A Student’s Guide to OSAP: How it works, Alternatives, Advantages, and Loan Forgiveness

Several of my close friends would never have had the opportunity to attend post-secondary school without financial assistance. The Ontario Student Assistance Program (OSAP) is a government program that offers financial assistance to students in need in the province. Each province in Canada has its own financial assistance program for students, for example, SABC in British Columbia.  How much you are entitled to from the government in grants is dependent on a variety of factors, including personal conditions that would prohibit or challenge your learning and your household income. OSAP aims to provide students across the province with the opportunity to attend post-secondary education, regardless of their individual circumstances.


How OSAP works

Some reputable websites that discuss how OSAP work are the Ontario government website, and this website hosted by York University.

OSAP functions by offering both grants and loans – you don’t have to pay grants back, while loans are taken and must eventually be repaid. More information on loans can be found further down in this article. OSAP functions by calculating a variety of factors, namely your financial situation, and offering you grants as a result. OSAP funding can be used to cover living expenses, tuition and school expenses, and in some cases childcare as well.  International students, individuals who do not meet academic progression requirements, people who’ve failed a credit check, and those who report income incorrectly to the service are not eligible to receive OSAP funding.

Here is a calculator which can help you determine your eligibility for OSAP

Alternatives to OSAP

OSAP isn’t the only option for students in Canada who are in need of financial assistance. Taking out a line of credit is extremely common. Many banks offer specific lines of credit for students at around the same interest rates as OSAP offers. Currently, the interest rate for OSAP is approximately 2.3%. While it is possible to find a line of credit that matches OSAP in interest rate, there are several advantages to government funding.


Advantages to OSAP

In comparison to bank loans, OSAP presents several advantages. For example, interest only begins accumulating after you’ve finished your degree. Due to the compounding of interest, this makes a massive difference when it’s finally time for you to repay your debt. Many banks require a co-signer, which can prove to an obstacle for some. Yet another advantage of OSAP is that the interest you pay is tax deductible, while line of credit interest is not.


Can OSAP loans be forgiven?

An advantage to OSAP is the Repayment Assistance Plan (RAP) . OSAP is inherently flexible and designed in many ways for the challenges that come with graduating school with student debt.  The RAP allows for individuals who qualify to have reduced payments on their outstanding student debt, or no payments at all. The government will “pay any interest owing on the federal part of your loan that your reduced payment does not cover” if you are approved for the RAP. The Government of Canada will pay down both the principal and interest after either 5 years in the RAP program or 10 years post-graduation. Therefore, after 15 years in the RAP, you will no longer be in debt.

Diving into a postsecondary education can often be intimidating and extremely stressful, however, OSAP exists to ease the burdens of those who cannot afford school on their own and to provide opportunity to those who otherwise would not be able to continue their education. This article covers some basic facts about OSAP, compares it to an alternative, and discusses repayment options.

Please write to us with feedback as we use your comments, concerns, and criticisms to build our blog! We hope we’ve been able to help you have a better understanding of financial aid available for students in Canada.


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