# Interest Rates

### Interest Rates for Student Loans

Interest is charged on your student loans when you enter Repayment Status.

There are two types of student loan interest rates – fixed rate and floating rate. (Floating rate is sometimes referred to as variable rate).

• Interest rates on student loans are based on the prime rate.
• Interest accrues daily and is calculated monthly. This means interest charges are applied to your loan balance on the last day of each month when you are in repayment.

### Interest Rate and Prime Rate

Each of Canada’s five major banks post their prime rate. The interest rate charged on student loans is based on the prime rate.

For Alberta student loans, the interest rate charged is the prime rate as declared by the Canadian Imperial Bank of Commerce (CIBC) + 1%.

For Canada student loans, the Canada Student Loans Program (CSLP) uses the prime rates declared by the five largest Canadian banks to calculate its prime rate. CSLP calculates its prime rate by eliminating both the highest and the lowest of the five rates, then calculates the average of the remaining three.

### How the Prime Rate Affects Loan Repayment

Changes to the prime rate affect the interest calculations on your loan. When the prime rate changes, the interest on
your loan(s) change, however, your monthly payment amount will remain the same:

• If the prime rate increases, you will pay more interest.
• If the prime rate decreases, you will pay less interest.

### Floating Rate versus Fixed Rate

#### For Alberta student loans:

• The interest rate is set by default when you enter Repayment at a floating rate, which is CIBC’s prime rate +1%.
If you have a floating rate, your interest rate will change along with the prime rate.

• On a one-time basis, students can request a fixed rate, which is CIBC’s prime rate + 2%.

Choosing a floating rate will usually save you money because floating interest rates are lower than fixed rates. This is true as long as floating rates don’t rise dramatically over the long term of the loan. Use the Loan Repayment Estimator to compare the cost of choosing a floating rate versus a fixed rate to pay off your loan: