How to Get an extra $7,500 in Alberta Student Loans (and why you should)

Alberta Student Loans are quirky, as is any government program. But one thing most medical students don’t realize is that the Alberta government won’t give you the maximum loan you’re eligible for automatically – you have to ask for it. Keep in mind, the deadline to apply for (or request additional) student loans is 1 month before the end of your semester, so if you’re a University of Calgary MD student, you have until February 29 of first year to apply.

If you browse through the Student Aid Alberta website you’ll find that the maximum amount of funding you can get is $7,500 per semester, which isn’t very helpful since medical school semesters are kind of screwed up, and in any event when you actually applied you probably got ~$22,500 or so of loans.

And the reason you got $22,500 in loans is because buried inside the dry-as-a-bone 123-page Student Aid Alberta policy and procedure manual is this little table:

Student Aid Alberta Medical Students

So the standard loan that Alberta Student Aid gives to all first year medical students for their first two semesters is $22,500, unless you’re deemed to have enough personal resources (e.g. you or your spouse are rich) that you don’t require government help. And if you’re in that situation, you should know that Alberta Student Aid must give you enough loans to cover tuition/fees and books, regardless of how much money you otherwise have. Simply fill in the Reconsideration Form (details further down) and follow these instructions:

Alberta Student Loans Tuition Books Only

On the other hand, if you got the $22,500 and that’s not enough (and unless someone else is paying for your housing and food, it won’t be), there’s a way to get more.

Buried down on page 56 of the student policy manual is the follow gem:

Alberta Student Loans More Money

I’ve highlighted the lines that are applicable to medical students, which is that if you’re in medical school (which is a program listed in section 2), you can get an extra $7,500 for each year you’re enrolled, as long as you’re below the lifetime limit. As of February 2016, the lifetime loan limit is $175,000 for medical students:

Alberta Student Loans Lifetime Limit

So we’ve established that you’re eligible for up to $7,500 in extra money. How do you apply for it?

You’ll want to fill out a Reconsideration Form, which you can either print and mail in, or upload it online through your Student Aid Alberta account.

Alberta Student Loans Reconsideration

Note that you’ll only need to fill out the first 2 pages of the form, and in the box labeled “Reason for Requesting Additional Funding”, explain that:

  • You’re a medical student who’s eligible to borrow up to $7,500 extra per year
  • You didn’t receive enough money to cover your living expenses, which are:
    • $xxx a month in rent
    • $xxx a month in food/clothing/transportation, etc.

For faster service, I suggest you include proof of your housing expenses, such as copy of your lease, rent receipts or check images – if they have to ask you for these, it could delay your funding by a few weeks.

Now, even if you don’t pay rent because you live with your parents, you could still be eligible for extra funding, although it might not be the full $7,500. Alberta Student Loans uses the following chart to determine your funding if you’re single without dependents.

Alberta Student Loans Living Allowance

Tuition/fees and books at the University of Calgary are estimated at $21,882 for the 2015-16 year, so add 8 months (12 months if you’re in 2nd year and up) worth of expenses to that, then subtract what you’re already gotten in loans, to figure out roughly how much extra money Student Aid Alberta will give you.

So you might be thinking, why should should get more student loans if you already have a line of credit, or you can borrow from your family?

There are a few good reasons to max out your student loans:

They’re interest free till graduation from residency (provincial loans)

That’s potentially thousands of dollars interest saved. Although interest rates are low on lines of credit, that interest rate is variable (it could go up at anytime), and it’s not tax-deductible later on. And if you’re borrow money from your family, that’s money they don’t have to invest, so they’re still losing out by lending it to you.

They help you qualify for means-tested scholarships and bursaries

Most medical schools have scholarships and bursaries that are given to the neediest students. And your degree of need is generally assessed by how much money you owe the government. Lines of Credit don’t count towards your indebtedness, only government student loans. So if you’re going to be in debt, owe it to the government, because it helps you qualify for free money.

