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Law school loans options in Canada

Federal and private student loans, plus forgiveness and assistance programs for future lawyers.

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The average cost of attending law school in Canada in 2018-2019 ran between $7,000 and $34,000 per year, according to the Law School Admission Council (LSAC). Add on to that the cost of transportation and living expenses, which can cost another $10,000 to $20,000 per year, and you have a pretty steep bill. Chances are, you might need some extra help covering those upfront costs — and government loans may not be enough. Luckily, you have several other options when it comes to paying for law school.

What loan options do I have?

The majority of law students graduate with well over $80,000 in student debt, according to a study conducted by the Canadian Bar Association. And the majority of law students take out some kind of private student loan such as a line of credit.

There are two types of student loans you might want to consider: government and private. Provincial government loans are usually co-funded by both provincial and federal governments. These loans often prove to be the most competitive option, however, there are limits to how much you can borrow as well as when and how you receive your money.

Private student loans are often used to pick up the slack when provincial loans fall short. The cost can vary and often these loans don’t come with nearly as many benefits. But as a law student, you might need to use a combination of both.

Government loans for law school

Student loans offered by your provincial government should be the first place you look when applying for law school funding. The interest rates are determined in part by Canada’s prime interest rate, which is set mostly by the Bank of Canada. Government loans usually come with a range of flexible repayment plans that include interest-free periods in which you don’t have to make payments and adjustable repayment plans to accommodate those who are struggling financially. In fact, some of these plans will forgive your federal student loans after 20 or 25 years of repayments.

Another advantage of government loans is that interest paid can be claimed as an income tax deduction. This means you can deduct it from the total amount of income you pay tax on, translating to a lower overall tax bill. Also, as a student you’re probably not making a bunch of money. You can carry forward this tax deduction and apply it once you’re earning a higher level of income.

You can only get provincial student loans from the province in which you permanently reside. You’ll generally get more funding if you attend a publicly-funded school within your province. The amount typically decreases if you attend a non-privately-funded institution, a school outside your province or a school in another country. It is possible to get provincial loans if you attend a law school outside Canada, but don’t count on the amount being very high.

Law school loans from private financial institutions

Details on bank financing programs are current as of April 24, 2020.

Lines of credit are a popular option for Canadian students. Student lines of credit offered by the country’s big banks often offer lower interest rates than government student loans. Canada’s biggest and best-known banks have lending options specifically geared to students in certain professions, such as medicine and law. Below are some of the options.

BankDetails

CIBC logo

CIBC

  • CIBC offers the Professional Edge Student Program. Law school students can borrow up to $100,000 via a line of credit at the CIBC Prime rate plus 1%. While in school, students only make payments on the interest portion of the loan, and this applies for up to two years after graduation or articling. You can also save on purchases with over 450 partner brands. You need proof of Canadian residency or citizenship to apply, as well as proof of enrollment at a Canadian university or college.

TD Canada Trust bank logo

TD Canada Trust

  • TD offers student lines of credit to Canadian law students for up to $125,000 for over three years of study. The bank doesn’t specify a specific interest rate, only saying it offers a “competitive” rate based the TD Prime Rate. Students can make interest-only payments while in school and for up to two years after graduation. There is also an option to pay more than the minimum amount each month to pay off the debt faster.

RBC Bank logo

RBC

  • RBC doesn’t mention a limit on what law school students can borrow with its line of credit. It also doesn’t advertise the rate you’d pay on the loan, but does state the rate won’t change after you graduate. You do not need a co-signor unless you have a limited credit history.

Scotiabank logo

Scotiabank

  • Scotiabank offers a Student Professionals line of credit for law students. There is no rate mentioned, although the bank says you can borrow up to $375,000 (a bigger advertised maximum limit than other banks). It offers the standard two-year grace period after graduation before you have to start repaying the principle.

BMO logo, icon only

BMO

  • BMO has a professional student line of credit. You can borrow up to $80,000 over four years (the lowest advertised maximum amount) at the BMO Prime Rate plus 1%. As with the other student lines of credit at big Canadian banks, you only make payments on the interest portion of your loan while you are in school and for two years afterward.

