Canada student loan repayment is and will continue to be a large issue. Student loan debt can be an enormous burden. Between 2012 and 2013, more than 400,000 students borrowed money to help pay for more post secondary education. (The Canadian Federation of Students). Accumulated federal student loan debt in Canada is now more than $15-billion. That doesn’t include obligations on lines of credit, credit cards or provincial loan programs – a total estimated to be as much as $8-billion. (Globe & Mail). This amount of debt affects our entire economy. Unfortunately many students can’t pay back their loans causing Canada student loan repayment to be a huge issue for both recent graduates and our economy. After trying unsuccessfully to collect for more than six years, the government writes off the loans. In total, $540 million worth of student loans has been written off over the last three years. (Human Resources and Skills Development Canada).
What happens if you don’t make your student loan payments? Your student loan will not be erased until you have paid it in full. If you don’t make your loan payments, you will be in default. Your Canada student loan repayment obligation continues, notwithstanding the above-noted government loan reserve and write-off policy.
What happens if I’m in default on my student loans? If you are in default of your Canada student loan repayment obligations:
- Your debt will be turned over to a collection agency.
- You will be reported to a credit bureau.
- You could be ineligible for further loans until the default is cleared.
- It can affect your ability to get a car loan, mortgage or credit card.
- Your income tax refund and HST rebate can be withheld.
- Interest will continue to build up on the unpaid balance of your loan.
Will bankruptcy erase my student loans? Bankruptcy will not discharge your student loans until you’ve been out of school for seven years. There are cases when student loans have been discharged after five years, but the borrower has to prove before a court that they would undergo extreme hardship if required to wait seven years. So depending on how long it has been since you were last a full or part-time student for which you received a student loan, bankruptcy may not clear you of your Canada student loan repayment obligations.
What can I do if I can’t meet my Canada student loan repayment obligations? One of your options is the federal government’s program called the Repayment Assistance Plan (RAP). There are eligibility requirements and your loan must not be in default. If you qualify:
- You can make affordable payments based on your gross family income and family size. Your loan payments would never exceed 20% of your gross family income.
- Your monthly student loan payments will either be reduced, or you will not have to make any payments.
- You have a maximum repayment period of 15 years (or 10 years for qualified borrowers with a permanent disability).
- Enrolment is not automatic and you would have to re-apply for this plan every 6 months.
Don’t wait for your Canada student loan repayment debt to become critical and don’t ignore any of your debt. It will not go away on its own. You need professional help from a trustee. Contact Ira Smith Trustee & Receiver Inc. and make an appointment today. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now you can get back on the road to financial health.