How much does the average Canadian owe in student loan debt?

In shocking statistics, the average student loan debt in Canada for a bachelor’s degree is a whopping $28,000. According to the Canadian University Survey Consortium, students also owe in addition on average $3,000 in credit card debt on top. Government funded student loans are the most frequent form of student debt in Canada, and the vast majority of graduates with student loans will typically owe money on government funded student loans. It is not uncommon to see graduates who take on both government and private student loans often owing more than the average amount too.

When should you get help for student loan debt?

Student loan debt takes years to repay. According to the Canadian Student Loan Program, the average student in Canada will take 10 years to repay their student loan debt. At Spergel, we see many individuals looking for help with their student loan debt in their mid to late thirties, and often older too. Despite facing crippling student loan debts, often it will make up just a portion of their overall debts owed. Because of the hefty cost of living and rising interest rates, student loan debt is often just the tip of the iceberg. It can encourage students and graduates to find themselves facing credit card debt, payday loans, and car loan debt too. All of these debts can quickly become unmanageable, and often lead to insolvency. The sooner you address your financial issue, the better – and often the more debt relief options will be available to you too. At Spergel, our experienced Licensed Insolvency Trustees have been helping Canadians gain debt relief for over thirty years, and we are here to help you. Unlike other debt relief firms, you will be assigned your very own Licensed Insolvency Trustee to assist you throughout your debt relief journey, instead of being passed from person to person.

What is the best way to resolve student loan debt?

No matter how bad you might feel your student loan debt situation is, there is always a debt relief solution. Here are some of the most popular forms of debt relief for resolving student loan debt in Canada:

• Voluntary renegotiation. In some cases, you can try to contact your student loan lender and negotiate new payment terms that are more affordable for you. Transparency about your situation and a solutions focused attitude can go a long way. Voluntary renegotiation is a good option if you can pay your loans in full and only need temporary relief. If you need more significant support, this may not be the right option for you.
• Canada Repayment Assistance Plan. The Canada Repayment Assistance Plan is only applicable to government guaranteed student loans. If you can provide evidence of financial hardship, your monthly payments can be reduced depending on your income. In order to be eligible, you must live in Canada, and have finished your studies at least six months ago. You must not have defaulted on your student loans. While the Canada Repayment Assistance Plan does not eliminate your student debt, it provides payment relief to those who need it most.
• Bankruptcy. Bankruptcy is the process of assigning any non-exempt assets you may have over to a Licensed Insolvency Trustee in exchange for the clearance of your unsecured debts. An important point to note is that government guaranteed student debt is only eligible for discharge via the Bankruptcy and Insolvency Act if you have been out of school for more than 7 years. This can be shortened to 5 years if you can prove evidence of financial hardship.
• Consumer proposal. A popular bankruptcy alternative, filing a consumer proposal is the legal process of suggesting an affordable monthly repayment figure to your creditors. A Licensed Insolvency Trustee will help to negotiate with your creditors on your behalf. If accepted, your debt can be reduced by up to 80% and you will receive protection from your creditors via a stay of proceedings. Much like with bankruptcy, consumer proposals will only discharge debt over 7 years old.

Although neither consumer proposals or bankruptcy can eliminate student debt if it is less than 7 years old, significantly reducing or eliminating your unsecured debts can make it much easier for you to repay your student loan debt. This is because it can clear other debts and improve your cashflow. At Spergel, one of our experienced Licensed Insolvency Trustees can review your financial circumstances and recommend the best form of debt relief for you.

What is the seven year rule for student loans?

The seven year rule on debt relief for student loan debt is referenced in section 178 (1)(g) of the Bankruptcy & Insolvency Act:

any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred (i) before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act or enactment, or (ii) within seven years after the date on which the bankrupt ceased to be a full- or part-time student; or (h) any debt for interest owed in relation to an amount referred to in any of paragraphs (a) to (g).

When establishing your last date as a student and understanding how old your student loan debt is for filing either a consumer proposal or bankruptcy, you should have this date verified professionally. You should call Canada Student Loans or your province’s student loans body for confirmation of the official date you ended your studies.

What is the hardship provision?

You may have heard of the hardship provision when looking into student loan debt relief. If you are able to provide evidence of financial hardship, the seven year period that must pass in order to qualify to have your student loan debt reduced can be shortened to five years. You will need to share proof of intending to use your student loan for good, for example, using it for education or a vocation. You will also need to show how repaying this debt is causing financial hardship. If you would like to apply for the hardship provision, it is a good idea to speak to a Licensed Insolvency Trustee for advice on your unique circumstances.

