What method of payment actually is a form of borrowing money that needs to be paid back later?

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If you need help paying for your post-secondary education, student loans give you the money now and you pay it back later.

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Borrowing money is called taking out a loan. Not only do you have to pay the money back, but you have to pay extra for the privilege of borrowing. The extra money you pay is called interest.

Borrowing money to pay for your post-secondary education may not cover all your costs. You may also need to:

Here are your options for borrowing money as a student:

Government student loan

You may be eligible for a student loan from the Alberta government, the Canadian government, or both. You only have to apply once through Alberta Student Aid to be considered for both loans.

Full-time and part-time students can apply for student loans. In this video, Kristina talks about her experience applying for a student loan:

Kristina is an agriculture student at a rural public college. She discusses her experience choosing a college and living in a student residence.

Government student loans offer unique benefits:

• For full-time students: loans remain interest-free and payment-free while you’re in school. When you graduate or leave full-time studies, you have a six-month grace period before you have to start making payments. During this time your loan will not gain interest.
• For part-time students: interest will not accrue on your part-time loan during the study period. Principal and interest will need to be repaid seven months after you are no longer a student. If you are returning to school part-time and already have Alberta student loans for full-time studies, you can return them to interest-free and payment-free status by notifying your lender of your part-time status [pdf]. If you have Canada student loans from previous full-time study, interest will accrue and payments are expected while you are studying part-time.

When you apply for student loans, you are automatically considered for grants. Grants are free money that you do not have to pay back.

If you have problems repaying your government loans, there’s help. You may be able to negotiate your repayment terms or access government repayment assistance programs. Speak with your school’s financial aid office for more information.

Student line of credit

You can also consider borrowing from a bank, credit union, or treasury branch. These institutions offer student lines of credit. They may call these “student loans,” but lines of credit are a bit different.

When you take out a loan, you receive all the money at once. A line of credit allows you to take out money as you need it, up to the limit you’ve negotiated with the bank.

Student lines of credit also differ from government student loans in other ways. For example:

• If you don’t have a job or credit history, you’ll probably need someone to co-sign the line of credit for you. This “co-signer” is someone who agrees to pay the loan if you can’t.
• You start paying interest on anything you borrow right away, whether or not you’re enrolled in full-time studies.
• The bank decides what the interest rate is, not the government.
• Depending on the terms, you may not need to start paying down the principal until up to 24 months after you graduate. But interest will continue to be added on each month.
• If you have trouble paying back the loan, you can’t access repayment assistance programs offered by the government.
• When you file your income tax, you can’t claim a tax credit on the interest portion of the amount you pay on your loan. (This tax credit is only available if you have government student loans.)

Book an appointment to visit your local bank or apply online. Make sure you have your paper or digital school documents on hand to speed up the process.

Learn more about student lines of credit.

Student credit card

In addition to student lines of credit, many banks offer student credit cards. These are usually no-fee credit cards with low credit limits.

Credit cards work like a line of credit, and allow you to borrow up to the limit. They usually offer a 21-day grace period for you to pay what you borrowed back in full without charging interest. But be aware, they can have interest rates of 20% or more if you do not pay the balance in full each month.

A student credit card can help you manage day-to-day expenses while building your personal credit rating. Always pay your credit card bills on time, and try to only spend what you can afford to fully repay by the due date.

Talk to your bank to see if they offer a student credit card, and to learn how to use one responsibly.

Borrowing from family and friends

You may be able to borrow money from a family member or friend willing to provide a loan. A loan means that they expect you to pay them back.

Make sure you have a plan for how you’ll repay this person. You may want to write up an agreement stating how much money you’re borrowing, and your timeline for paying it back.

Tips for borrowing money

Whether you take out a loan from a government or bank, consider these tips:

• Apply early. You should apply at least 60 days before your classes start so you have time to figure out your finances.
• Ensure you have a Social Insurance Number and an Alberta Student Number.
• Remember that your own resources are considered to decide if you’re eligible.
• Remember that you’re legally responsible for repaying your student loan just as you would be for any other type of loan. This applies whether or not you complete your studies, are satisfied with your education, or land a job after.
• Remember that the less money you borrow and the faster you pay it off, the less interest you’ll pay and the more you’ll keep in your pocket.