Other sources of funding

There are several other ways to pay for your law school education besides government loans and private financing.

Registered Education Savings Plans (RESPs)

A Registered Education Savings Plan (RESP) is a long-term investment account that lets people (usually parents and grandparents) save up to $50,000.00 for a child’s education. Money deposited into an RESP grows in 2 (or possibly 3) ways:

  • Funds are put towards either fixed investments (i.e. short-term bonds, GICs and investment savings account) or equity investments (i.e. stocks and mutual funds). Interest earned on these investments is not taxed.
  • Through the Canada Education Savings Grant (CESG), the federal government matches annual RESP contributions by 20% if the the future students receiving the funds are 17 or younger. The CESG applies on the first $2,500.00 of annual contributions (or $5,000.00, if unused contribution room from previous years is carried forward) up to a lifetime limit of $7,200.00.
  • Through the Canada Learning Bond (CLB) program, children from low-income families will get up to $2,000.00 in RESP contributions from the federal government. This is not a matching program – no personal contributions are necessary to get the CLB.

Contributions to an RESP are not tax deductible. Withdrawals from an RESP for educational purposes are called educational assistance payments (EAPs) and count as part of the student’s annual taxable income. Should funds go unused and get returned to the contributor, he or she can receive the funds without paying additional tax.

Registered Education Savings Plans (RESPs)

Early RRSP withdrawals under the Lifelong Learning Plan

A Registered Retirement Savings Plan (RRSP) is very similar to an RESP in that it’s a long-term investment account designed to save for the future – in this case, old age. Again, similar to an RESP, money can grow tax free, but withdrawals are taxable. However, one crucial difference between the 2 types of accounts is that contributions to an RRSP are tax deductible.

Because RRSPs are designed to help people save for retirement, withdrawals before you reach 71 years old are heavily taxed. But there are 2 circumstances in which you can withdraw from an RRSP prematurely: to buy or build a home (under the Home Buyers’ Plan) and to help fund your education (under the Lifelong Learning Plan).

Under the Lifelong Learning Plan (LLP), you can take up to a certain amount out of your RRSP yearly to pay for full-time training or education at a designated institution for yourself, your spouse or your common-law partner. Withdrawals cannot be used to cover training or educational expenses for your children or your spouse/common-law partner’s children.

Most educational institutions in Canada will qualify as “designated institutions,” as will many institutions in the US and abroad. As of 2019, the maximum yearly withdrawal limit is $10,000 up to a total limit of $20,000 (once you reach this, you’ll have to wait a while to withdraw again).

Registered Retirement Savings Plans (RRSPs)

Scholarships and bursaries

According to CBC, millions of dollars’ worth of scholarship money for all levels of education goes unclaimed each year. Often, students assume they need very high grades or that they have to jump through an insane number of hoops to be awarded a scholarship. In fact, the majority of scholarships are not merit-based and may not take more than a few hours to apply for.

While this could seem like a long time, the results could really pay off, even if you only win a few of the awards you apply for.

There are several established companies that produce robust online databases tracking scholarships and bursaries available in Canada. You can browse through thousands of scholarships worth millions of dollars on the following sites:

What’s the difference between a loan and a grant?

Short answer – loans have to be paid back, but grants don’t. A loan is usually paid back with interest, meaning you pay extra for the convenience of borrowing money you don’t have at the moment. A grant is free money. You can keep it without any fees and without having to pay it back.

Bottom line

Law school is expensive, and provincial loans often don’t cover the whole cost. There’s a chance you can secure additional funds to help pay for your education at a better rate of interest by using private lenders. But interest rate isn’t everything. Government loans offer tax benefits and often feature more generous and flexible repayment terms.

If you are confident of earning a strong salary right out of school, private loans may be a good option. That said, it’s important to do your research and pick an option that works for your own personal financial situation.

Check out our guide to student loan options to learn more about financing options, interest rates, repayment plans and how to find the best deal for you.

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