If you file for a consumer proposal or bankruptcy, can you stop making student debt payments?

Not all Canadians realize that if you file a consumer proposal or bankruptcy, you can stop making payments on your student debt. Both forms of legal debt relief offer full protection from creditors including student loan lenders, meaning that legally they cannot continue to contact you. While this sounds great, it does not wipe your student loan debt, however. Your student loan debt will also continue to accrue interest, and therefore gradually become more expensive. Once your consumer proposal or bankruptcy is completed, you will be expected to continue to make your payments. For this reason, you should continue to make your payments where possible.

How do you resolve student loan debt on private loans?

Private student loans work differently to government funded student loans. In fact, they are much the same as any other unsecured debt. This means they can be filed as part of a consumer proposal or bankruptcy. Unlike government funded student loans, there is no seven year rule or limitation period. All you need to do is pass the waiting period in order to have the debts discharged. This is to prevent individuals taking out student loans simply to have them discharged as part of a consumer proposal or bankruptcy.

Who can I speak to in order to resolve student loan debt?

At Spergel, our experienced Licensed Insolvency Trustees know student loan debt inside out. We have been helping Canadians gain debt relief and free themselves from student loan debt for over thirty years. We will review your financial circumstances and advise you on the best option for repaying, reducing, or eliminating your student loan debt altogether. If you need student debt help, it is best to reach out sooner rather than later so that you can gain peace of mind.

If you are looking to resolve student loan debt, book a free consultation with Spergel. Our experienced Licensed Insolvency Trustees are well versed in student loan debt and have helped over 100,000 Canadians gain debt relief. We will assess your student loan debt and advise you on the right pathway to a fresh financial future. Reach out today – you owe it to yourself.

The student debt crisis in Canada

While you may be thinking that student debt making up 30% of the average millennial insolvency is a proportion of a wider figure, put into perspective, student debt is an epidemic in Canada. This is due to the proportion of student loan borrowers versus the overall population, and the young age of these borrowers. The amount of student debt currently outstanding is huge – as of 2020/2021, Canada Student Loans (CSL) has lent $4 billion in student loans to over 576,000 students. Although it was a 5% decrease in the total number of recipients year on year, shockingly it was an increase of 15% in value compared to the previous year, showing that the total amount of debt is increasing contrary to the reduced number of students. Even this is not the full picture – on top of federal government loans, students are also financing their studies through other means too – including provincial student loans and private loans. For most students, around 60% of their Canada Student Loans assessed financial need is provided through federal student loans. The remaining 40% is covered by the province or territory. In Ontario in 2019/2020, OSAP funded around around $4.6 billion in financial aid to over 440,000 students, with a major portion of this being repayable loans vs grants. There is no specific report we can look to in order to assess private student loans, but you can only imagine the additional borrowing on top. This is not to mention the students who supplement their student loans by borrowing credit card debt, or via personal loans or student lines of credit to further increase their average student debts.

Increasing tuition fees leading to insolvency

Of course, the price that students now need to pay for their education is contributing to growing student debt, and a subsequent increase in insolvencies. For 2022/2023, the average cost of undergraduate tuition at a Canadian university is $6,834 – this is an increase of 20% in the last decade. This is before we add on other obligatory fees including study materials, accommodation, and so on. The majority of post-secondary education is being funded by student loans, and despite the addition of the Canada Education Savings Grant program, half of Canadians aged between 18 and 24 have a student loan. This is a combination of both government and private student loans. As if this was not bad enough, the student loan debt taken out is proven to hang around and is not cleared quickly. TD anticipates that most students take ten years to pay off their student loans. Some students do not even get to repay their student loan debts – instead, they declare insolvency.

Student debt is leading to insolvency much sooner

You do not have to search far in the news to see how millennials are increasingly finding themselves struggling with debt. In fact, nearly half of all insolvencies in 2022 were filed by millennials. This means that the rising cost of tuition is causing problems for students and graduates alike. Increasing debt when students are graduating is simply not sustainable, and it is causing many graduates to file insolvency much sooner than they would have in the past. The average debt by age in Canada is has grown considerably for those aged between 18-29. There is a trend since 2016 that shows that the average age of debtors is getting younger, and nowadays the average insolvent millennial is just 33. In order to have student loan debt reduced or eliminated via a bankruptcy or a consumer proposal, individuals need to have stopped their studies at least seven years ago. This is often why the average individual filing insolvency is in their early to mid thirties. They may well have been struggling with debt throughout their twenties. Although federal and provincial student loan and grant schemes including the Ontario Student Assistance Program (OSAP) has helped more students get to college or university, it has also led to an increase in people dropping out. Any student that drops out still needs to repay their student loan debt, which can prove particularly challenging when they cannot suitable employment. Although they too can have their student loan debt eliminated, they need to wait until seven years pass from the end date of their studies before they can file either a consumer proposal or bankruptcy.

