The Price is Wrong

Canada Cleans Up On Fixed-Rate Student Loans

 They only talk about the 'cheap' student loans.

When media and government discuss student loans, they usually talk as if there’s only one type. The one with the lowest price-tag – that’s what gets covered.

Not the more expensive ones, even though that’s what many Canadian students are stuck with.

Right now, what’s cheapest is the ‘variable’ (floating) student loan. And you don’t hear much about fixed-rate student loans.

But what about the students with fixed-rate loans? How many people realize that they’re paying double or triple the interest charges that most people hear about?

Let’s dig into that.

The interest charge on ‘floating’ student loans rises and falls with Canada’s ‘prime’ lending rate.

Since we’ve had an unusually low prime rate for the past few years, floating student loans have recently become popular. In Ontario, it’s the only kind you can get.

But back in the ‘80s, interest rates shot up so high that floating-rate loans would have left students paying double-digit rates.

After that, lower-income student were often attracted to fixed-rate student loans. They thought these would protect them.

That ‘80s interest-rate spike is why I stayed neutral in my web articles comparing loan types (fixed or floating). I listed the pros and cons and gave no opinion.

But it’s time to take a stand. Because some Canadian governments charge a ‘premium’ for a fixed-rate student loan that’s outrageously high compared to other forms of debt, such as mortgage loans.

To keep this short, I’ll save the grim details for my next blog.

For now, I’ll just end my neutrality:

Just say NO to fixed-rate student loans in Canada. They will almost certainly cost you more. Like, thousands of dollars more!

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Next Blog...

The Price is Wrong: Part 2

How much will you be hosed by certain Canadian governments if you take their fixed-rate student loans? We crunch the numbers for you!

 

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© Jeannine Mitchell 2013 - 2014