Most Canadians graduating from post-secondary school have debt, with the average graduate carrying between $10,172 to $29,000 depending on the type of school and length of the program. These loans typically take between nine to fifteen years to be paid off in full.
Recently the government increased the minimum annual income students need to make before they are required to make debt payments to $25,000, but for those who face financial difficulties in addition to large student loan debt, sometimes repaying the debt can seem impossible – and sometimes it actually is!
Beginning a career with existing debt while making a lower than average income as an entry level employee creates a cycle of struggle for many graduates. Many are not able to build an emergency fund to cover surprise expenses and are forced to delay major life goals such as buying a home and starting a family. When faced with unexpected bills and no funds to spare, consumers turn to credit cards or payday loans in an attempt to get ahead but are set back further when they are hit with high interest rates and fees.
Recent graduates struggle to make ends meet for years before they seek help because they are not aware of their options for student debt relief. While there is a 7-year stipulation on including your student loan in a bankruptcy, there are other alternatives and special circumstances that you may qualify for.
If you’re experiencing any of the following symptoms you should contact a Licensed Insolvency Trustee to learn all your options for dealing with student debt:
What Are My Options?
A Licensed Insolvency Trustee can access your situation and provide clarity on any choices you can make to improve your financial situation. Depending on your circumstances, if you’ve surpassed 7 years since completing your studies your options may include negotiating a new payback structure with through a consumer proposal or filing bankruptcy to eliminate the debt completely. An important note is that the 7-year rule begins from the official date the student stopped studying. To clarify the date, contact your loan provider.
For those with student loans less than 7 years old that have not missed payments, the government offers additional options for debt relief.
The Bankruptcy and Insolvency Act has a special rule for people who can prove financial hardship to show they have acted in good faith and will continue to experience financial difficulty so that they are unable to pay back the student loan. To apply for financial hardship you’ll need to determine whether you have Canada Student Loans, provincial student loans, or both. If you have both, you only need to apply to the Canada Student Loan program. If you ceased studies more than 5 years ago, you may be eligible to seek debt relief through insolvency and have the loan fully discharged. There are also a number of different programs for debt relief through provincial loan providers, so contact your specific provincial body to learn what is available to you.
Both Canada Student Loans and provincial student loans offer various payment restructuring, interest relief, and debt relief programs. The standard repayment term for Canada student loans is 9.5 years, but if you have lost your job or had a reduction in income you can request for the term to be extended temporarily or permanently to make the payments more affordable for your budget. Unfortunately, this means you pay more in interest. You can also request to make payments towards the interest only to reduce the monthly payment amount and provide relief up to a maximum of 12 months over the term of your loan.
Even if you haven’t surpassed the timeline to discharge the debt from bankruptcy, you can still seek relief from additional creditors to help you make managing monthly payments more affordable. Depending on your circumstances you may qualify for an insolvency solution, creating one low monthly payment you can afford that allows you to seek debt relief from other creditors while continuing your student loan payments.
Only a Licensed Insolvency Trustee can provide a thorough evaluation of all of your options. Contact Doyle Salewski for a free, no-obligation consultation to learn what your options are for student debt relief in Ontario and Quebec.