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Buy now pay later means you pay by installments over time, instead of paying the full amount upfront.

Find out how buy now pay later works and what you need to know before you sign up.

When you use a buy now pay later service, you can buy a product and delay payment. You usually pay off your purchase over a few weeks. For bigger purchases, it may be longer.

You don't pay interest on the purchase. Instead you're charged fees.

Lots of shops offer different buy now pay later options. Buy now pay later providers include:

• Afterpay
• Brighte
• Humm
• Klarna
• LatitudePay
• Openpay
• Payright
• Zip Pay

Some buy now pay later arrangements are also offered through credit card networks such as Mastercard and Visa.

Before you sign up to buy now pay later

What to look out for

While buy now pay later can be convenient, it can be difficult to juggle repayments with other financial commitments.

In 2020, ASIC research into the buy now pay later industry found that in order to meet repayments on time, one in five consumers:

• missed or were late paying other bills or loans
• cut back on or went without essentials such as meals

Before you sign up, keep in mind:

• It’s easier to over spend – you can over-commit to spending you can’t afford
• Fees can add up – you are charged fees to use the service
• It can be hard to manage – if you sign up for more than one service, it can be hard to keep track of payments
• It might affect a loan application – lenders consider buy now pay later spending when you apply for a car loan or mortgage
• Late repayments can appear on your credit report – this affects your ability to borrow money in the future
• Lay-by can be cheaper – lay-by has no account keeping or late fees

Compare the fees charged

Buy now pay later services are often advertised as 'interest free' or '0% interest'. But they charge fees that can add up quickly. They may charge:

• late fees — if you miss a payment or pay late, around $5 to $15
• monthly account-keeping fees — a fixed monthly fee, up to $8 a month
• payment processing fees — some charge an extra fee of around $3 each time you make a payment
• establishment fees — a fee to set up the account. For some there are no establishment fees, for others these fees can be up to $90.

To compare fees charged by different providers, see buy now pay later fees on the Australian Finance Industry (AFIA) website.

You may also have to pay bank fees:

• overdrawn fees — if you don't have enough money in your account to cover the repayment
• interest — if you are paying by credit card

We explain how buy now pay later works and some tips on what to look out for if you use buy now pay later services

Tips for managing buy now pay later

To make the most of buy now pay later services:

• Stick to a limit and aim to have only one buy now pay later account at a time.
• Budget for bills, loan payments and buy now pay later payments.
• Consider linking your buy now pay later account to your debit card instead of your credit card. That way you're using your own money and avoid credit card interest.

What to do if you get into trouble

Most buy now pay later providers have dedicated complaints and hardship services. Contact your provider if you have a complaint or if you're having trouble making repayments.

If you need help to get your finances back on track, talk to a financial counsellor. They offer a free and confidential service to help you understand your options and deal with money issues.

National Debt Helpline — 1800 007 007

The free National Debt Helpline is open from 9.30am to 4.30pm, Monday to Friday.

When you call, you'll be transferred to a financial counselling service in your state.

Mob Strong Debt Helpline — 1800 808 488

Mob Strong Debt Helpline is a free legal advice service about money matters for Aboriginal and Torres Strait Islander peoples from anywhere in Australia.

The helpline is open from 9.30am to 4.30pm, Monday to Friday.

Georgia pays more for buy now pay later

In the lead-up to Christmas, Georgia decides to take advantage of online sales. She finds a new pair of designer sneakers for $150. As money is a bit tight, Georgia signs up to a buy now pay later service to split her payments.

She then finds a hair straightener for $300 at another store. She uses a different buy now pay later service to buy the straightener.

A fortnight later, Georgia discovers that her bank account is overdrawn. Before she bought the items, she hadn't checked whether she would have enough in her account to make both repayments.

Both buy now pay later providers charge Georgia missed payment fees. Her bank also charges her an overdrawn fee. Georgia is now waiting to see if the record of late payment will appear on her credit report.