Employment challenges leading to student debt default

When it comes to the student debt crisis, many students say that poor finance management is a key debt problem, as well as employment issues. Although according to Canada Student Loans the three-year default rate for students has been decreasing since 2012, this is likely due to an increased usage of the Repayment Assistance Program (RAP). Canada Student Loans reported a total of 309,348 borrowers in the Repayment Assistance Plan for 2020/2021, which has increased over the past five years. As university graduates often end up taking on multiple roles – unpaid internships, part time roles, and minimum wage roles, it can be increasingly challenging to secure a stable job with sufficient income to sustain student loan debt repayments and general living expenses. On top of this, there are increasing rents across Canada, particularly in major cities. This has led to more debtors with unpaid student loan debt. If this situation continues for seven years following the last date of studies, they may file a consumer proposal or bankruptcy as a form of debt relief if they continue to struggle.

Accumulating postgraduate debt and being unable to fulfil financial obligations

Making student loan debt payments after graduation is not as straightforward as budgeting to repay loans. Having such vast debts at such a young age can cause cash flow issues, especially when most are earning a lower wage than the average income. Graduates finding it difficult to repay student loan debts may struggle to build up emergency savings, save for a downpayment on a home, and maintain their student loan repayments. For this reason, some look to other forms of income including credit card debt and payday loans. By taking out this additional credit, additional debt is accumulated which can often lead to insolvency. In 2022, over one in three millennials carried student loan debt, owing on average $16,725 – student debt was a whopping 30% of this total unsecured debt. For this reason, student loan debt appears to be the key culprit.

Women are hit harder by student loan debt

Interestingly, student loan debt is a greater problem for women. According to 2016/2017 numbers from Canada Student Loans, 61% of Ontarians with student debt were female. They also reported that 65% of Repayment Assistance Plan (RAP) recipients were female. Women are also less likely to find work after graduating. Even if they do, they are more likely to be out of work for reasons including maternity leave and childcare, hindering their ability to keep a steady source of income. This increased difficulty to secure income makes it challenging for women to make their student loan debt repayments. On top of this, women are more likely to be single parents than males. This makes it even more difficult for women to juggle childcare and student loan repayments on one income. Compounded by the gender pay gap, the situation does not look bright for women when it comes to student loan debt in Canada at present.

How to eliminate student debt

Despite government attempts to make student loans more affordable and accessible to Canadians, interest charges on OSAP loans continue to increase, reversing some of the measures put in place by the government previously. The introduction of the Repayment Assistance Program has attempted to support students facing financial difficulty, although many recipients of the program are still facing insolvency or do not qualify for the program’s strict criteria. In some cases, delaying payments is not helpful when they are facing other debt issues. When repayment assistance is insufficient, those with student loan debt they cannot shift usually turn to the Bankruptcy and Insolvency Act for support via a consumer proposal or bankruptcy.

Filing a consumer proposal

Filing a consumer proposal is the only form of legal debt settlement. It is the process of working with a Licensed Insolvency Trustee to propose an affordable monthly repayment figure to your creditors. If they agree, the rest of your debt is cleared. You are only committed to making these affordable payments for a fixed period of time, up to five years. It can reduce your debt by up to 80%, and has a number of other key advantages including allowing you to keep your home and car and offering protection from creditors. At Spergel, we have a 99% acceptance rate on any consumer proposals we file.

Filing bankruptcy

Bankruptcy is the process of assigning any non-exempt assets you may have over to a Licensed Insolvency Trustee to go towards the repayment of your creditors. In exchange, you will be cleared of your remaining debts. Bankruptcy is the best way to gain a fresh financial future in Canada. Although many Canadians think that bankruptcy will leave them with nothing, this is not the case. Each province lists out assets you can keep, including clothes and a vehicle and your home within a certain threshold. Unlike other bankruptcy firms, at Spergel you are assigned your own Licensed Insolvency Trustee to walk you through the entire process, instead of being passed from person to person.

