Closed-End Funds
Posted by Gail | Filed under Investing
Student loan question/feedback requested; please see the end of this blog.
The common everyday open-end funds make up the lion’s share of the mutual fund market. They are referred to as open-end funds because they continuously issue and redeem units. However, there’s another type of investment fund that behaves very differently. A closed-end fund issues a specific number of shares which remains fixed until the company decides to issue additional shares, so the number of shares outstanding remains unchanged for long periods. Shares of a closed-end fund trade on a stock exchange or in the over-the-counter market. If you want to buy or sell shares of a closed-end fund you must place an order with a broker, just as you would if they were buying or selling common shares. And if you want to sell your shares in a CEF, then there has to be an investor out there willing to buy them.
While for many CEFs liquidity is not a huge problem, some CEFs are very illiquid trading just a few hundred shares a day. So CEFs aren’t the right choice for short-term money. However, this very lack of liquidity may create interesting investment opportunities for money that has patience. If market conditions turn sour, illiquid CEFs tend to trade at remarkable discounts, as existing holders become desperate to sell.
While the price of a mutual fund is the net asset value (NAV) as determined by the fund company, the price of a CEF is the market price as determined by the principles of demand and supply. If a gaggle of investors wish to buy shares of a CEF and only a few shares are available, the CEF will trade at a premium to the NAV. With many shares chasing just a few buyers, the CEF will trade at a discount. The premium/discount is calculated by dividing the market price less the NAV by the NAV. So, if the NAV of is $10 and the market price is $12, the CEF is trading at a premium of 20%. However, if the NAV is $10 and its market price is $8, the CEF is trading at a discount of 20%. The discount/premium gives a snapshot of the current valuation of the CEF with respect to its NAV: if the CEF is trading at a wide discount then it is attractively valued.
The discount or premium at which a CEF trades is perhaps the single most important factor influencing the decision to invest in the CEF. Many funds consistently trade at or close to a particular level of discount or premium. Fund performance influences the premium or discount at which a CEF will trade. Consistently high performance of the fund will create demand for the fund so the fund will trade at a premium. The opposite is also true.
Another factor that affects a fund’s perceived value in the mind of investors, and therefore the premium or discount at which it’ll trade, is the fund’s tax liability. If an older CEF has significant capital gains liability attached to long-term holdings, new investors may be loath to assume this large capital gains tax liability if the funds unwind some of those highly profitable positions. Let’s say you bought shares at $25 apiece. If the next day the fund returns $5 as a capital gains distribution, you’ll only have $20 invested per share (despite any commission you may have paid on the full purchase). To add salt to the wound, outside of a retirement plan you’ll have to pay taxes on that capital gains distribution even though you didn’t own the fund when it was racking up all those gains. Since this would be an immediate loss, funds with these capital gains issues tend to trade at a discount.
Just as ease of access can create changes to demand for a specific CEF, so too economic, social or political developments may significantly impact the price investors are willing to pay for shares of a fund. This is particularly true for funds which invest in emerging markets where economic and political volatility are par for the course.
While CEFs issue a set number of shares when the fund is established, if the fund is trying to attract additional money into its coffers, it may resort to rights or secondary offerings. And to encourage investors to reinvest dividends and capital gains distributions, a CEF may have a very attractive DRIP in place. The existence of a DRIP, rights or secondary offerings may create short-term volatility. While secondary offerings tend to happen only occasionally, when they do, they are often priced lower than the current market price. Violá: the premium on existing shares disappears, perhaps never to reappear.
If you decide to get into the CEF market, know that you will never find the absolute bottom (so you should dollar-cost average down) and resign yourself to the fact that there will always be dud in your basket (so make sure you diversify). No matter how good a CEF looks, don’t stick all your chocolate chips in that cookie.
Since CEFs are more like individual stock investments than traditional mutual funds, use the same criteria for choosing a CEF as you would for investing in an aggressive stock.
Perhaps the biggest difference between a mutual fund and a closed-end fund is this: While a mutual fund may have a short-, medium- or long-term investment window as it’s objective, with a CEF you’re almost always into it for a short-term gain. However, you can only commit long-term money or your most aggressive dollars since if the gain doesn’t immediately materialize you’ll have to hold on for recovery or take the loss. CEFs should be considered highly speculative. Yes they sound like mutual funds in many respects, but they’re the tight-rope-walking, trapeze-swinging cousins and should be treated with a fair about of caution.
