Personal Finance

# Help! How to repay OSAP, in one shot from your saving/investment or slowly?

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• Oct 1st, 2021 6:22 pm
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[OP]
Newbie
Apr 19, 2015
36 posts
Northern Ontario, ON

## Help! How to repay OSAP, in one shot from your saving/investment or slowly?

My kid is graduating from University and she owes about 36000 to OSAP. She has about 36000 in her investment(non registered) earning about 6%/year. OSAP is currently charging prime+1%=3.45%/year.

Which is better in long term, using 36,000 in her investment and return money to OSAP in one shot or keep her investment and slowly return to OSAP as she still earns from 6%-3.45%=2.55%??? How do you calculate this? If she returns in one shot, she can start building new savings right away from her employment(it can be like \$400/month). Can anybody figure out which is better in 2 scenario with actual figure?? She has to start returning money to OSAP from Feb or March 2022. What about tax implication? Is it better to return slowly as you get better deal in tax(I don't know enough about it)? Or OSAP's interest may go up and her investment can go down, so it is better to return in one shot???

Any info is appreciated.
14 replies
Jr. Member
Oct 22, 2020
110 posts
A few points:

1) Non-registered investments means she'll have be taxed on any net capital gains (and distributions). If that out of 36k, say 6k are capital gains, then 3k of will that will counted as income when she sells her investments. Can she cash out some TFSA money instead and use that to pay? Will her new employment income allow her to request a Repayment Assistance Plan (edit: mistakenly said Continuation of Interest-Free Status application )?

2) The tax credit on OSAP is 15% federal and + 5% Ontario. Meaning if she pays \$100 in interest, she can reduce her taxes by \$20 (edit: added Ontario portion).

3) Keep in mind that the day you have to make payments and the day that interest starts is not the same. No payments are required the first 6 months, but the Ontario interest portion starts incrementing right away.

4) For sure the interest rate will go up. The federal interest holiday will end sometime.

5) Who knows, maybe the next government will do some more benefits / loan forgiveness, etc. Government largess seems to be all the rage these days.

Looking at the bigger picture, the potential gains and loss of opportunity will not be that big either way. I would say the bigger issue will be spending / saving / investment behavior. If one action cultivates better long term behavior, I'd advise that. But of course that is more personal and you'd know better than us strangers.
Last edited by kelaaa on Aug 20th, 2021 8:02 am, edited 1 time in total.
Nov 13, 2013
3827 posts
Ottawa
kelaaa wrote: A few points:

1) Non-registered investments means she'll have be taxed on any net capital gains (and distributions). If that out of 36k, say 6k are capital gains, then 3k of will that will counted as income when she sells her investments. Can she cash out some TFSA money instead and use that to pay? Will her new employment income allow her to request a Repayment Assistance Plan (edit: mistakenly said Continuation of Interest-Free Status application )?

2) The tax credit on OSAP is 15%. Meaning if she pays \$100 in interest, she can reduce her taxes by \$15.

3) Keep in mind that the day you have to make payments and the day that interest starts is not the same. No payments are required the first 6 months, but the Ontario interest portion starts incrementing right away.

4) For sure the interest rate will go up. The federal interest holiday will end sometime.

5) Who knows, maybe the next government will do some more benefits / loan forgiveness, etc. Government largess seems to be all the rage these days.

Looking at the bigger picture, the potential gains and loss of opportunity will not be that big either way. I would say the bigger issue will be spending / saving / investment behavior. If one action cultivates better long term behavior, I'd advise that. But of course that is more personal and you'd know better than us strangers.
These are all very good points. Keep in mind the 6% is not gusranteed. Current gusranteed returns are closer to 1%. 6% sounds like safish dividend stocks mixed with some fixed income but that can still easily turn south. The past 15 yeara paying off debt has been the wrong choice but most of the past 100 and 1000 it was the better choice.
[OP]
Newbie
Apr 19, 2015
36 posts
Northern Ontario, ON
Thank you both for your info！

Great advice, we will look into OSAP stuff but is it possible to repay Ontario portion, then 6 month later to Federal?? Please advise if you know how to go about it. She can repay slowly to OSAP but then when she has more money, can she pay more? Is there any penalty?

Her TFSA is earning about 10%/year, so she should keep it.

Thanks again!
All should end well. If not well, it is not the ending.
Nov 13, 2013
3827 posts
Ottawa
puinkl wrote: Thank you both for your info！

Great advice, we will look into OSAP stuff but is it possible to repay Ontario portion, then 6 month later to Federal?? Please advise if you know how to go about it. She can repay slowly to OSAP but then when she has more money, can she pay more? Is there any penalty?

Her TFSA is earning about 10%/year, so she should keep it.

Thanks again!
Correction. Her TFSA has earned 10% a year it is not earning. Frankly thats low for recent bull markets buy maybe she is invested partially in low risk investments.
Deal Fanatic
Jul 26, 2007
6727 posts
Toronto
On top of all the financial advices, when it's time to make the actual payment(or payments)you can use CT triangle mc to pay to national student loan payee to earn 1% or \$360. That's lot of frying pans one can buy.
Deal Expert
Jan 27, 2004
50038 posts
ONTARIO
fogetmylogin wrote: Correction. Her TFSA has earned 10% a year it is not earning. Frankly thats low for recent bull markets buy maybe she is invested partially in low risk investments.
I'm +15% since march 2020 in my wealth simple tfsa robo advisor thing set on the highest growth level (i think its 90% equity 10% cash/bonds). So I guess if you calculate YOY % increase, thats maybe 12ish %?

