OSAP & Consumer Proposals

OSAP funding is designed to make post-secondary education more accessible for students who are unable to manage the upfront costs on their own. If you are one of those students who want to apply for OSAP in Toronto or who has applied already, consider how the funding can affect your financial future in the case of a bankruptcy or consumer proposal in Ontario.

OSAP: Ontario Student Assistance Program

The Ontario Student Assistance Program (OSAP) is a financial aid program funded by the provincial and federal governments. It provides funding through a variety of grants and student loans to help students pay for the following essentials:

  • Tuition
  • Compulsory student fees
  • Textbooks
  • Equipment
  • Supplies
  • Living expenses
  • Childcare

The costs to attend university and college are growing every single year, which makes it more difficult for low- and middle-income Ontarians to apply. As of 2020, the average tuition is $6,580 for full-time undergraduate students in the country. The average tuition for full-time graduate programs is $7,304. This means that, if someone intended to get a bachelor’s degree in four years, they would need to have over $26,000 in savings to pay for tuition. That total doesn’t include other essential costs during those four years, like textbooks, equipment and living expenses. 

The costs of tuition also depend on the program that you apply for. As of 2019, the average tuition for studies in dentistry was $23,474. The average tuition for studies in medicine was $14,780. The average tuition for studies in law was $13,332. The reality is that a lot of Ontarians don’t have the savings to manage these costs all on their own.

How OSAP Works

When you apply for OSAP, you are automatically considered for grants and loans. A grant is a form of funding that requires no repayment whatsoever. A loan, on the other hand, is borrowed funding that you will be expected to repay in the future. 

After your application is reviewed, you will get an estimate of how much funding you can receive through grants and loans for the academic year. You can decline your loan approval if you’d rather not take that type of funding. If you accept the loan option, you will need to register with The National Student Loans Service Centre and complete a full-time or part-time Master Student Financial Assistance Agreement.

You can go to the province’s official OSAP page to see more information on how to apply, when to apply and when to expect an official response. 

Paying Back OSAP:

When Do You Have to Pay Back OSAP?

You will have to pay back OSAP loans sixth months after your study period ends — this could be after you’ve completed your program or dropped out. The six-month grace period gives graduates some time to prepare to pay back OSAP through the National Student Loans Service Centre. It’s important to know that the Ontario portion of your loan will be charged interest during the grace period.  

How Long Will It Take to Pay Back OSAP?

How long it will take to pay back OSAP depends on the loan amount, but the average time it takes graduates to repay their student loans is nine and a half years. The National Student Loans Service Centre bases their repayment schedule on this average. 

You can use this OSAP payment calculator to see what your monthly contributions will be based on your total debt, payment schedule and interest rate.

Do You Have to Pay Back OSAP Grants?

Do you have to pay back OSAP grants? No. Grants are not loans, so they do not need to be paid back after you use them.

That said, there are some exceptions to this rule. The government could convert part or all of your OSAP grants into a loan, which means that you will have to repay them in the future. Consider the reasons why the government converts grants into loans to see how you can avoid this tricky financial situation. 

Another exception to this rule is when you receive a grant overpayment, which is when you get more funding than you’re entitled to. How does this happen? It can happen because of an unexpected change in your course load. It can also happen if you didn’t report your income accurately. If you have an overpayment, you will be notified by the Ministry of Colleges and Universities or your institution’s Financial Aid Office. They will advise you on how to repay the funds.

Getting OSAP with Bad Credit:

Can You Get OSAP with Bad Credit?

Can I get OSAP with bad credit? The short answer is, it depends. 

If you’re 22 years of age or older, the government will run a credit check on you to review your credit history. They will be looking to see whether you have been delinquent for more than 90 days on 3 or more credit accounts/loans (with a combined value of $1000 or more) in the past 3 years. If they find evidence of this, you will be notified that you are ineligible to receive funding through OSAP due to poor credit history. 

What happens if you fail this credit check? You can send a credit check appeal to the OSAP Appeal Board if your poor credit history is due to financial difficulties beyond your control. You will also need to prove that you are likely to pay off your student loans in the future. You might be able to get OSAP with bad credit after doing this.

Debt Relief Programs & OSAP

Can I Get OSAP While in a Bankruptcy or Consumer Proposal?

The requirements for OSAP funding state that you are not eligible if you have filed for personal bankruptcy, a consumer proposal or consolidation order beforehand. You should not try to hide this fact while filling out your application. The government will find the proof during your credit check. 

Credit bureaus keep notes of your insolvency filings for several years. The credit bureau Equifax only removes a bankruptcy from your report 6 years after you’ve been discharged, while TransUnion removes it after 7 years. Equifax removes a consumer proposal 3 years after you’ve completed the payment plan. TransUnion removes it 3 years after completing the payments or 6 years after signing the proposal — whichever option comes first. 

However, it’s still possible that you can get approved for OSAP after a consumer proposal or personal bankruptcy. You will have to disclose whether you’re currently completing the process or whether you’ve received a full discharge. You will have to add documents proving your current status. There is still a chance that you could be approved for funding.  

If you happen to file for bankruptcy during your OSAP funding, it’s possible that you can complete your program using the loans and grants that you received for the academic year. You may not be able to change your course load, and you will have to contact OSAP about the change in your financial status.

Consumer Proposals & OSAP 

Getting OSAP after a consumer proposal can be a challenge. And on the other hand, it can be challenging to get a consumer proposal after applying for OSAP in Toronto. 

The Bankruptcy & Insolvency Act in Canada excludes government granted student loans from being discharged in a consumer proposal. It can only be discharged in a consumer proposal seven years after you have left the college/university, whether you graduated from the program or dropped out. 

So, if it’s been less than seven years and you file for a consumer proposal, your OSAP student loans will be separated from your debt-total, and you will still be required to make payments through the National Student Loans Service Centre after the proposal is completed.

Bankruptcy & OSAP

The seven-year rule between consumer proposals and OSAP in Toronto also applies to personal bankruptcy. If you file before those seven years are up, your student loans will not be discharged in the bankruptcy process

However, if it’s been 5 years since you were a full-time student, then you might be able to look into a hardship option with your bankruptcy case — this would give you an opportunity to discharge this debt earlier. Talk to a Licensed Insolvency Trustee to see whether this option is available to you. 

Consumer Proposals with David Sklar & Associates

If you are struggling with your finances, including your OSAP repayments in Toronto, you should talk to a Licensed Insolvency Trustee at David Sklar & Associates. One of our seasoned trustees will look over your situation and assess the best way to eliminate your debt and achieve financial stability.  

A common solution is to file for a consumer proposal, which is an alternative to filing for personal bankruptcy. A consumer proposal is a legally binding agreement made between you and your creditors where you pay a fraction of the total that you owe. If the creditors agree, you can manage this smaller repayment plan over a period of up to five years. Then, your debts with those creditors are considered paid in full. Your post-secondary education should feel rewarding, not disheartening.

If your student loans are weighing on you, you should seek out professional help. If you are considering taking this step, contact David Sklar & Associates. We will get you through every step of a consumer proposal.

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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