Notably, you must wait seven years from finishing your studies before including government funded student loan debts as part of a consumer proposal or a bankruptcy. That said, clearing your other unsecured debts can ease the burden of not knowing how to make your student loan payments. It can help to make these repayments much simpler and less stressful. There is also the possibility of gaining student loan forgiveness if you can prove that you are facing financial hardship. Private student loan debts, including bank loans, credit card debt, and student lines of credit can be discharged in a consumer proposal or bankruptcy without a compulsory waiting period. The best place to start if you are struggling with financial difficulties is to speak to a Licensed Insolvency Trustee – they will review your unique financial circumstances and advise you on the best pathway to debt relief for you.

If you have any questions on the student debt crisis, or are struggling with your student loan repayments, book a free consultation with Spergel. Our expert Licensed Insolvency Trustees have been helping Canadians gain debt relief from their student loans for over thirty years, and we can help you too. Reach out today – you owe it to yourself.

What are the options for student loan debt consolidation?

Debt consolidation is the process of condensing multiple separate debts into one. Generally speaking, it has a number of advantages. Firstly, it simplifies your debts to allow you to make one monthly payment. Additionally, it often reduces your overall interest payments, bringing down your monthly payments in many cases. The problem is that student loan debt consolidation brings its own challenges that may affect your options. This is mostly around the type of student loan that you have. Is your student loan debt federal, provincial, or private? For private student loans, there can be some additional rules that can affect your consolidation options. If you are wondering how to consolidate student loans, there are typically a few ways to do so:

Debt consolidation loans

A debt consolidation loan is a new loan borrowed from a bank or financial institution used to pay off your student debts. Before agreeing to any debt consolidation loan, you should ensure that you are getting a lower interest rate than what you are currently paying across your debts. In order to qualify for a debt consolidation loan, you need to have a good credit score, and be able to use assets as collateral against your loan. This can be difficult as you are a student after all. There are a few other setbacks – many financial institutions will not lend money to consolidate government funded student loans. You will also lose tax deductions as the interest on your student loan is tax deductible. If you have a poor credit score, you can expect to pay high interest rates, which may be more than you can actually afford.

Debt management plan

An alternative to a debt consolidation loan is a debt management plan. These are typically taken out via credit counselling agencies. A credit counselling agency will work with you to collect on behalf of your financial institution. That said, debt management plans do not work for all debts. The government does not tend to deal with credit counsellors, which can make things difficult for those with government student loans. You should look to the government Repayment Assistance Plan in this instance for income based relief. A debt management plan is better placed for consolidating private student loans like credit card debts, outstanding bills, and bank loans. Even with a debt management plan, there is no reduction in the amount you pay – you will still need to repay 100% of your debt. If you need a reduction in your overall debt, a consumer proposal may be a better student loan debt relief option for you.

Consumer proposal

A consumer proposal is a legal form of debt settlement that can reduce your debt by up to 80%. It is the process of proposing an affordable monthly repayment amount, and your Licensed Insolvency Trustee will negotiate with your creditors on your behalf. Creditors are more likely to accept a consumer proposal over a bankruptcy, as in most cases they will receive more in the way of repayment. Consumer proposal offer debt relief and protection from your creditors via a stay of proceedings. For a student loan debt to be included in a consumer proposal, you must have finished school at least seven years ago. Even if you finished more recently, filing a consumer proposal on your other unsecured debts can make your student loan payments more manageable.

If you want to learn more about how to consolidate student loans, book a free consultation with the experienced Licensed Insolvency Trustees at Spergel. We have been helping Canadians gain debt relief on student loan debts for over thirty years, and we are here to help you too. We will review your financial circumstances and recommend the best path of debt relief for you. You owe it to yourself.

What types of student loan are there?

The first step is understanding which student loan you have, and what is funding your studies including any expenses and living costs. Generally speaking, there are two primary types of student loan – a government guaranteed student loan, and a student line of credit. Here is the difference between the two:

Government guaranteed student loans

Government guaranteed student loans are those that come from the government (federal or provincial) in order to offer financial support for students. This includes OSAP loans.

Student lines of credit

Student lines of credit through banks or other financial institutions are not the same as government funded student loans. They are actually considered private student loans, and are most often used to finance education when government student loans are insufficient.

What are the consequences of not paying student loans?

Much like not paying other forms of debt, there are serious consequences of not paying student loans. Not paying your student loan debt can lead to impact on your credit report, and also the involvement of collection agencies. Below, we cover the consequences of not paying student loans.

Collection agency involvement

If you fail to make payments on your student loan for nine months, you will find yourself in default. When you are in default, your student loan will be sent to the Canada Revenue Agency for collection. Unlike other creditors – including private student loan lenders – the CRA has unrivalled powers when it comes to collections. They can take action including wage garnishment and freezing your bank account. They do not even need to get a court order before doing so. The CRA can even withhold your tax refund to put towards your student debt. On the contrary, if you stop paying off your private student credit card or line of credit, your lender will likely get a collection agency involved. This will mean collection calls, letters, and occasional visits by collection agents looking to reclaim their money. If you had a cosigner on your student loan, the lender will also likely contact them repeatedly to encourage them to repay the debt owed.

