In this article, we will not only find an answer to the above question but we will be answering all probable questions that may come to your mind regarding the topic in question.
1. Eligibility Criteria for Student Loans
2. Can you include interest on student loans in debt tax deductions?
3. Significance of Line 31900
4. Advantages of Paying Off Student Loans
Eligibility Criteria for Student Loans
Here are the eligibility criteria for getting student loans in Canada:
• Students facing financial constraints
• Citizens, Permanent Residents, and Protected Persons can get student loans.
• Full-time students, part-time students, and students with permanent disabilities are eligible for student loans, but each has different requirements.
Can you include interest on student loans in debt tax deductions in Canada?
A student loan is not entirely tax-free in Canada. Every year, the percentage of tax credit that you get on your student loan interest stands at 15%. Because paying taxes on student loans can be a cumbersome exercise, you can include the interest in debt tax deductions. The loans that are eligible for interest deductions or tax deductions under The Canadian Revenue Agency (CRA) are the ones that you receive under the following acts:
• Loans that you use via the Canada Student Loans Act
• Loans that you use via the Canada Students Financial Assistance Act
• Loans that you use via the Apprentice Loans Act
• Loans that you use via the Provincial or territorial government laws
• Line of Credit
• Business Loan taken
• Loans that you take from a private lender or a financial institution
Remember that you cannot deduct interest on a private student loan.
Also, in case you don’t have a taxable income or if your federal tax amounts to zero, you can carry forward the interest on the student loan to a future year when you earn more income.
Significance of Line 31900
If you want to claim the interest on your student loan, you need to punch in the amount on Line 31900 of the tax return.
Are you looking for a tax credit on your student loan interest? It is possible if your income tax exceeds the credit amount. In case it is the other way round, you can carry forward the amount in any of the five years that follow.
If you are eligible for provincial or territorial tax credits, you can claim the same through Line 58520 of Form 428.
Advantages of paying off student loans
Do you now know the answer to one of the essential questions students ask – Is student loan tax-free in Canada? We are sure you do by now. Let’s now talk about the advantages of paying off student loans. Here are the benefits that you need to be aware of:
• Once you are free from the burden of payment, you can invest in your future.
• You will be stress-free after paying off your student loans.
• You can live a happy life without stress
Are student loans eligible for tax refund garnishments?
Tax refund garnishment is possible for federal student loans that are in default. However, tax refund garnishments are not possible for private student loans in default.
Is there anything called “student loan debt forgiveness” in the Canadian context?
Upon completing five years of employment, either the whole amount or a percentage of your student loan debt will be eligible for forgiveness.
What about the expiration of Canadian student loans?
OSAP debt or Ontario Student Assistance Program debt has no expiration date. It will go away only after you pay off the debt in full.
How do I stop paying student loans in Canada?
That is possible if you opt for filing bankruptcy or a consumer proposal. To make your student loan eligible for discharge, you will have to opt to file for bankruptcy after seven years of completing graduation.
If I miss a payment of my student loans, will it affect my credit score in Canada?
Yes, it will. If your credit score indicates that it is, in fact, risky to lend money to you, lenders will avoid lending you money in the future.
Paying off a student loan is a cumbersome exercise, but if you want to lift off your financial burden to some extent, you can claim any amount that is eligible for tax returns. If you face trouble paying taxes on a student loan, you can contact us and ease your mind. We provide the best solutions to Canadian students regarding any query/queries they may have.