Should I take OSAP (student loans) even if I can pay for my tuition? This is something I have been pondering for a while. I am currently in my second year at University and my program comes with mandatory Co-op throughout the 4 years of study. I have completed 3 Co-op terms already and those have covered my expenses and tuition for each term at the university. I understand that not every Co-op will provide enough compensation every time but my parents are ready to support me where and when needed. 

OSAP is a government program which funds students doing their post-secondary education in Ontario, more here. The loans are interests free until the student has completed his education. Then the interest rate is as follows:


  On the provincial part of your OSAP loan, the rate is the prime rate
  of interest plus 1%. On the federal portion interest rate can be the
  prime rate of interest plus 2.5%.


So my question is, should I apply for OSAP and receive their funding and save what I earn from Co-op? Or is it better to not receive any OSAP funding?
I also considered doing this, though I didn't (more from sloth than anything else).

As I understand it, from other students in Ontario, you can pay back the entire OSAP loan in a lump sum at any time. Since the loan is interest free, a rational investor would take out the maximum amount allowed, put it in a risk free asset, and pay it back as late as possible, pocketing the interest. 

Now, interest rates are low right now, and OSAP needs a lot of paper work. Being in debt can also be stressful for some people. If you are sure that you won't need any OSAP money, then perhaps the $100 or so you'd make per year in interest is not worth your time.

Also, note that borrowing money now, and then paying it back early will often cause the provincial government to lower your future OSAP payments - since you clearly didn't need the whole amount.