt remaining 15 years after leaving school.
The repayment assistance plan is an excellent way to avoid defaulting on your student loan and seems to be a generous advantage over that of bank student loans. On the canlearn.ca website, there is a repayment assistance estimator where you can punch in your numbers and get an estimate of how much you'll be paying per month under the repayment assistance plan. Considering the current state of the economy, particularly in southwestern Ontario, if you feel that understanding OSAP's Repayment Assistance Plan is something that will benefit you, I suggest contacting OSAP for more info to be clear about the terms of the repayment assistance plan. With all of these possible options for repayment, you should do everything possible to avoid defaulting on your student loan.
For more information on the repayment assistance plan, go to tinyurl.com/OSAPrap.
Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honour's Bachelor of Arts from the University of Western Ontario.