Next Week: Seg Funds
Last Week: What’s In a Mutual Fund’s Prospectus
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On a completely separate note, I’ve been getting quite a few letters recently about problems claiming interest relief or getting accurate statements from the student loans folks. I’d like to get some more information on this, so if you have a story to tell about the student loan system going very wrong for you, please post it below. I’m planning to do some following up and see what I can find out, but I’ll need some sense of what kinds of problems people are having. If you know of anyone who wants to share their story, please suggest they come here and post today. Ta, g
June 8, 2010 at 6:51 am
Student Loan follow up – My loan came due in Nov of 2007, and it was paid off in April of this year. I personally did not have any problems, but I was also on top of it:
- I created a spreadsheet with the current interest charges, had it calculate for the daily interest cost, and would check my numbers to ensure they were matching consistently (I would sometimes be a few cents off, but that’s because the calculation is an amount between the two interest rates (Ont/National).
- I checked in every month – I was making “bonus” payments on the 15th of the month, I would login to my account to ensure it was showing up. It took around 5-6 days for the extra payment to appear, but it would always count it as having arrived on the date I made the payment. I would then check in again around the 2nd (the PAP amount always went through in less time on their system)
- One thing I do have a complaint about is that they didn’t issue anything for taxes, other than a one page statement indicating what I paid. I then had to calculate the actual interest that was paid for my taxes, and I don’t know if I did it right, since I simply added each number in the interest column. I just pulled the statement I received in late February/early March – it’s dated Jan 15, but I didn’t get it until after my T4, which we got Feb 24. The statement does match my online statement, which matches my excel spreadsheet, but I didn’t try for interest relief. Friends did, they got it, but it does depend on not only your loan amount / payment fee, but also on your income for the previous three months, I believe.
June 8, 2010 at 7:09 am
A Closed ended fund is that just a ETF?(Exchange traded fund?)
As for Student loans, I missed my first payment but was back on schedule after that, they would send me a letter each month telling me I had missed a payment that month because they applied my automatic payment to the month previous, so I was always missing payments. I event ually got caught up.
Also I had all government student loans, at one time this was through the bank then when I was going to school they switched to having it run through their own offices, during the time of paying it off, the bank backed loans were simple, call them up and have them take an extra payment. The Student loan offices were horrible, Call them up and then I’d have to write a letter with all sorts of personal information on it and fax it over to them. If I was lucky the extra payment would be taken out of my bank account in 2 weeks time. it was annoying.
I’m glad I’m done with them and I’m glad my children will never have to worry about dealing with them.
regards,
Jason
June 8, 2010 at 7:44 am
Jason,
Closed-end mutual funds are a different can of worms from most exchange-traded funds. ETF’s are typically structured as open-ended funds, and institutional investors can subscribe for (or redeem) units at (or at least near) NAV. This helps prevent the trading-price of ETFs from varying too far from NAV as, at a certain point, if the discount gets too large, it creates an arbitrage opportunity for big institutional investors. This is why discounts to NAV for ETFs are typically far less than for closed-end funds.
June 8, 2010 at 7:53 am
Well I wish I didn’t use student loan but it was at the time very popular and I felt it was the only way to go to school.
After finishing school I volunteered in Africa. I had filed for interest relief for that time period so not to go into arrears on my loans. I got the approval letter from the loan office and was on my way to Africa.
While there about 5 months I started receiving phone calls from RBC saying that I was past due on my loans. They are very good at tracking you down. When I returned to Canada I had letters from the Federal Government stating that they wanted the full amount of the federal portion of my student loans paid immediately. Pretty scary stuff at the time.
What had happened is I had gone to school one year in Alberta and three in Ontario. The loan office had split my loan into two locations one being held at each end of the country so when I had applied for interest relief they only approved the one file number I thought I had been active under. They are not supposed to split loan holding locations. The one identification number shoud have been enough, lucky me I had two.
Things got worked out in the end after much hassle, stress and loads of phone calls. I, of course, got the short end of the stick with regard to the interest accumulated during my so-called interest relief period (at least it was only on half of my loans).
