The average Canadian student loan debt is about $27,000, depending on the province and the school. Statistics show that it takes an average of 14 years for students to pay off their debt completely after leaving school. Obviously, this has a huge financial impact. Post-secondary education is getting more expensive and many entry level jobs don’t pay new graduates enough money to pay down their debts, afford monthly expenses and have any savings left over. This means that people are having to put off purchasing items like automobiles or houses. This situation also leads to people ending up in financial trouble due to borrowing money to make ends meet.
It’s no wonder that many people are looking for student loan debt relief.
A common question is whether a consumer proposal or bankruptcy can help with student loan debt. This depends on how old the debt is. According to the Bankruptcy and Insolvency Act, you can eliminate student loan debt through bankruptcy or consumer proposal if your loans are more than seven years old.
Therefore, if you’ve been out of school for more than seven years and are struggling to pay down your debt, you could find relief by speaking with a trustee in bankruptcy and considering your options.
Student Loans More than Seven Years Old
When you speak to a trustee, he or she will review your financial situation and provide you with the options available to you. Two common debt relief options are bankruptcy and consumer proposal. These are both legal processes that help someone who is struggling with debt to discharge these debts. As mentioned, if your loans are more than seven years old, they can be included in a consumer proposal or bankruptcy filing.
Bankruptcy is a situation where honest but unfortunate debtors are provided with a solution that allows them to be discharged of their debts. If you are unable to pay your debts are they become due, bankruptcy may be an option for you.
A consumer proposal is a situation where you make an offer to all of your creditors that sees you propose to pay them a portion of the debt owing in monthly payments over a set period of time. Once these payments have been made, the remaining debt is forgiven.
In order to determine if either of these situations can help you and provide you with the student loan debt relief you’re looking for, you will need to speak with a trustee in bankruptcy. This is a person who has been trained and licensed to assist people with financial issues and help them understand the options that are available to them.
Student Loans Less Than Seven Years Old
If it has not been seven years since you graduated, your student loan cannot be included in your consumer proposal or bankruptcy. If you are in this situation, you will need to consider other options to help you handle your student loan debt. There are some hardship provisions in the Act which could allow you to receive repayment assistance. This assistance could see your student loan payments reduced or you may not have to make any payments, depending on your financial situation.
If you have a permanent disability and are having trouble repaying your loans, you can apply to receive assistance as well.
In any case, you have to apply to receive payment assistance and will not automatically receive assistance without applying. You may have to apply directly to the province where your loan was issued, depending on the province you live in.
With repayment assistance, the Government of Canada and the province will pay the interest owing that your revised payment does not cover for up to 10 six-month periods or 60 months during the 10-year period after you leave school. You need to reapply every six months.
Also, keep in mind that while a consumer proposal or bankruptcy will not specifically help with your student loan debt if this debt is less than seven years old, these processes can help you if you have other sizable debt (like credit cards with high interest rates) that you are unable to pay down.
When you have a large student loan, there isn’t much money left over for other expenses. This is especially true when you are just getting out of school and looking for a job. You may not get a job right away and, even if you do, an entry level position may not pay you enough to handle all of your expenses. This situation often results in young people borrowing money, using lines of credit or building credit card debt in order to pay their expenses. These debts can get very large and once they’ve grown in size, they can be quite difficult to pay down.
This often leads to high debt loads and money problems. If you are in a similar situation and are having difficulties paying down your debt, speaking to a trustee in bankruptcy is a good idea and one that can help you position yourself to live debt free.