Canada student loan debt solutions

Each year, thousands of Canadians rely on student loans, i.e. financial assistance provided by the federal and provincial government, to help fund their continuing education. A student loan is an investment in your future, education and training to help create better job and career opportunities.

Unfortunately, competitive job markets, changing economic times, unexpected illnesses or life situations, or the inability to find a job in your chosen field can make it difficult to repay your student loans.

If you are struggling to make ends meet and your student loan repayments are causing you financial and emotional stress, you do have some options for dealing with your debt.

Options for dealing with student loan debt

Repayment Assistance Plan (RAP) - If you are finding it difficult to make your monthly federal student loan payments, this Canadian government program allows you to apply to have your financial situation reviewed. The government will assess what you are able to afford, based on factors such as income and family size, to contribute towards your student loan on a monthly basis. In some cases, borrowers may not have to make any student loan payments until their income increases. To find out how to file an application, or use the Repayment Assistance Estimator, visit the RAP website.

Provincial government options - Provincial governments have programs of their own to help make paying your provincial student loans more manageable, such as interest relief, revision of repayment terms, debt reduction in repayment and the Repayment Assistance Program.

File a proposal to reduce your student loan debt - Most people who borrowed money to fund their education want to repay the debt; they just may need more time, or a more efficient plan, to do so. A consumer proposal allows you to negotiate to reduce the amount of debt you owe and consolidate the remaining outstanding debt into one manageable monthly payment.

If you have been out of school for seven years, student loan debt will be discharged by a consumer proposal.

If you have not been out of school for seven years, student loan debt will not be discharged by a consumer proposal. However, this may still be a viable option since being released from other overwhelming debts can make managing your student loan payments easier. Filing a consumer proposal can also give you protection from creditors if the student loan program specifically agrees to your consumer proposal, thereby releasing your student loan debt. Naturally, this is very rare.

Filing for bankruptcy - Even with assistance from the government, many people still struggle to pay off their debts – including student loans.

If you have been out of school for seven years and still having trouble taking control of your debt, you may consider filing for bankruptcy. This option will discharge you from your student loan debt if you ceased to be a student at least seven years prior to filing. 

If you have not been out of school for seven years, your student loans will not be discharged or go away in bankruptcy. Bankruptcy may be a viable option, however, by creating a period where you are protected. Although your student loan cannot be discharged by your bankruptcy, being released from other overwhelming debts can make managing your student loan payments easier.

For more information contact BDO to arrange a free, no obligation consultation to review your situation and discuss your options.