Marwaho

LOC vs OSAP?

9 posts in this topic

Hi All,

I am not very educated in this department and I was wondering if some people who know about this can pitch in.

I been have advised that if I am approved for a LOC, to not go for OSAP (OSAP covers around 60% of cost).That sounds really odd to me but I was wondering if some of you may know what this is about.

Thank you,

 

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So, if you are approved for a LOC you may still apply for OSAP because a LOC counts as a liability and does not impact the amount you would receive from OSAP. However, if you go with OSAP and then require or choose to apply for a LOC, you'll have more issues being approved because a LOC application will consider existing debts. 

You are correct that a large portion of OSAP does convert to a grants/bursaries which do not have to be repaid but I believe the maximum per year for OSAP is around $15k and this may not be enough. 

A professional student LOC would max at roughly 100k for your 3 year program ~ 33k per year which may be required to cover your tuition, books, living expenses etc. Additionally, as it is a LOC, when you pay into it, you release the limit. For example, if you owe 14k to OSAP and pay $1000, you'll now owe 13k, with a LOC if you owe $14k and have 33k available and pay $1000 towards it, you'll owe 13k and still have the remaining 20k available. A LOC can be more flexible.

In short, if you can afford to only do OSAP, then it absolutely makes sense to go that route- just remember, if you decide to go with OSAP and then later need a LOC it's going to be tougher than the reverse order. 

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Hmm, not sure how sound that advice is. How can OSAP hurt? There are many benefits to an OSAP loan:

1. You don't pay interest while you are in school. 

2. You may receive grants = free money (yay!). Grants not guaranteed...

3. You may be forgiven a certain amount that you received while in school once your studies are over as there is a cap on what you are required to repay for each year. For example, even if in your first year you receive 14k, you may be forgiven a part of it (you can find out more about this on the OSAP website). 

Yes the interest is much higher after you finish school (around 6.5 for OSAP as opposed to around 3? for LOC), however you get a tax credit for that interest so the difference may come out in the wash, but even if it doesn't, keep in mind point #1, above. 

I am really curious what your advisor based his/her advice on... 

 

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I'd just add that since the LOC has a lower rate, but osap doesn't charge interest while you're in school, it makes more sense to take and use your osap money at first opportunity, then dip into LOC if needed (likely). 

 

Upon grad, pay off your osap debt immediately with the LOC money you have available (if you can pay off all of it, do it) since then you'll be getting charged less interest.

 

This honestly makes sense even if you end up using 0 dollars of the LOC while in school, since the debt restructuring after school results in less interest being paid.

 

*this should not be relied on as financial advice; it is, at most; financial information*

 

;)

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I'd be curious to know who gave you that "advice" as I can't think of a reason where it would make any sense.

 

As others have mentioned here by applying for OSAP you are getting an interest free loan while you are in school, some of which may be in the form of grants which will never have to be repaid. Although the interest rate may be higher upon graduating, at that time you can use the LOC to pay down your OSAP, and there may even be an opportunity for repayment assistance through OSAP which may even be better that that.

 

I question the advice given to you, and I always recommend for students to apply for as much government student loans/scholarships/bursaries etc. as you can get, and use that before you would use our LOC. You can't beat free money, our LOC usually becomes better once you graduate.

 

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1 hour ago, pzabbythesecond said:

I'd just add that since the LOC has a lower rate, but osap doesn't charge interest while you're in school, it makes more sense to take and use your osap money at first opportunity, then dip into LOC if needed (likely). 

 

Upon grad, pay off your osap debt immediately with the LOC money you have available (if you can pay off all of it, do it) since then you'll be getting charged less interest.

 

This honestly makes sense even if you end up using 0 dollars of the LOC while in school, since the debt restructuring after school results in less interest being paid.

 

*this should not be relied on as financial advice; it is, at most; financial information*

 

That makes the most sense and that was my plan initially. I think the advise I got was based on the interest rates. However, I do not have to deal with any interest rate from OSAP if I pay it out of the LOC as soon as I am done. This clears up a lot, thank you all!

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1 hour ago, Marwaho said:

That makes the most sense and that was my plan initially. I think the advise I got was based on the interest rates. However, I do not have to deal with any interest rate from OSAP if I pay it out of the LOC as soon as I am done. This clears up a lot, thank you all!

Good plan. But keep in mind what others said about OSAP's tax credits and flexibility of payment options which could be beneficial even after you graduate. You can reassess the benefits of low interest rate vs. tax credits in a few years when you graduate.

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21 hours ago, pzabbythesecond said:

*this should not be relied on as financial advice; it is, at most; financial information*

Fyi this does not work. Telling people not to rely on your advice does not all of a sudden change it from "advice" to mere "information".*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*This is not legal advice and shall not be construed as my legal opinion. 

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