Sounds about right if you're in a mainstream growth type of mutual fund/ETF.

Not everyone is gonna go in and start flipping a bunch of individual stocks. Most people just get an ETF or mutual fund and call it a day. They might buy a few stocks that interest them.
Last edited by UrbanPoet on Aug 24th, 2021 12:24 pm, edited 1 time in total.
Deal Fanatic
Oct 1, 2004
6651 posts
GTA
Have her apply for repayment assistance to see if she qualify before deciding to pay.
[OP]
Newbie
Apr 19, 2015
36 posts
Northern Ontario, ON

paying-off-osap-credit-card-1769261/

But how this is different from paying your cell bill with any credit card?? Why it has to be Triangle? PCMC earn 1% on any card use. What about Tangerine? If this can be "recurring bill payment" category, she will earn 2%???

All should end well. If not well, it is not the ending.
Deal Fanatic
May 11, 2014
5657 posts
Rankin Inlet, NU

paying-off-osap-credit-card-1769261/

But how this is different from paying your cell bill with any credit card?? Why it has to be Triangle? PCMC earn 1% on any card use. What about Tangerine? If this can be "recurring bill payment" category, she will earn 2%???

You can't normally pay student loans with credit cards period, so tangerine or any other credit cards are a no go. They won't allow it. CT is the only credit card that has a bill pay function that acts like online banking to allow you to pay bills that otherwise wouldn't allow credit card payment such as municipal taxes or insurance. Student loans and tuition are also payments that are not allowed on credit card in general (unless you pay the 1-3% fee they sometimes allow). So to pay OSAP, you are looking at \$360 in CT Money.

Sask Pension Plan Upto \$7000/yr in Credit Card spending on RRSP contributions
Deal Fanatic
Jul 26, 2007
6727 posts
Toronto

paying-off-osap-credit-card-1769261/

But how this is different from paying your cell bill with any credit card?? Why it has to be Triangle? PCMC earn 1% on any card use. What about Tangerine? If this can be "recurring bill payment" category, she will earn 2%???

You can double dip when paying for tuition by using CT MC to pay University directly, must pay in full amount or OSAP pays 50% of tuition balance first to their university and rest to kid's account.

And the when it's time to pay OSAP, select national student loan payee and remember to pay monthly manually or setup reoccurring payment. I haven't tried setting up reoccurring payment within CT MC site, only paid the full amounts.
[OP]
Newbie
Apr 19, 2015
36 posts
Northern Ontario, ON
If her debt is \$37000 and her triangle CC credit limit is \$10,000, can she pay
\$10K in Dec
\$10K in Jan
\$10K in Feb
\$7000 in March (I think March is end of 6 months grace period for Fed portion. She does not have Ontario portion)?

Or can parents pay, using our triangle CC and get 1%?

Oh this is wonderful!! Hope more people can make use of this!!

Thank you thank you thank you!
All should end well. If not well, it is not the ending.
Deal Fanatic
Jul 26, 2007
6727 posts
Toronto
puinkl wrote: If her debt is \$37000 and her triangle CC credit limit is \$10,000, can she pay
\$10K in Dec
\$10K in Jan
\$10K in Feb
\$7000 in March (I think March is end of 6 months grace period for Fed portion. She does not have Ontario portion)?

Or can parents pay, using our triangle CC and get 1%?

Oh this is wonderful!! Hope more people can make use of this!!

Thank you thank you thank you!
Anyone can pay national student loan at anytime using their CTMC as long as you have their loan account number.

Try paying \$1 months in advance to make sure it goes through. I do this for all my first bill payments using CTMC.

Under add payee it's called :

NAT STU LN SER
Sr. Member
Jan 24, 2015
521 posts
Oakville, ON
peteryorkuca wrote: Anyone can pay national student loan at anytime using their CTMC as long as you have their loan account number.

Try paying \$1 months in advance to make sure it goes through. I do this for all my first bill payments using CTMC.

Under add payee it's called :

NAT STU LN SER
I just paid \$1 through CTMC and will see if it goes through. Thanks.
Sr. Member
Jan 24, 2015
521 posts
Oakville, ON
kelaaa wrote: A few points:

1) Non-registered investments means she'll have be taxed on any net capital gains (and distributions). If that out of 36k, say 6k are capital gains, then 3k of will that will counted as income when she sells her investments. Can she cash out some TFSA money instead and use that to pay? Will her new employment income allow her to request a Repayment Assistance Plan (edit: mistakenly said Continuation of Interest-Free Status application )?

2) The tax credit on OSAP is 15% federal and + 5% Ontario. Meaning if she pays \$100 in interest, she can reduce her taxes by \$20 (edit: added Ontario portion).

3) Keep in mind that the day you have to make payments and the day that interest starts is not the same. No payments are required the first 6 months, but the Ontario interest portion starts incrementing right away.

4) For sure the interest rate will go up. The federal interest holiday will end sometime.

5) Who knows, maybe the next government will do some more benefits / loan forgiveness, etc. Government largess seems to be all the rage these days.

Looking at the bigger picture, the potential gains and loss of opportunity will not be that big either way. I would say the bigger issue will be spending / saving / investment behavior. If one action cultivates better long term behavior, I'd advise that. But of course that is more personal and you'd know better than us strangers.
The temporary elimination of interest on Canada Student Loans may be through to March 31, 2023. Does that mean I don't need to pay any interest for Canada Student Loan before that? So, is it a good idea to pay monthly and slowly, and then pay it faster or full when the interest rate is up? Thanks.

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