If you are preparing for higher education, one of the first things you will probably consider is your finances. You will have tuition costs, books, and other potential fees such as housing, food, and travel. Here, we will break down the key differences between a student loan and a student line of credit, including how each works, who qualifies, and how repayment is structured. 

What’s the difference?  

Student Loan – A student loan is money a student can borrow to help fund their post-secondary education. On PEI, the federal and provincial governments offer loans to students in post-secondary education who are in financial need. 

Student Line of Credit - A student line of credit is a loan provided by a financial institution to students pursuing post-secondary education.  

How do I qualify? 

Student Loan - To receive a student loan on PEI, you must be a: 

• PEI resident 

• Canadian citizen or landed immigrant/permanent resident (Record of Landing required) 

• Full-time student at a designated post-secondary institution. 

For government student loans in Canada, parental income and financial need are the main factors considered when determining loan amount. Find more information on student loans and grants on PEI here.  

Student Line of Credit - Often, if students choose to have a student line of credit, it is a secondary form of student borrowing because they do not qualify for the amount. Income and credit requirements apply when qualifying for student line of credit products. If a student does not qualify on their own for a student line of credit, their parent or guardian can act as a co-signer on the loan.   

What is the interest for a student loan and a student line of credit? 

Student Loan - For a government student loan, interest does not have to be paid until after the student has received their degree or diploma. Students can also apply for debt repayment assistance each year. If qualifications are met, the government pays the interest portion of the student loan or defers the payment.  

Student Line of Credit - With a student line of credit, interest begins accruing right away, and the student or co-signer begins making small monthly interest payments while the student is attending school. After graduation or after a student is no longer in school, they are entitled to a 6–12-month grace period where they continue to only pay the interest.  

What does repayment look like for a student loan and a student line of credit? 

Student Loan – Government loans do not require payment while a student is in school. After finishing school, there is a six-month non-repayment period on the loan before payments on the loan begin.  Depending on your financial situation, you may qualify for delayed repayment.  

Student Line of Credit – Upon completion of school, students will continue interest only payments for 6 months before starting regular payments. Once regular payments begin, amortization can range from five years to twelve years depending on the amount borrowed. 

For both a student loan and a student line of credit, it is important to read the fine print and make sure you understand the full extent of loan payment expectations. If you have questions about your finances in post-secondary or want to learn more about our products for students, text us at 1-855-728-2211 or call your local branch. 

Tip: Along with student loans, the PEI Provincial Government also offers grants and bursaries to qualified students. Find out more information here.