Higher education comes with a big price-tag, which most students can’t afford right off the bat. So, they take out loans in order to make it to class and get their degrees, then end up saddled with thousands in debt after graduation. It’s an all-too-common problem.
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Canada is currently in the midst of a student debt crisis. Over 20% of Bachelor degree holders graduate from their programs owing more than $25,000 in debt. Those findings are from 2017 — the numbers have likely grown since then. Tuition costs have gone up every single year for the past three decades, and the majority of students are having trouble keeping up.
According to Statistics Canada, undergraduate students currently pay an average of $6,838 for tuition in a single year. In 2017, that average was approximately $6,500 a year. Graduate students pay an average of $7,086 per year. And the following specialty programs come with astronomical tuitions in Canada:
The steady rise in tuition costs isn’t the only thing causing students to take out massive loans. The student debt crisis is aided by precarious employment and stagnant wages — these can barely cover the costs of living in the GTA, let alone the rising costs of higher education.
Decades ago, students could pay off their yearly tuition with the money that they made during a summer job. Now, a student would have to make almost $7000 from seasonal employment. The minimum wage in Ontario is currently $14.00 an hour — this means that students would have to work over 490 hours just to match the price of tuition. If they worked for forty hours a week for three months straight at a minimum wage job and saved every single penny of their paycheques, they would still come up short.
Plus, tuition isn’t the only expense that comes with the university/college experience. Students have to pay for books, dorm rooms/rent, utilities, food, transportation, phone bills and more. When you tally up the costs, it’s easy to see why so many people turn to loans for help.
A steep tuition rate is one thing that makes paying for secondary education difficult. Another challenge is student loan interest. These interest rates make your debt grow long after you’ve received your cap, gown and diploma.
When it comes to federal student loans, applicants are given a six-month grace period after graduating where they won’t have to start their repayment plan. The grace period allows for graduates to adjust from their full-time schooling to find full-time employment.
Previously, federal loans during the grace period were still subjected to accruing interest. Although you had the opportunity to delay your repayment plan, you would dig deeper into debt. Now, graduates are free from collecting interest during the grace period.
Unfortunately, provincial student loans don’t carry the same benefit for applicants. In January 2019, the Ontario Government announced that OSAP (Ontario Student Assistance Program) would undergo some changes in the upcoming year. One of the biggest changes was that the six-month interest-free grace period has ended — the loans will collect interest from the moment that students graduate. Now, students using OSAP will be given no interest-free buffer between their schooling and their job hunt.
Many shared their worries about the changes for OSAP grants and loans on social media. They were upset that they would get less funding and face greater debt than they did the year before. They wondered if they could even afford to stay in their programs. And some admitted that they would be forced to juggle employment with their full course load in order to make ends meet.
Maybe you’re struggling to find stable employment and you’re not bringing in enough income to settle the repayments. Maybe you’re dealing with other types of unsecured debt and your student loans are taking the backseat to higher interest rates. Whatever the reason, you should know that there are resources that can help you repay your student loans.
Start by trying out Student Loan Repayment Relief plans for provincial and federal loans:
These will be your most straightforward options. You may be tempted to try student loan debt consolidation but that move comes with several downsides. Debt consolidation loans often have high-interest rates — student loans don’t. Taking out a consolidation loan in order to pay off the student debt isn’t the best strategy since your debt from the former loan will build up much faster. Your resolution could end up costing you more in the long-run.
Plus, a debt consolidation loan will eliminate the possibility of filing for a tax break.
So, what other options are there? When you’re struggling with insolvency, and you’re looking for a crucial form of debt relief, you have two options: a consumer proposal or personal bankruptcy.
A consumer proposal is a legally binding agreement made between a debtor and their unsecured creditors, giving them a lowered amount to pay off over a maximum five-year period.
Personal bankruptcy is the legal declaration of insolvency, followed by the settlement of major assets and the distribution to creditors. It is usually thought of as a last resort. Licensed insolvency trustees will check to see if you’re a more suitable candidate for a consumer proposal before suggesting a bankruptcy filing.
The problem is that graduates looking for student debt help will meet some roadblocks with consumer proposals and bankruptcy filings. There are specific guidelines for Student Loans. If you don’t meet those guidelines, these relief methods will not help rid you of the student loan debt.
To be able to rid yourself of your student loan debt in a bankruptcy, you must have ceased being a student for a minimum of seven years. The seven-year qualification also applies to student loan debt and consumer proposals — along with restrictions for the repayment process. The Student Loans Program participates in dividends during the proposal or bankruptcy. Once the proposal or bankruptcy is complete, you will still have to pay the outstanding balance, plus the interest, minus the dividends. If you ceased being a student more than seven years prior to filing the proposal or bankruptcy, when the proposal or bankruptcy is complete, your student loan debt is considered paid in full.
If you’re having trouble with your student debt and live in Ontario, you can always book a consultation with one of the licensed insolvency trustees at David Sklar & Associates for assistance.
You’re not alone. Many Canadians are struggling with the burden of student loan debt long after graduating from their program. The positive news is that many Canadians have also found a way to relieve themselves of that burden — and you can, too. Follow these financial tips and you can say goodbye to your student loans forever.
Don’t be fooled by the misleading promises made by high-interest loan lenders who promise a quick & easy debt solution. Set yourself up for financial success.
Higher education comes with a big price-tag, which most students can’t afford right off the bat. So, they take out loans in order to make
As of November 2016 The Canadian Gov’t has made some changes to the Student Loan Income Threshold levels are per family size.
Find out what your options are regarding Student Loans and Bankruptcy in Ontario, Canada.