In a little over a year from now I should finally have the bugger paid off and I think I will party or shop the month after with what would have been my loan payment! However, I hear Gail’s voice saying to apply it to my LOC, hopefully that will be gone then too!
Student loans serve a great purpose, you just have to be careful and prepared.
Michelle
June 8, 2010 at 8:02 am
Re: Student Loans
I have not had any difficulties with accurate statements (if you are talking about Canada or Ontario Student Loans) as there is a number you can call which will you give you your up-to-date balance and interest rates ( 1-800-563-2422).
Interest relief should be pretty straight forward but it depends on your situation and if you get the correct paper work in on time (again if you are talking about Ontario or Canada Student Loan). If you are still a student and having difficulties you are best to go directly to the Student Loan Department at your school. If you have graduated call the number above. It is essentially you get paperwork verifying you have returned to school and are a full time student by the deadlines. If it has been six months since you graduated and you cannot afford to start paying back and are looking for an extension for continued interest relief be prepared to advocate for yourself and the fact that they will work with you but it will take some time and again you have to have all your paperwork in order on their time lines.
June 8, 2010 at 8:26 am
Student loans. I’m so glad they’re out of my life.
The worst problem we had was with my husband’s student loans, which were in repayment while I was in school doing an advanced degree.
One day, out of the blue, a very nasty collector called and told us we needed to give them $14,000 within 48 hours. Or else what, I’m not sure. We had no assets, except for a $300 car.
He was working and they didn’t garnishee his wages — which, in retrospect, seems strange to me. I can only guess that nasty collector was working for a division of the bank and was expected to scare the money out of us before they went ahead to garnishment.
She would give us no information, except that it was because of defaulting on his student loans, and that a payment hadn’t been made in over 6 months.
The problem with that scenario is that we’d been making the payments by cheque, and had the cancelled cheques for the last 6 months. She would not take the information from us.
Luckily, my husband’s father worked at a law firm and was able to have one of the lawyers write a letter on our behalf. Once the letter was received by the bank and the collector (who wouldn’t give us her fax number, but did give it to the law office), the calls stopped right away. I often wonder what would have happened if we didn’t have easy access to legal help.
For both of us (and we graduated in the 90’s), there was never any form of loan statement issued that clearly defined ‘federal’, ‘provincial’, ‘guaranteed’, etc. portions of the totals, or how payments were applied to those different pieces of the pie. When I paid my loans off early, I was given a final total that was almost $300 more than I’d calculated, given the interest rate that was posted on my online banking site. I paid it, unhappily. One month later, I received a cheque in the mail for that amount with a letter explaining how I’d overpaid.
I’m so glad to be rid of them, and I also vow that my children will never need to deal with the student loan trolls.
June 8, 2010 at 8:56 am
Jason:
Extra student loan payments are a lot easier with Internet banking. After adding the account (and doing a $5 payment to ensure it goes to the right place), you just select it as a “pay bill” item, and add your payment amount.
I never tried to make an extra payment over the phone. I simply did it myself, since I didn’t want to get on the phone for ages just to do an extra payment.
June 8, 2010 at 10:24 am
Student loan followup – I did three degrees on loans (was new to Canada and just didn’t have the money otherwise, despite working one and sometimes two jobs right through all of them). Ended up with about $60K in loans when I graduated in 2004 – presently down to about $29K despite several periods of interest relief (yay!). I am currently aggressively paying them down and am going to treat myself to a trip to Italy with my hubby when they are finally gone – then rebalance my budget to focus on long-term priorities and to give me some more breathing room. My issues have been with interest relief. I started studying in the mid-90s and so have one set of loans held by RBC and another (later) through the National Student Loans Service Centre. NSLSC has always been very easy to deal with – when I’ve needed to I’ve gotten interest relief approved quickly and relatively smoothly – they’ve also adjusted the term of the loan several times, and I’ve had no issues. My problems have been with RBC. NSLSC says they pass interest relief approvals on to your previous lenders, but I haven’t found that to be the case. Twice I’ve had to deal with RBC sending threatening letters and demanding payment in full when I’ve been on approved interest relief. Once they sent my account to collection. In both cases, it took a lot of time and energy, multiple phone calls and faxing interest relief approval forms to RBC to sort it out – the last thing you want to do when you’re also dealing with the stress of being unemployed. RBC got out of the loans business about 10 years ago and I get the feeling they frankly resent having to deal with legacy student loan accounts like mine – so they’re not investing much in terms of customer service or ensuring the system runs smoothly. It’s left a bad taste in my mouth and I will never, ever again purchase an RBC product – they had an opportunity to earn a lifelong client and they f$%#ed it up!