Student loans are sometimes forgiven

Occasionally, governments (usually Liberal or NDP governments) will forgive some portion of your student loans. It might be a percentage, or a fixed amount, but there’s a chance you won’t have to pay back all of your loans. There may also be special programs to forgive large chunks of your loan if you practice in a rural area. In other words, student loans are sometimes free money.

Student loan interest is tax-deductible

As I implied earlier, any interest you pay on student loans is tax-deductible. This may not mean much now, but later on when you’re raking in the dough as an attending, every dollar you pay in student loan interest will generate a tax refund of anywhere from 30 to 50 cents, depending on what tax rates are. So in effect you’re getting a big discount on the interest. It may still make sense, though, to pay off your federal loans with a line of credit when they’re no longer interest-free, since federal interest rates tend to be quite high. But I’ll write about the best strategy for that later on, if I ever graduate from medical school 😉

How to Get the Best Deal on a Medical Student Line of Credit

Every bank in Canada worth its salt offers some variation of a Medical Student Line of Credit. Basically, it’s a big-ass loan from the bank to help pay for tuition and living expenses, and can be for as much as $275,000 as of August 2015.

Since it’s a line of credit, once you’re approved for the loan, you can use as much or as little of the $275,000 as you want, and you’ll only pay interest on the amount that you use, starting on the day that you withdraw the money. Until you graduate from residency, you don’t need to repay what you borrow, but you do need to make interest payments every month, even while you’re in school. This is the main reason why everyone should be applying for a government student loan first, since they’re interest and payment-free until you graduate. But for most people, government loans aren’t enough to live on, and many of us will have to turn to a line of credit to make ends meet.

Fortunately, medical student lines of credit are offered at the prime interest rate, which is an extremely favorable rate usually reserved for the banks’ best customers, e.g. medical students. The prime rate is currently 2.7%, but it isn’t fixed in stone, and can change in an instant based on the whims of the Bank of Canada. The prime rate is hovering just above its all-time low right now, so there’s a good chance it’ll be higher at some point during your medical training career. Hence, it’s a good idea to keep borrowing to a minimum because even a small increase in the prime rate can mean hundreds of dollars a year in extra interest payments.

Canada Prime Lending Rate History
The Prime rate fluctuates a lot, so borrow cautiously!

Since almost every bank will offer you a line of credit of $275,000 at prime rate, you might think they’re pretty much all the same and it doesn’t matter which bank you go to, but nothing could be further from the truth.

The fact is, all the banks do offer the same basic terms, but there are huge differences in the side perks on offer. Each bank wants to win your business and get you hooked on their services so when you’re a practicing doctor you’ll keep taking out loans and mortgages from them. It’s a privilege for them to get you as a customer.

So how do you get the best deal?

Never deal with anyone who isn’t a Medical Student Line of Credit Specialist

If a bank employee’s title doesn’t include the words “medical student adviser” or something to that effect, don’t bother talking to them about a line of credit. Most bank employees don’t deal with medical students very often so the only ones with much expertise are the specialists.

Scotiabank Medical Adviser
Only talk to people on this list

Don’t walk into a bank unannounced and expect to deal with a employee competent in medical student lending. Every bank in every city with a medical school has a specialist just for you – find out who they are and make an appointment to see them.

Shop around

Call or email all the medical student advisers in your area and ask what’s their best offer on a line of credit, bank account and credit card. Don’t be loyal to any bank just because your parents bank there and you’ve had an account there since you were eight.

If dealing with big banks isn’t your thing, check with local banks or credit unions such as ATB in Alberta, as they often offer a similar deal.

Consider the total package

You need more than just a line of credit. You need a bank account and a credit card too. Most banks have a medical student package that includes a fee-free bank account and credit card. Generally speaking, the bank account and credit card offers are the most significant differentiating factors between the various banks.

