Repayment Essentials
Introduction

Financial Terms Explained

If a student loan is your first loan – you are entering a new world of financial terms. Understanding these terms will help you take control of your student loan payments.

Amortization

The time period your loan repayment is spread out over. Standard Alberta student loan amortization periods:

  • 36 months for loans up to $3,000
  • 72 months for loans between $3,001 - $6,000
  • 114 months for loans $6,001 and over
Accrue The ability for something to accumulate over time.
Balance Total amount owing. Balance = Principal + Interest.
Principal The original sum of money borrowed in a loan, on which interest is charged. As you make payments, your principal goes down.
Interest The amount paid by a borrower to a lender for the use of money.
Interest Rate The amount charged by a lender to a borrower for the use of money. Typically expressed as an annual percentage.
Prime Rate

The prime rate is determined by the variable rate of interest for consumer demand loans.

  • Alberta student loans use the prime rate declared by the Canadian Imperial Bank of Commerce (CIBC)

  • Canada student loans uses the prime rates declared by Canada’s five largest banks.

The Canada Student Financial Assistance Program calculates its prime rate by eliminating both the highest and the lowest of the five rates, then calculates the average of the remaining three. The Prime Rate is calculated monthly.
Fixed Rate

A fixed rate means the interest rate on your student loan remains the same for the entire repayment term.

If you choose a fixed rate, your loans will stay at that rate until they have been paid in full.

  • The fixed rate for Alberta student loans is Prime.
  • The fixed rate for Canada student loans is Prime plus 2%.
Floating Rate An interest rate that moves up or down with the market.
Daily Interest Charge The amount of interest calculated to accrue on the balance of your student loan on a daily basis, charged monthly.
Repayment Term The projected period of time (in months) required to repay your loan based on monthly payments being paid on time.
Payment Frequency How often you are making payments. You are automatically setup with monthly payments. You can request to switch to bi-weekly or weekly payments.
Period of Study End Date This is your last day of study, confirmed by your school. Your loan status will change to In Grace on the 1st day of the following month.
Default Your Alberta student loan is in default if your payments are 150 days (5 months) overdue. Defaulted loans are returned to the Government of Alberta and sent to collection agencies for recovery.
Return to Government When you default on your Alberta student loan, the debt is sent to Treasury Board and Finance - Crown Debt Collections. Your debt will be sent to a private collection agency. You will have to make payment arrangements with the collection agency to bring your loan back into good standing.
Good Standing Your loans are up-to-date with no outstanding payments.
Consumer Debt Debts that are owed as a result of purchasing goods that are consumable and do not appreciate over time.