June 8, 2010 at 10:31 am
re: Student Loans
I was lucky enough to win an Louise McKinney Scholarship for academic achievement worth $3000 (at the time, now it’s $2500) funded by the Province of Alberta. Sounds good, right? What they don’t mention is that money is applied to any outstanding student loans you’ve received and specifically, any GRANT money you got, first.
I never actually saw any money, it went directly to my grant (free) money, my loan (expensive) stayed the same and– this is the part I loooove– I had to pay tax on it. When I complained, I was told I should just be proud to have won it and it would look good on my resume. I responded that I would have been better to work at a part-time job, be a C student and buy a much-needed used car.
What i got to keep was a lovely certificate with a naugahyde cover. My Mom was so pleased.
June 8, 2010 at 10:37 am
Student Loans: It takes absolutely forever and every scrap of personal information you could possibly have in order to sign up for any kind of phone or internet service that could make managing your loan easier.
June 8, 2010 at 10:50 am
Government Student loans.
Well, I can tell you that it’s VERY easy to get them, as long as your parents don’t make much money. One fellow helped me get approved while I was away in Africa one summer. Very nice.
I’ve been trying to qualify for interest relief. But because I work 7 days a week at 2 jobs, I don’t qualify. For a couple, we need to make under $3800 gross (or was it $3300) to qualify. My husband is not working and there is no way we can make ends meet with like $3000 net a month (yes, I’m including large savings in that and tithe – I don’t really want to cut this out but will if it comes down to it). So they need you to make no money and then you qualify. My income is about to go down yet again because I’m accepting a 0.6 position. But I need for my income to go down before I qualify. Which makes it hard to qualify.
The other problem I’ve had with BC Student loans is that I’ve legally changed my name after getting married. I’ve called them about it, I’ve faxed them copies of the legal name change certificate twice, I’ve mailed them a copy twice and I think they STILL have my old name on the account. At least that’s a minor problem.
And then of course there’s the not being able to apply for interest relief until 6 months after you finish your courses while your interest accumulates problem.
June 8, 2010 at 11:40 am
Gail, this website will blow your mind with awful tales of loans gone wrong… http://www.canadastudentdebt.ca/default.asp
Personally I have had enormous troubles getting statements, forget about any kind of itemization of charges, etc.
Loan has been sold to several banks over the course of its sordid life. This also adds to the confusion, not to mention there are rumblings about the legality of the government bouncing your loan of any old financial institution while claiming a “loss” on their books.
June 8, 2010 at 12:02 pm
I’ve never had a problem with repaying my student loans. When I left school, I had four loans – 2 through the bank (provincial and federal) and two through the government (also provincial and federal). I had automatic payments set up immediately and although it was a pain having four payments coming out, they were each relatively minor amounts, so it definitely do-able.
When I went to pay off one of my government loans, I just went down to their office, told them what I wanted to do, paid by debit card and it was done. No problems. I’m only $1500 away from having it all paid off now.
My one issue with student loans came when it was actually time to get the funds. I had loans through my first year in University and going into my second year, I had no problem applying to get the funding for my second year. The problem was that I had had surgery over the summer between 1st and 2nd year and we told the student loan office this as I wasn’t able to work during the summer and they needed to know so that I wouldn’t be penalized because of that. Well, I was. When I got my loan papers before school, I hadn’t received nearly enough because they said I had had months of working to save up my part of it. And no matter who I talked to, they couldn’t rectify it. We offered to show a doctor’s note, etc. but they basically said it was too late to get anything now. It was so frustrating as we had told them all this when I first applied, so there should have been no reason why they penalized me for this. I was happy to work summer jobs every other year and I had a part-time job during the year. But that second year of school was tough and thankfully my parents were able to help out to fill the gap.
