Repayment, default, and rehabilitation: the road after school

Leaving school starts a clock you should know about before it starts ticking. You do not begin repaying the day you graduate. You enter a six-month non-repayment period, during which no payments are required. Your provincial portion may accrue interest during that period depending on your province — the federal portion does not, because no federal interest accrues at any time since April 1, 2023. Near the end of the non-repayment period, the NSLSC sends you a consolidated loan package setting out your total balance, your payment amount, and your first payment date. Read it when it arrives, not when the first payment is due.

How your payment is set

The typical repayment period for a Canada Student Loan is 10 years, with a maximum of 15 years where an affordable payment based on family income and family size is less than the required monthly payment. Your actual term depends on your balance and on any arrangement you make with the NSLSC: you can ask to revise your terms, for example by extending the repayment period to lower your monthly payment, or shortening it to clear the debt faster. There is no prepayment penalty on a government student loan in the sense that matters to borrowers: you can make extra payments or pay the balance off early without a fee, and for the interest-free federal portion the benefit is cash-flow freedom rather than interest saved. For a provincial portion that charges interest, early repayment saves real interest, so extra payments are best directed where they cut interest first — ask the NSLSC how your extra payment will be applied before you send it.

What default means, in plain terms

Default is what happens when required payments are missed for long enough that the loan is no longer considered in good standing. The consequences are serious and practical: the loan may be transferred for collection, the outstanding balance may become due, your credit history will be affected, and you lose access to the normal repayment tools — including RAP — until the loan is brought back into good standing. Default is not a moral judgement and it is not the end of the road, but it is a door that closes options, and it closes them at the worst possible moment. The single most effective default prevention is boring: if you cannot afford a payment, contact the NSLSC before you miss it, and apply for RAP or a revision of terms while you are still up to date, because RAP eligibility requires you to be up to date on your payments.

Rehabilitation: the way back

Rehabilitation is the route back to good standing for a defaulted loan. It is arranged through the NSLSC, and it generally involves agreeing to a rehabilitation plan and making the required payments under it, after which the loan can be returned to the NSLSC in good standing and the normal tools — including RAP — become available again. The details, including the number and size of payments and how outstanding interest is treated, depend on your loan and your jurisdiction, and provincial portions in non-integrated provinces may have their own rehabilitation routes. This site deliberately does not quote a fixed payment count as a universal rule, because rehabilitation terms are set case by case and quoting one province's pattern as a national rule would mislead borrowers elsewhere. The reliable steps are the same everywhere: contact the NSLSC promptly, ask specifically about rehabilitation, get the plan in writing, and make every payment in the plan on time — a rehabilitation plan that is started and then missed helps no one.

Two habits prevent most repayment trouble. First, keep your contact details current with the NSLSC from the day you leave school, so the consolidated loan package and every later notice actually reaches you. Second, diary your RAP reapplication dates if you are on RAP, and your rehabilitation payment dates if you are rehabilitating — both systems reward the borrower who never lets a date slip, and both punish the borrower who does. Repayment is a decade-long administrative relationship; treat it with the same attention you gave your application.

Sources: Employment and Social Development Canada, Consolidated Financial Statements 2024-2025 (no payments while studying or during the six-month grace period; typical repayment period 10 years, maximum 15 years); Canada.ca, Repayment Assistance Plan page (RAP requires loans in repayment and payments up to date); NSLSC rehabilitation guidance via provincial student aid offices.