What is the difference between a student line of credit and a student loan in Canada?

A government student loan (Canada Student Loan / OSAP / provincial equivalent) is issued by the federal or provincial government, based on demonstrated financial need, requires no credit check, and comes with protections like the Repayment Assistance Plan (RAP), interest-free federal status (as of 2023), and a non-repayment period. A student line of credit is a revolving credit product from a bank, issued based on creditworthiness (often requiring a cosigner for undergraduates), charges interest from the moment you draw on it (interest-only payments typically required in school), and comes with no income-based repayment protections. They serve different functions and are often used together.

What interest rate does a student line of credit charge?

Bank student lines of credit for undergraduates typically charge the bank's prime rate + 1% to prime + 2% (the spread varies by bank and your negotiated terms). For professional programs (law, medicine, MBA, dentistry), some banks offer rates at prime + 0% or even slightly below prime. With the prime rate approximately 4.95% as of early 2026: an undergraduate student LOC might charge 5.95%–6.95%; a professional student LOC might charge 4.70%–4.95%. Compare: federal Canada Student Loans charge 0% interest (no interest at all as of April 2023). Ontario Student Loans charge the prime rate variable or prime + 1% fixed — still likely higher than a well-negotiated professional student LOC.

Do you have to make payments on a student line of credit while in school?

Most bank student lines of credit require interest-only monthly payments on the amount drawn while you are in school. You do not need to pay down the principal while enrolled, but interest accrues and is payable each month. Some banks offer a 1–2 year post-graduation grace period during which you continue to make interest-only payments before full principal+interest repayment begins. This is different from government student loans, which require no payments and charge no interest during the 6-month non-repayment period. The interest-during-school feature of an LOC significantly increases its total cost compared to a government loan.

Does having a student line of credit affect OSAP eligibility?

Yes. When you apply for OSAP (or other provincial student aid), your student line of credit limit and balance may be considered as a resource available to you, which can reduce your assessed financial need and therefore reduce your OSAP grant and loan amounts. Different provinces treat LOC assets slightly differently. In Ontario specifically, OSAP considers available credit resources. Using a student LOC before exhausting all government aid is generally a mistake — take all available OSAP first, then use a student LOC for any remaining gap.

What is a professional student line of credit and who qualifies?

Major Canadian banks offer large lines of credit specifically for students enrolled in high-earning professional programs: medicine (MD), dentistry, law (JD/LLB), optometry, pharmacy, and MBA programs. These products have much higher limits than standard undergraduate LOCs: RBC MedStudents: up to $350,000–$375,000; TD Health Professional Banking: up to $325,000–$350,000; Scotiabank Professional Student Plan: up to $275,000–$350,000 depending on program; BMO Professional Banking for Students: up to $350,000. These LOCs charge lower rates (prime or near-prime), have interest-only payments during school and residency, and typically do not require a cosigner for eligible students at accredited programs. Comparison shop between banks before committing as terms vary significantly.

If I have a professional student line of credit, do I still need government loans?

Law and MBA students typically do not qualify for significant government student aid once they have available credit through a professional LOC — OSAP and most provincial programs consider the LOC a resource that reduces financial need. Medical and dental students in Canada technically may still receive some government loan amounts, but the professional LOC usually provides far more than needed. The key difference: government loans come with RAP if income is low after graduation; professional LOCs do not. Given that MD/DDS median incomes are high, this is often not a practical concern for most medical/dental graduates, but residents (low residency salary, high debt) should be aware.

Can you convert a student line of credit to a regular loan after graduation?

Yes. Most banks allow you to convert your outstanding student LOC balance into a fixed-term personal loan with a set amortization schedule (typically up to 10 years) after graduation — usually at the end of the post-graduation interest-only period. This converts the revolving line (where you only had to pay interest) into a fully amortizing loan with principal payments. The rate may change at conversion. Converting to a fixed loan forces structured repayment and prevents you from continuing to draw on the line, which can be a helpful behavioral constraint to ensure you actually pay down the balance.

Student Line of Credit vs Student Loan Canada: Which Should You Use?

Understanding which product to use — and in what order — can save you thousands of dollars in interest and protect your access to income-based repayment options.

