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According to the OSAP website you will not be charged interest until 6 months after you graduate for the Ontario portion of your loans (Canada portion accrues interest immediately after graduation). The loans are interest and payment free while enrolled full-time.

That means for the next year you could earn interest on your savings and have extra cushion at no cost to you.

Live frugally while in school and you can pay off all or most of the loans before you start accruing interest. Even if you can't pay it all off, you'll be paying a relatively small amount of interest. The rate is not fixed currently, it's based on prime rate when your first payment is due, so the main risk is skyrocketing interest rates in the near future, but this is unlikely.

If the lack of savings will cause you anxiety over the next year, then taking a loan seems worth it. If any portion of what you can get from OSAP is grant, you can take that without hesitation.

Both your aversion to debt and your aversion to living paycheck-to-paycheck are admirable. Many people live in both of those states.

Fortunately, if I am reading your question correctly, you can avoid both. You currently have $18k in your savings, and your tuition for the upcoming year is only $13k. This means that if you pay cash for your tuition, you will be left with $5k in your savings account. That is a great emergency fund for a student. In addition, you are currently employed at a "well-paying" job, so your income should cover your living expenses for the next year.

Congratulations on saving up so much in your savings account, but you don't need to be afraid to spend it. Education in a marketable skill is a great thing to spend money on, and you will still have enough cash left to cushion you from unforeseen situations.

3.5% is not exactly a high interest loan, but it is certainly much more than you are earning in your savings account. It doesn't make sense to sit on a pile of cash that you don't need and borrow money at the same time.

Choosing to pay off debt vs. make payments should always consider the utility of both:

Paying back $13.5k over 9.5 years at 3.5% would mean you pay $2,388 in interest over the course of the loan. Leaving $13.5k in a savings account at a 1.5% APY for 9 years would give you $2,000 in compounded interest.

This means you would effectively be paying $400 over the course of 10 years to 1) build credit history, 2) leave yourself an emergency fund, and 3) open up the possibility of investing the money elsewhere. All while leaving yourself to opportunity to reallocate that money somewhere that will give you more value (monetary or otherwise).

Please ask yourself the following:

• Is being debt-free a higher priority to me than building credit?


• Will paying off the loan entirely leave me enough of an emergency fund? (Six months of expenses worth is the typical recommendation.)


• Can I invest my savings somewhere that will give me an even higher return than the loan interest rate?

If you 1) own or co-own a new business in Ontario or 2) work for or volunteer with a not-for-profit organization, you are most likely eligible to extend your grace period an additional 6 months. This could buy you additional time to find a job and save money to pay back the loan before the interest kicks in.

Also, you may be eligible for repayment assistance if you are not earning much: Repayment Assistance Estimator

The core of the answer here is independent of the specifics of the Canadian education funding system, IMO.

You are approaching the transition to earning your own living, and having to operate within the financial constraints which that imposes on you.

Keeping a cash "emergency fund" of a couple of thousand dollars is highly desirable, so long as you see it as covering relatively short term, low cost emergency situations.

Beyond that, you need a strategy to handle longer term unexpected events - for example a few months during which your are not working (through no fault of your own) but you need to finance somewhere to live, and your day to day living expenses.

I would see your $18k savings as covering that type of scenario. One unbreakable rule of personal finance is simple and obvious, but often ignored when thinking about future plans: you can only spend your money once. If you spend that $18k on your education in your final year, you now have no cushion of cash to get you through an unforeseen situation in future.

You could take the view that it would be better to defer taking out a loan to cover such a situation until you are forced to do so, but that ignores the fact that being in such a situation will not improve your ability to take out a low cost loan. Student loans generally are low cost, compared with other forms of borrowing.

If I were in your position, I would prefer the option of keeping your $18k cash cushion intact, take the student loan, and (as you appear to have done already) have a credible plan to pay the loan off, if nothing else untoward hits you financially.

You might want to consider a different place to park the $18k than a bank savings account - so long as it is still accessible in a reasonably short time scale (say 1 month) with no penalties. The main factor in choosing what to do with it is to preserve its value (against inflation, etc) rather than to hope to increase it, but with a significant risk of the opposite happening. Assuming your income will exceed your expenditure after you graduate, you have a lifetime ahead of you in which to invest your surplus income in the hope of long term gains (i.e. a timescale of 20 or even 50 years) without worrying about short term losses, or the possibility that you have to cash in those investments to meet an emergency.

Think 18k savings is by far easier re-saved then the 13k debt. Sure there is opportunity cost of finishing your degree now, and having 18k immediately available, but quantifying the opportunity cost requires a lot of for site. At best 13k at lest say 8% apr over say 6 years is 20k. So your opportunity cost of 18k liquid cash now must at least be 2k to break even. The interest on the student loan is very easily predicted and quantified in best and worst cases. The other end isn't and probably should be weighted by some probability which even then isn't necessarily useful. Some things like say a down payment on house or retirement fund may be able to prove positive over using your savings now. But given your age and uncertainty and risk associated with recent college grad, I don't like it.

This question has the ability to degenerate into a political argument, so I will not address the potential "Ontario bamboozlment".

Its great that you hate debt despite the avocation of taking on debt from the media. Guess who the media works for? Banks, and others who profit from consumers taking on debt. Your instincts are right on.

First I would go to my current employer. Do they want to take you on after you graduate? Would they be willing to help you with your current tuition? Can you negotiate something where everyone agrees on post graduation salary and they either help you with tuition or even bump your salary? That could solve your issue right there.

There was a study done where most emergencies people experience are less than $1,000. You will have 5 times that amount, and it will only be for a short time.

Failing that I would use savings. You will still have some buffer and that small buffer will help you curb spending until you have your savings replenished anyway.

Even if you do decide to do the student loan, I would not take the three years to pay it off. Get that thing paid off in a year or less. Just continue to live like a student, and throw all extra cash at the debt.