Do you want a top-tier credit card, like the TD Aeroplan Infinite, or the RBC Avion Infinite, which come with loads of airline miles and free travel insurance? Ask for it before applying for the line of credit. As a student carrying loads of debt without a steady income, you’re not usually seen as the ideal candidate for the best rewards cards, but it’s an important perk you can negotiate. You can also get the annual fee waived, for at least one year.

TD Aeroplan card
The TD Aeroplan Infinite comes with a 25,000 Aeroplan mile bonus and free travel insurance

As for the bank account, you should expect to get a bank account with zero monthly fees and plenty of free transactions. You should also negotiate a free order of checks (aim for at least 200), as those can come in handy. Some banks offer a certain number of free email money transfers every month, which are really useful for splitting bills or the rent with friends and roommates.

Never forget the golden rule when dealing with banks, that almost any fee can be waived, and exceptions can be made for almost any rule. If the person you’re speaking to says they can’t do it, ask to speak to their supervisor/manager. Someone high enough in the chain of command has the authority to do just about anything.

Not all lines of credit are made equal

There are a few key differences in the actual line of credit between the different banks.

The amount of money you can borrow in one year

Every bank except RBC limits how much you can borrow in a given year. So despite having a total $275,000 credit line, you might only be able to use $50,000 in your first year. For most people, that’s more than enough, but if you want flexibility in case of an emergency, it might be a consideration. Generally, there’s some flexibility on these annual limits when push comes to shove, but that’s just another hurdle to jump.

How interest is paid every month

With Scotiabank and National Bank, your monthly interest is paid automatically by withdrawing even more money from your line of credit to cover it. This is known as “capitalizing” the interest. Since most medical students don’t have a regular source of income and need to borrow money to pay the interest anyways, it can be a very convenient feature.

With TD and RBC, your monthly interest payment must come out of your bank account and can’t be automatically taken from your line of credit. In practical terms, this means you need to make sure you have enough money in your bank account to cover the interest payment on the day it’s due. If you don’t, you’ll be hit with a insufficient funds charge, usually around $35, in addition to penalties for making a late payment. Banks will often forgive you the first time this happens, but it’s one more thing to add to your calendar.

Medical Student Line of Credit Cheat Sheet

I’ve put together a cheat sheet of the various banks’ packages, based on information gleaned from talking to banks, consulting their websites and of course the premed101 forums (a good resource to consult for the latest info). Any of this information is subject to change or be out of date, but it’s a place to start. 🙂

If all else fails, just remember to negotiate and don’t consent to a credit check until you’re happy with what’s being offered. You can always walk away and think about it. 🙂

 Bank of Montreal (BMO)CIBCMD Management (National Bank)Royal Bank (RBC)ScotiabankTD
Maximum Credit Line$250K, max $75K/year$275K$275K$275K$275K (max $50K/year for school plus $75K for residency)$250K
Maximum Credit Line in First Year$75K$70K$50K$85K
Interest RatePrime ratePrime ratePrime ratePrime ratePrime ratePrime rate
Grace Period after Graduation from Residency - Interest-only payments during this time12 months12 months12 months12 months12 months12 months
Credit cardNo special dealStudent credit card with $1K limitCMA Platinum Mastercard, with annual fee waived for 2 years$5K Visa Avion Infinite card with annual fee waived first yearUp to 2 cards, total $10K limit with fees waived (Visa Infinite Momentum and Amex Gold)No special deal
Interest automatically paid from Line of Credit (vs from bank account)unknownNoYesNoYesNo
NotesLimits can be flexible
Chequing accountNo monthly fee
30 transactions/mo
2 free email transfers/mo
No monthly fee
Unlimited transactions
No monthly fee
Unlimited transactions
200 free cheques/yr
No monthly fee
Unlimited transactions
12 bank drafts/yr
5 free email transfers/mo
No monthly fee
Unlimited transactions
$5K overdraft protection
No monthly fee
25 transactions/mo