Side-by-side comparison

Feature	Government student loan	Student line of credit
Issuer	Federal/provincial government	Bank or credit union
Eligibility	Financial need–based	Creditworthiness (cosigner often needed for undergrads)
Interest while in school	None (federal: 0% permanently; provincial varies)	Yes — interest accrues and monthly interest payments usually required
Interest rate	Federal: 0%; Provincial: prime or prime + 1%	Prime + 0% to prime + 2% (varies by program and negotiation)
Repayment start	6 months after leaving school	Interest-only in school; principle repayment begins ~1–2 years post-graduation
Income-based repayment	RAP available through NSLSC	None
Loan forgiveness access	RAP forgiveness, rural healthcare programs	None
Bankruptcy discharge	7-year rule applies	Standard unsecured debt rules
Impact on OSAP	N/A (IS the government loan)	Can reduce OSAP eligibility
Limit	Based on assessed need	Up to $350K+ for professional programs; $10K–$80K for undergrad

Government student loans: the right first choice

Before drawing on a bank line of credit, exhaust your government loan options:

Apply for OSAP (or your provincial equivalent) first — even if you expect a partial grant, it is free money before it becomes a loan
Federal Canada Student Loan is 0% interest — there is no cheaper money available anywhere
Provincial loans (e.g., Ontario Student Loan) may carry some interest but still come with RAP protection

Government loans are limited by assessed need. Once you hit the maximum, a student LOC fills the gap.

Student line of credit for undergraduates

For undergraduate programs, banks offer student lines of credit with limits typically $10,000–$80,000 depending on the program and institution.

Pros:

More flexible than a government loan (can draw as needed)
No strict eligibility criteria beyond creditworthiness
Interest-only in school = manageable monthly cost

Cons:

Usually require a cosigner (parent/guardian) if you have limited credit history
Interest during school (often 5–7% annually)
No RAP if you struggle to repay after graduation
Reduces OSAP eligibility if reported as available credit

Undergraduate student LOC rates (approximate, early 2026):

Bank	Typical student LOC rate	Max limit
RBC	Prime + 1%	$80,000 (combined)
TD	Prime + 1%	Varies by program
Scotiabank	Prime + 1%	$80,000
BMO	Prime + 1%	$60,000
CIBC	Prime + 1%	$60,000

Always negotiate the spread — banks have flexibility, especially for students at competitive programs.

Professional student lines of credit

For students in medicine, dentistry, law, pharmacy, optometry, and MBA programs, banks compete aggressively to offer large LOCs with premium terms, knowing these graduates will be high-income banking customers.

Medical/dental LOC comparison

Bank	MD limit	DDS limit	Rate	Interest-only period
RBC MedStudents	$375,000	$350,000	Prime	School + residency
TD Health Pro	$350,000	$325,000	Prime	School + 2 years post
Scotiabank	$350,000	$300,000	Prime	School + residency
BMO	$350,000	$300,000	Prime – 0.25%	School + residency
CIBC	$325,000	$300,000	Prime	School + 2 years post

Law LOC comparison

Bank	JD limit	Rate	Notes
RBC	$150,000	Prime + 1%	Standard
TD	$125,000	Prime + 1%	Standard
Scotia	$125,000	Prime	Negotiable
BMO	$125,000	Prime + 0.5%	Standard

For professional programs: shop the banks before selecting one. Rates and limits can vary by $25,000+ in limit and 0.5–1% in rate. Visit each bank’s student-focused advisor.

During school: managing interest payments

Most bank student LOCs require monthly interest-only payments on your outstanding balance. Budget for this carefully.

Example for law student:

Drew $80,000 in year 1 (average draw)
Rate: prime = 4.95%
Monthly interest on $80,000 at 4.95% = ~$330/month
Year 2: drew another $40,000 → balance $120,000 → monthly interest ~$495
Year 3: final year, balance $150,000 → ~$619/month

Many students pay this from their remaining LOC room (drawing on the LOC to pay the LOC interest) — this accelerates balance growth. Try to pay interest from income or savings when possible.

After graduation: repayment structure

Government loans: 6-month non-repayment period → full principal + interest payments begin → RAP available if income is low.

Bank LOC: Interest-only period continues 1–2 years post-graduation → convert to term loan or begin principal repayment → no income-based protections.

Priority order for repayment: If you have both:

Pay minimums on the 0% federal Canada Student Loan (no urgency to pay this fast)
Aggressively pay down provincial loans and bank LOC interest (these have real interest costs)

Special case: medical residents

Medical residents earn approximately $65,000–$85,000/year — well below the debt load they carry ($150K–$375K in LOC balances common). Most banks allow interest-only payments to continue through residency. Budget carefully: residency interest alone on $300,000 at prime is ~$1,237/month ($14,844/year). That is significant on a resident salary.

Post-residency as an attending/GP: salary typically $250,000–$400,000+ gross. Most physicians repay LOC within 3–5 years of completing residency.

When a student line of credit makes sense vs. when it doesn’t

Use a student LOC when:

You’ve maxed all available government student aid
You’re in a professional program with high earning certainty post-graduation
You need funds beyond government loan limits
You can make interest payments during school to limit balance growth

Avoid or minimize a student LOC when:

You haven’t yet applied for all available government student aid
Your post-graduation income is uncertain (arts, humanities, early educators, social work)
You cannot make interest payments in school (adds to balance compound)
No cosigner available and the bank’s rate is 7%+