RAP 201: More on Canada Student Loans' New Repayment Assistance Plan

                                     The 2 Stages of RAP
Stage 1
Time: Lasts 5 years (5 years straight or 5 years within a 10 year period).
Benefit: Based on your income and family size, you are assessed an “affordable monthly payment” that is never more than 20% of your gross income. You won’t have to pay as much interest as people not in the RAP program, so your debt will be paid more quickly because more of your payment will go towards your ‘loan principal’. ‘Principal’ is the amount you owe.

Stage 2
Time: Lasts up to 10 years, but the maximum time for Stage 1 plus Stage 2 will total 15 years. Exception: Borrowers with Permanent Disabilities reach the end of RAP in 10 years.
Benefit: You will keep making your “affordable monthly payment” and the government will keep assisting with the interest cost. But now the government will also start paying a share of the loan principal. So your debt should be paid off more quickly than before.
Finally, the government pledges to forgive any remaining Canada student loan debt at the end of the 15 years (10 years if you’re permanently disabled)
              What Happens When You’ve Been Repaying for Years Already?

Q. RAP takes 15 years. I've already been paying my Canada student loan for ages, so I’m not too excited about another 15 years.

A. You'll get credited for that time you've already been in repayment. ‘Repayment’ also includes periods of Interest Relief, interest-only payments or other arrangements where the loan stays in good standing..

Example: You're a 2001 graduate who started your Canada student loan repayments in October, 2001. You get apply to RAP and get accepted in October, 2009. So by that time, you're 8 years into a 15-year program.

But… You won’t be in 'year 8' the way you would have been if you’d been able to enrol in RAP back in 2001.

Remember RAP's Stage 1, where the government pays some interest costs but does not directly help reduce your debt? That ‘5-Year’ stage is considered equivalent to 10 years outside the RAP program. So if you are in Year 8 of repayment, you’d need 2 years in Stage 1 to qualify for Stage 2, where you do start to get that gradual debt reduction.

Still, CSL managers say you would still qualify for that 15-year end-date. So, at the end of 15 years of repayment (8 years before RAP and 7 years inside RAP), your remaining debt would be paid off.
                                             '15 Years' Is Not Always 15 Years
Q. I've been repaying for 15 years already. Will the government pay my remaining loan debt?

A. First, you have to qualify for the RAP program: not in default, low-enough income, etc. Second, you have to work through 6 months or a year of RAP first, before they forgive your remaining Canada student loan debt. This is an example of when the 15 years is in fact 15 1/2 to 16 years.

Q. I've been out of school 13 years now, and still repaying my Canada loan. I'd like to go back to school this year. Would that affect my eligibility for RAP?

A. Not your eligibility, but definitely your timeline. A return to full-time classes would roll your 13 years back to zero.

So, assuming your income stayed low enough to qualify for RAP, you could be repaying your current Canada Student loan for 28 years before you got that '15-year' loan forgiveness. Of course, the odds are that you've already paid so much on your loan that it wouldn't last another 15 years of payments anyway. But people who are far into repayment should consider the impact full-time school would have on their finances.

                                                        And Incomes Change…
Q. What happens when my income changes over that 15-year period?

A. Your monthly Canada student loan payment gets adjusted, based on changes to the size of oyur family or your previous year's income.

Q. What if my income gets too high to be in the RAP program?

A. You will then start paying the normal monthly amount, based on what is left of your loan and your loan term.

Q. And what if my income goes back down again?

A. If your loans were still in good standing (payments being made as scheduled), you could re-apply for RAP.

Q. Would they start me at the beginning of the 15 years?

A. No, they would base it on how long you had been in repayment after school.

Q. And what if I was in RAP until year 14 and suddenly got a great job that took me out of the program? Wouldn't I miss out on that government payoff of the outstanding debt after 15 years?

A. Yes, but due to the gradual debt reduction taking place after your first 5 years in RAP, your loan amount by year 14 would be much smaller, and having a great job would be a pretty good tradeoff!
                                                              Assorted Q & A

Q. I got Interest Relief just before RAP started and then I heard that Interest Relief was ending. Does that cut short my Interest Relief?

A. No. You'll get the full 6-month period allowed for Interest Relief, but you should try to stay covered during your transition. Ask your lender to arrange for you to apply for RAP before the 6 months is up. That way you can move into RAP, based on the number of years you've been in repayment. This will include the time you were covered by Interest Relief.
Q. The terms for my Canada student loan are for 9.5 years of monthly payments. So would I be in RAP for only 9.5 years?

A. No, RAP is a 15-year program. So if you got accepted, your loan term would just be 'extended' to 15 years. This is the same timeframe used for 'extended repayment," a change that costs you more money in interest costs because you pay longer, but which cuts the monthly payment down. However, if the federal government sticks to current rules for RAP, extending your loan term might not cost you more in RAP - if the government ended up paying the remainder of your debt after 15 years.