If you have a student loan and you feel constantly overwhelmed trying to keep up with your payments, then this blog is for you. In this article, we explore how your student loans can be included in a Consumer Proposal.
Types of educational loans
There are two types of loans designed to fund education or training, “private” loans, and government Student Loans (“SL”) including loans made under the Apprentice Loan Act. So-called “private” loans are provided by banks or educational institutions themselves. The information presented below only applies to government student loans as “private” loans are not subject to the rules being described in this blog.
Seven-Year Rule
The seven-year rule is defined by the Bankruptcy and Insolvency Act which states that in order for the student loan to be discharged by a Consumer Proposal, the individual must finish being a full-time or part-time student more than seven years prior to the date of Consumer Proposal filing. If you file your Consumer Proposal within seven years, then the balance of the student loan will survive your Consumer Proposal.
In each case, the student loan will be listed as a debt in your Consumer Proposal in order for the creditor to be notified of your filing and receive payments if any were to be made from your Consumer Proposal estate. The unpaid balance, however, will either survive your Consumer Proposal or not, depending on the seven-year rule.
It is not uncommon for a person to terminate their studies and then return to school and/or apply for a new student loan for the resumed studies. The age of your student loan will always be determined by the federal/provincial agencies administering your student loan. To inquire about your student loan and confirm the date of last attendance, you may call 1-888-815-4514 for Canada Student Loans and a separate phone number for a provincial student loan. In Ontario, the number is 1-807-343-7260.
The good news is that in all cases, you will have an option to stop servicing your student loan until you complete your Consumer Proposal. Be mindful, though, that if the student loan will survive your Consumer Proposal, the balance will include interest for the entire unpaid period. In this case, it is also your option to continue to make payments towards your student loan during the Consumer Proposal and avoid additional interest.
Inform your Licensed Insolvency Trustee of your student loan age before you file Consumer Proposal so that she/he can give you the correct advice.
Let’s TalkHardship Provision
If you filed a Consumer Proposal and five or more years passed after you finished being a full-time or part-time student, you may make an application to a Court and ask for full forgiveness, also called a discharge, of the unpaid balance of the student loan. This is called a Hardship application. The Court may or may not grant you a student loan discharge. The application is usually made through an insolvency lawyer. Among other things, you will be required to provide proof to the court that you have experienced, and will likely continue to experience, financial struggles that make you unable to pay back the student loan.
Options You Have To Deal With Your Student Loan
The options will largely depend on the amount of the SL and whether or not you have other debts.
If SL is your only debt and you just need temporary assistance with its repayment, then you may contact Federal/Provincial SL centers to find out about the repayment assistance program, interest relief and payment deferrals. Here are helpful links to these resources:
Due to the Covid-19 pandemic, effective April 2021, the Government of Canada has suspended the accumulation of interest on Canada Student Loans until March 31, 2023.
What if the repayment assistance programs won’t be a real help in your specific situation? What if you have other debts and you feel you have been drowning in it?
You can consider making a Consumer Proposal or filing a bankruptcy.
Even if your student loan is under seven years, the Consumer Proposal process will allow you to pause your payments to SL, get rid of the burden of other debts, and be in much better standing than before. As mentioned earlier, at the same time you may also apply for a form of repayment assistance such as an interest relief or make a Hardship application.
When you book a consultation with David Sklar & Associates, you can have peace of mind knowing that your trustee will work with you and consider your student loans when helping you weigh your debt relief options
Can I Get A Student Loan After A Consumer Proposal?
If you have filed a consumer proposal, you may still be able to apply for Ontario Student Assistance (an OSAP loan). That said, you will need to provide additional information with your application. You have a higher chance of getting approved for an OSAP loan your first time applying.
Student Loan Debt Relief with David Sklar & Associates
The licensed insolvency trustees at David Sklar & Associates are always ready to answer your questions and concerns about financial problems and guide you toward a practical solution. Call us at 1-844-962-9200
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