COVID-19 and the Six-Month, Interest-Free OSAP Moratorium

COVID-19 has made paying off student loans even harder than usual, and that’s why OUSA recently sent letters to the provincial and federal governments asking them to provide support to post-secondary graduates as they navigate the repayment process. Shortly after, both governments announced a six-month moratorium (or “freeze”) on Ontario Student Assistance Program (OSAP) payments and interest accrual until September 30, 2020.

Below, I’ll explain what this means and answer a few of the questions we’ve heard from students, including how the moratorium is different from the usual OSAP grace period, how it affects students graduating this year, and, in general, what improvements OUSA wants to see to the current grace period structure.

If you’re new to OSAP or have questions about how the program works, check out my post about the 2019 changes or visit this page for details on who’s eligible for grants and loans, where funding comes from, and how repayment works.

Note: This blog was written based on information available as of Friday, April 3, 2020. As Ontario continues to respond to COVID-19, the dates and government policies discussed here are subject to change. Keep an eye out for official updates from the Government of Ontario, the Government of Canada, OSAP, and the National Student Loans Service Centre (NSLSC).

How has COVID-19 affected OSAP loan repayment?

From March 30 until September 30, 2020, you don’t need to make payments on your OSAP loan and you won’t be charged interest. The principal and interest on your loan will stay the same until the beginning of October (unless you want to make payments before then, in which case  you’ll need to manually request to do so through your NSLSC account). 

In response to COVID-19, the provincial and federal governments recently introduced a six-month, interest-free moratorium on OSAP repayment. These were separate announcements — and, technically, they’re separate moratoriums — because OSAP loans are funded by both levels of government. When you repay your loan, you’re paying back Ontario and Canada, and both of them have now said it’s okay if you hold off until later this year.

After September 30, 2020, it’s business as usual: Interest charges will resume and you’ll be required to start making loan payments again.

How is the six-month OSAP moratorium different from the existing six-month OSAP grace period?

The OSAP moratorium and grace period are not the same thing. They function separately (with overlap in some cases — see my next question) and there are a few key differences.

First, the moratorium period is completely interest-free. Borrowers won’t be charged interest on either the provincial or federal portion of their OSAP loans until after September 30. The grace period, on the other hand, is only partially interest-free: During the six months after students finish school, they accrue interest on the provincial (but not federal) portion of their loans.

Second, the moratorium applies to all OSAP borrowers, regardless of what year they graduated; the grace period applies only to new graduates. The moratorium also has the same time period for all borrowers (March 30 to September 30), while the grace period begins and ends depending on when the borrower completes their studies.

How does the OSAP moratorium affect students finishing school this year? Do they still get a six-month grace period?

If you’re graduating this year, you still (technically) get a six-month OSAP grace period — but in most cases, it will overlap with the moratorium period.  Think of it as a “boosted” grace period. How this plays out, exactly, depends on when you complete your studies (and no, unfortunately you don’t get a six-month grace period after the six-month moratorium ends.)

For example, if you finish(ed)…

…at the end of December 2019, your grace period started a few months ago and, since then, you’ve been accruing interest on the provincial portion of your loan. Your grace period will continue until the end of June, but April through the end of June will be covered by the moratorium, which means no interest will build during that period. You will continue to benefit from the moratorium until the end of September and will be required to start making payments at the beginning of October 2020.

…at the end of April 2020, your grace period will run until the end of October; however, May through September will be covered by the moratorium. This means that for five of your six grace period months, you will not accrue interest on either portion of your loan. For the final month (October), interest will accrue on the provincial (but not federal) portion of your loan. You will not be required to make payments until the beginning of November.

…at the end of August 2020, your grace period will run until the end of February 2021. The first month of your grace period (September) will be covered by the moratorium, which means that you will only accrue interest on the provincial portion of your loan from the beginning of October until the end of February, with no requirement to make payments until the beginning of March 2021.

In general, what is OUSA’s stance on OSAP grace periods and interest charges?

OUSA recommends that the provincial government implement a two-year, interest-free grace period on the provincial portion of OSAP loans, and that they work with the federal government to implement this grace period structure on a federal level as well. In other words, we want new graduates to have two interest-free years before they’re required to pay back their loans.

This would give graduates the time they need to find well-paid employment in their chosen field, and to save money for investments, home ownership, starting a family, and other milestones. Under the current grace period structure, many OSAP borrowers (particularly those from low-income families) have no choice but to let the interest on their loan build during the six-month grace period, which makes it harder for them to become financially stable long-term.

To learn more, see OUSA’s Student Financial Aid policy.

These are challenging times for everyone, including post-secondary students. We’re doing our best to stay on top of government updates and keep you informed. If you have general questions about the interest-free moratorium, reach out to [email protected] and we’ll do our best to help! However, if you have questions about your OSAP account, please contact OSAP (1-877-672-7411) or the National Student Loans Service Centre (1-877-672-7411).