What Will the New Liberal Government Change About Student Loans?
Student loan debt is a big problem for many people. In general, the average graduate with a student loan leaves school owing about $27,000 in student loan debt. As you can tell, this is a large amount of money and an amount that can affect a person’s future for a very long time.
With the recent election of a Liberal majority government in Canada, this is a good time to talk about student loan debt and what – if anything – will change under Prime Minister Justin Trudeau.
One of the main changes could be a form of student loan debt relief. When Justin Trudeau announced the Liberal platform prior to the election, it included a section about student loans. Specifically, the plan called for exempting graduates from having to repay student loan debt until they are earning at least $25,000 a year. The federal government would pay the interest until this point.
The platform also includes raising the maximum Canada Student Grant to $3000 for low-income full-time students and $1800 for low-income part-time students.
These plans are designed to ease the burden of student loans.
Student loan debt can be very difficult to pay down. One reason for this fact is that many students have difficulty finding high-paying jobs in their field when they graduate. The Liberal government hopes to provide at least a partial solution to this problem by exempting students from having to repay their student loan debt until they are making at least $25,000. Currently, students are expected to begin repaying their loans six months after they have graduated.
Existing Student Loan Debt Relief Options
Currently, the government’s Repayment Assistance Plan is designed to help students who are having difficulty repaying their student loan debt. This plan reduces the amount a person is expected to repay (or, in some cases, even eliminates the payments entirely) depending on an individual’s financial situation. You must apply for this plan as you are not automatically enrolled in it. In addition, you must re-apply every six months to a maximum of 10 six-month periods or 60 months during the 10-year period after leaving school. During this time period, the Government of Canada and your provincial government pay the interest owing.
If your loan is not paid off in 10 years, you can apply for stage two of the repayment assistance plan. Under this stage, the Government of Canada and the government of your province continue to cover the interest owing and also start to cover a portion of the principal. The balance is paid off over time so that you have no student loan debt 15 years after you have graduated. However, during this stage, you cannot receive additional student loans or grants until your current loans are paid off.
If You Cannot Repay your Student Loan Debt
If you are in a position where you have tried to repay your student loan debt and you have already applied for the Repayment Assistance Plan, but you are still having difficulty, you may wish to consider speaking with a licensed trustee in bankruptcy. This does not automatically mean that you will be filing for bankruptcy. A trustee in bankruptcy can review your situation and provide you with information on the options that are available to you.
It is important to note that student loan debt cannot be included in a bankruptcy or consumer proposal process unless you have been out of school for at least seven years. However, many people end up accumulating other debts (such as credit card debt or debt on an unsecured line of credit) while they are trying to repay their student loans. This is often because the cost of repaying student loan debt is so high that many people need to take out other loans in order to make ends meet. If this is the situation that you are in, you may be able to benefit from a consumer proposal or even a bankruptcy filing.
As you can see, there are already several options for those who cannot repay their student loan debt. However, the recent election of the Liberals could provide more student loan debt relief to recent graduates.