June 8, 2010 at 12:37 pm
The problem I had with student loan statements is that you only get it once – when you receive the initial amount due. You make monthly payments and the only way to get a current balance is to call (or maybe go online now, not sure). You get a statement in Feb for interest credit for your taxes and that’s it.
They should be ending year-end statements every year to help people stay on top of the debt.
June 8, 2010 at 12:41 pm
My biggest issue with student loans was that they looked at the parent’s incomes to determine what to give you. Regardless of the parent’s intentions to fund your education (or in my case, my parent’s refusal to fund it). In my experience that was a major issue and I thought very unfair. I was initially denied, and found the penalty for making a false statement was having a claim denied, so figured what the hell and wrote an appeal with such a degree of fiction it had a story arc. And was approved.
My other big issue is with loan forgiveness, particularly by the government. I don’t think it should be forgiven, ever, under any circumstances. Interest relief while in school, yes, but once not than I think it would be fairer to charge everybody the same and everybody goes in with their eyes open.
June 8, 2010 at 2:39 pm
Geoff: on the topic of loan forgiveness – I’m inclined to agree with you.
I worked my butt off to pay out my loan as quick as I could, and I don’t think it’s fair that someone else can simply get it forgiven because they held onto the debt making minimum payments for 8 years. We all enter into the same agreement; we all get the same terms; we can all get the same maximum amount available.
It’s not everyone else’s problem that someone decides to coast through classes, dropping them on a whim, and taking 7 years of full-time classes to do a 4 year degree. Why should everyone else pick up their tab? If they don’t pay it, someone else does, and I don’t want my taxes to go up because of (hundreds of?) thousands in loan money being forgiven. You take it, you pay it.
June 8, 2010 at 3:05 pm
Re: Student Loans
A similar occurance also happened a friend of mine. I finished up my Masters Degree sooner than expected when I applied for the loan, and I was able to sign a form acknowledging that I no long required the funds they were offering for the second half of the year (approx. $6k). As a result, they didn’t deposit that into my bank account. Fast forward 7-8 months later. I’ve already begun paying back my OSAP load to the National Student Loan Service Centre (NSLSC) because the university no longer administers it once I am no longer a student there. The OSAP administration at my university sends me a letter, demanding that I repay not only the $6k that was never deposited into my account, but another $4k, claiming I will not be eligible for assistance in my future education unless I do. I have to call them up to explain what happened. They don’t believe me, despite the fact that I have graduated. So I have to have the NSLSC send me a specific letter outlining what was paid out to me , what I refused and what I owe, that I then send to OSAP Admin to clarify my actual standing, what I owe, and that I have in fact already begun to pay back my student loan. All of this because 1 person, somewhere in the line, didn’t update my loan file. Headaches and hassle, because the university OSAP administrators don’t actually communicate with the NSLSC.
June 8, 2010 at 3:34 pm
@Heather:
I had almost the exact same thing happen to me! Didn’t accept the second round of money, and paid dearly for it later on (namely, I elected nto to eligible for aid in the future rather than continuing fighting with them for 3 MORE years)
June 8, 2010 at 3:40 pm
Student Loans:
While I was in school I was audited twice with a request to pay back a portion of my loans due to the fact that I had made more money then I had estimated. I diligently put away money each paycheck and marched myself to the bank holding my loans to begin the repayment process. I received a form to fill in, and a copy of each payment I made. I kept all my paperwork and all of these payment forms, having a running total myself. This is how I came to figure out that a payment I had made didn’t ever actually get to the Student Loan central office. It took 3 years of paper trailing from inside the central office to discover the payment was sitting on someone’s desk in the wrong department for that length of time.
I was fortunately enough to be able to make a lump sum payment prior to the end of my graduating month so as not to incur any interest on these loans. A Little known fact with these loans is this – if you are a student making a decent wage during a co-op position and have been saving money along the way for future repayments, YOU CAN MAKE A PAYMENT ANYTIME PRIOR TO GRADUATION AND THE END OF THE MONTH IN WHICH YOU GRADUATE AND THE PAYMENT COMES OFF THE ORIGINAL BALANCE GIVEN TO YOU. Nobody knows this, since it obviously doesn’t make the government back any money. For me, I also had to apply for a freeze on repayments during my co-op terms as they were required by the program I was in and not optional. Doing this was a pain int he butt, but make sure you keep in constant contact with your school and the loans people to ensure your paperwork is handled correctly.
