What you need to know about tackling student debt

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If you are a recent college or university graduate struggling to manage your student debt, you’re not alone. Across Canada, less than half of all graduates are able to pay off their student debt within three years of completing their studies. In fact, the average post‐secondary grad takes more than a decade to repay their student loans. And as tuition fees continue to rise, more and more students are turning to federal, provincial, and private loans to help finance their post‐secondary education.    

While most know that they have six months to start making repayments after their studies end, many are not aware that federal student loans start accumulating interest right away, or that the rules for provincial student loans vary.   

Add the challenge of finding full‐time employment after graduation, and it’s no wonder that so many young, educated Canadians have trouble making ends meet. In fact, some estimates show that student debt now plays a role in around 1 in 6 insolvencies in Ontario. If you are behind in your student loan payments and are struggling under a growing mountain of debt, you may have the following questions.   

Can I renegotiate the payment terms of my government student loans?   

Yes. The Canadian government has a Repayment Assistance Plan (RAP) program to help people struggling to repay their student loans. The RAP program offers a variety of options to consider, including a reduction of the monthly payment, payment deferrals, interest relief, and in some cases, loan forgiveness. 

It’s important to remember that if you choose to lower your monthly payments by extending your amortization period, you’ll end up paying more in the long run. That’s because your loan accumulates interest until it’s paid off.   

Am I eligible for RAP?

People who reside in Canada, have been out of school for at least six months, and are not already in default on their student loans are eligible to apply for the RAP program. Students in Ontario who need help repaying their OSAP debt can apply to Canada Student Loans.   

Can my student loans be included in a bankruptcy or consumer proposal? 

That depends. Government‐guaranteed student loans may be eligible for discharge if you have been out of school for seven years. This period of time may be shortened to five years if you can show that have acted in good faith to repay your debts, but they are causing undue financial hardship.    

What if I haven’t been out of school for at least five years?   

Many students who find themselves in financial trouble also carry other unsecured debts, such as credit card debt. Obtaining a discharge from those debts through a bankruptcy or consumer proposal can make it easier to make the payments on your student loans.   

I have private student loans. Can I try to renegotiate?   

Yes. If you financed your post‐secondary studies through a private loan such as a credit card, line of credit, or overdraft from a bank or other financial institution, you may be able to renegotiate the repayment terms directly with your lender.   

Can private student loans be included in a bankruptcy or consumer proposal? 

Yes. As a form of unsecured debt, private student loans may be discharged when you file a consumer proposal or for bankruptcy. 

Can Dana MacRae help me?

If you are struggling under student debt, we can help. As Licenced Insolvency Trustees we offer debt counselling services in Waterloo, we’ll explore all of your financial options and help you find a solution that works for you. 

Dana MacRae Licensed Insolvency Trustee has been helping people manage their debt since 2000. With 10 offices across Southwestern Ontario, it’s easy to schedule an appointment. Just go to www.danatrustee.ca and book your appointment online. We offer video conferencing, or book a home consultation and have the trustee will come to you (when allowed by COVID‐19 protocols). Contact us today at 1.800.665.9965 or info@danatrustee.ca to learn more about our services and find the financial solution that’s right for you.