Though I didn’t end up claiming any interest on my taxes, I was able to get out from under the government’s thumb without too much of a hassle – except that lost payment that I had all the paperwork for. If I had not kept anything they would have made me pay the same amount again and never dealt with the paperwork issue.
A suggestion to those who have been budgeting and putting some aside for after graduation – make the payments systematically in your last two months of school prior to graduation (the last day of classes in your last year, not the day of your commencement), that way the amount of interest you pay on the remaining balance is reduced and you can pay back more without incurring any interest. You have to keep in constant contact with your loans on this, and be patient. Ultimately it took 3 days of sitting in their offices in Mississauga on Robert Speck Parkway for them to get everything straightened out and accept the final payment.
May seem like a pain, but can save you thousands in the end.
June 8, 2010 at 3:43 pm
I think the experience with student loans really depends on when and where the loan was taken.
I know people who have/had the loans funded by the banks but backed by the government seem to have a harder time dealing with them — someone previously mentioned that they believe the banks don’t put any effort into them and this is probably true.
I also know that my sister who went to school in Ontario had a joint NSLSC / OSAP loan and has had nothing but headaches, whereas I had a a BC loan and a NSLSC loan. My 2 loans operated completely separately and but were easy to deal with.
I know that when I was paying them off (from 2003-2006) there were dramatic changes in access to info about them. At first it was only through their call-centers which had awful hours. Then the BC people started a website with some basic info, including the amount each payment went to principal & interest. and I could print forms to fax to them to make changes or extra payments. Then the National people went a similar route and by the end I got all the info online and made all the extra payments / changes online.
So at least I think generally the system is getting better.
June 8, 2010 at 7:26 pm
I have NS and Canada student loans and every time I call to make a change in my payment amount (As I have done a few times as extra money comes available in my budget), I end up having to make 3-4 phone calls to straighten it out. The incompetance is astounding. I make a simple request, which is accepted. Then I get a call a week later saying there is a problem in my file. I call back, “problem”, such as “the new payment date is a Sunday” (“OK take the money the next day”) is fixed, I’m happy. THEN a few days later another call, another problem. Rinse and repeat. Nothing is ever simple.
June 8, 2010 at 8:03 pm
Re: Student Loans
I left school with about $14,000 in OSAP loans and $18,000 on a line of credit from a bank. My goal had been to live at home and work multiple part-time jobs to try and graduate with as little debt as possible…problem being that our dear government agencies can`t seem to communicate/coordinate with each other to save their souls…)
You see, my mom is on disability benefits. Due to life circumstances and an injury she was unable to provide financially for me with tuition etc.. but graciously kept her doors open for me to stay with her while I attended university in my home town. We thought it a great way to trim expenses…
But it turns out that
a) OSAP won`t allocate money to cover living expenses if your parents live within 40km of the university, and
b) Ontario Disability didn’t view me as a dependent (as I was over 18) so for each dollar I earned with my FOUR part-time jobs, not only did OSAP dock my eligibility and reduce my loan amount, but Disability docked my mothers benefits too.
Of course, we didn’t figure (b) out until well into my 2nd year, when they started taking back-deductions from my mom. So my option was to either take a private loan to help pay living expenses to recover what was lost on my mom`s disability, or switch universities and take a huge OSAP loan to cover full living expenses in another town.
And now five years later, still with a substantial debt hanging around my neck, they’ve discontinued the interest relief program and replaced it with this new affordable payments program. But go figure – they only consider your gross income and the amount of your OSAP loan. There is no consideration of any non-OSAP debt payment costs. So you could be paying $1000 of your cash-flow to non-OSAP loans, or child support, or whatever and it wouldn’t impact their evaluation of your ability to pay at all.
I am just so thankful that I found a good job and will one day be free of this mess.
(and sooner than I expected, thanks to you Gail!)
June 8, 2010 at 8:15 pm
I have not had an issues getting proper student loan interest paid documents for tax purposes. They are mailed out timely in February. Keeping your mailing address current with those who hold your loans is imperative.
I think some people incur issues when claiming interest paid on a Student Line of Credit. This is not an eligible loan for interest paid on student loans on your tax return.
Source: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/319-eng.html
I have been requested to submit my interest payment statement for 2 years. I filed electronically, so they didn’t have access to it. I complied and have had no further requests.
The one thing I would like to see is a statement of payments from my bank that holds my old student loans that clearly shows how your payment is applied: principle and interest and monthly balance. I get one from the National Student Loan Centre for a separate student loan.
When I 1st started paying my student loans, the only way you could do monthly payment was a monthly debit for a set amount. Now I have the option to set my student loans as a bill through my online banking. This allows me to pay my loans when I want to, as long as I meet my minimum payment obligation each month. I always pay double to triple my month minimum payment. I am seeing serious progress as I can see my balance online.
June 8, 2010 at 8:39 pm
I had a BC student loan and still have a NSLS loan and have never had issues. I graduated in 2004 and paid of the BC loan by 2006, then went back and took out another BC and NSLS which will be paid off this year (graduated from the second degree in 2008). I pay and manage everything online and have never had difficulty with the systems…
June 8, 2010 at 11:56 pm
I just wanted to post that while there are lots of horro stories and bad administration (paperwork) of student loans, there is a positive side, and I didn’t want it to get lost in all the negativity.
I have had a very positive experience with student loans – the paperwork, while tedious and time consuming at times, was very straightforward, and I started student loans when they were done by CIBC, had them all transferred to the RBC, and then had to deal with the National Center as well for my last two years.
Although I do have two payments coming out (one to RBC, and one to NSLSC) they have been very easy to deal with as I have had to apply for interest relief, switch my term, apply for interest only, switch my term again, accelerate my payments, and then finally switch my term one more time (all these changes came with job changes).
I have heard lots of horror stories but wanted to make sure that you heard at least one positive story.
Carolyn
June 9, 2010 at 12:35 am
After reading everyone’s posts, it’s nice to know that I am not the only one that had issues with my loans in Ontario. It only took one semester with OSAP to realize that this way not the way I wanted to get through school. Instead I got a minimal line of credit from the bank, paid my tuition in September and worked all year to pay it off. Now with internet banking, I’m sure it would not be hard to make extra payments, but 6 years ago I could not understand why they wouldn’t take their money back without a hassle. After paying off my last year, I paid off the OSAP with the bank line of credit and within a year of graduation using my maternity leave benefits paid it off as well. I openned up a RESP asap and used the baby bonus $ to fund it monthly. My daughter’s 7 and has over 12,000 already
We would like her to have every opportunity we had, but with less financial stress.
June 9, 2010 at 1:58 am
Student Loan.
I never had any major issues with my loan (NSLSC/ OSAP), but I definitely wasn’t aware that the interest started as soon as you graduated (thought it started 6 months after you graduated). What I can’t get over is that when I received my repayment form, they had recommended a tiny amount for montly repayments & when you do the calculations, it came out as taking 9 years to pay off!
Fortunately, I did the math & didn’t accept their minimum payment (thanks to my Mom who helped me with all the calculations) & upped the monthly payments I made, so that it could be paid off in 3 years (which I did!).
It would be nice if they told you that only making the minimum payments would take X time to pay off & you would end up paying so much in interest.
As for the interest calculations you can claim on your income Taxes, I found that the summary sheet they sent in Feb made it quite easy to know the exact amount you were allowed to claim from the previous year.
June 10, 2010 at 3:37 pm
Student loans people have a bad rep goes way back. I graduated 89 had $11000 fed loan RB. Took 4 yrs U BCom that cost about $45000 but only had to pay back the $11000 except the word was I wouldn’t have to pay that back either. I wanted to pay it back but couldn’t get a job at first — tooooo much education & not enough experience!!! Applied for the interest relief & was granted 1 year according to the “Official” document. Then I was told that they (feds) made a mistake & it was only 6 months worth. Mean time I found a job which was only temp, moved again — single mom of 2 (9 & 10 yr olds) what do you think I did. I gave them (RB) $200/mth post dated cheques which were returned because it wasn’t enough?!? They sent my file to collections & the collections people scared the be#*?! out of me — going to take my vehicle, garnishee my wages, . . . Anyways I ended up giving the collections $200/mth & paid the loan off eventually — go figure!
June 10, 2010 at 11:38 pm
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