Impact on credit report

Canada Student Loans will typically report student debt to credit reporting agencies, including Canada’s two primary credit bureaus – Equifax and TransUnion. When they do, Canada Student Loans will appear on your credit report as an instalment loan. Private student loans including student lines of credit or credit cards will appear as revolving credit, as you only need to make your minimum payment each month for these kinds of loan. If you miss payments or are late to make student loan payments, your credit score will naturally be affected negatively. Equally, if your student loan account is in default or collections, this will also be reported to the credit bureaus. It will remain on your credit report for up to six years after the last action was taken.

Debt statute of limitations

You may be wondering when your student loan debt will disappear. Unfortunately, unless you file for student loan debt relief, it will never disappear. The type of student loan debt you have – either private or government – will determine the consequences of not paying student loans that you face. Each type of student loan debt has different kinds of enforcement on collection. If you have a private student loan, you will face provincial statute of limitation laws. For instance, in Ontario, if you have not acted on your student credit card or line of credit for two years, your debt can essentially become ‘too old’. This helps your defense should a lawsuit or wage garnishment arise. If there continues to be no activity, these debts would eventually become removed from your credit report after six years. While collection agencies will likely continue to contact you, legally you are not compelled to repay your debt past the limitation period. As for government student loans, there is no limitation period for collections. There are only two ways to not pay government student loans in Canada – by filing a consumer proposal or a bankruptcy. In Ontario, for example, if you owe Ontario Student Assistance Program (OSAP), the CRA will exercise all its collection powers until your student loan is formally discharged via a legal form of debt relief, or paid off in full.

What are your options for student loan debt relief?

Thankfully, no matter how bad you may think your student loan debt is, there is always a solution. At Spergel, we are here to help, and have helped over 100,000 Canadians over the last thirty years. Here are the most popular forms of student loan debt relief if you are struggling to make your repayments.

Voluntary renegotiation

Voluntary renegotiation is a good option if you are able to repay your student loan in full, but need to pause on making your payments for a short period of time. In order to arrange a voluntary renegotiation, you should contact your student loan lender or Canada Student Loan and ask to negotiate new payment terms that are manageable for you. You may wish to ask them to reduce your monthly payment temporarily, or to permanently extend your repayment period. If you need temporary relief, you can request interest-only payments for up to a year. For a more permanent measure, government student loans can be extended up to a fifteen year repayment period. Where private student loan lenders are concerned, you may be able to request a reduction in your interest rate.

Canada Repayment Assistance Plan

If you have a government guaranteed student loan, you may well be eligible for the Canada Repayment Assistance Plan. Dependent on your income and the size of your family, your monthly payments may be reduced or even eliminated. You could also obtain a payment deferral, or gain interest relief. In order to meet the eligibility criteria, you must live in Canada, have left your studies for a minimum of six months, and not be in default on your student loan. Although the Canada Repayment Assistance Plan does not eliminate your student loan debt, it can offer relief from payments for graduates who have an income that falls below the threshold.

File a consumer proposal

An increasingly popular bankruptcy alternative, a consumer proposal is a legal form of debt settlement that is able to reduce your unsecured debt by up to 80% while enabling you to keep your assets. This also applies to student debt if you meet the ‘seven year rule’, whereby you left your studies at least seven years ago. Even if you did not, a consumer proposal may still clear your other debts to free you up for paying off your student loan debt. In order to file a consumer proposal, you need a Licensed Insolvency Trustee. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief in Canada. They will review your financial circumstances and recommend the best pathway to financial freedom for you.

File bankruptcy

Bankruptcy is the legal process of assigning any non-exempt assets to your Licensed Insolvency Trustee in exchange for the clearance of your unsecured debts. Much like a consumer proposal, government student debts are eligible for discharge in line with the Bankruptcy and Insolvency Act if you finished your studies at least seven years ago. If you can prove that you are undergoing financial hardship, this time period can be reduced to five years. A stay of proceedings is triggered by filing bankruptcy, which offers full protection from your creditors.

If you are worried about the consequences of not paying student loans, book a free consultation with Spergel. Our experienced Licensed Insolvency Trustees have been helping Canadians on the journey to debt relief for over thirty years, and will help you with student loan repayment reduction. We will explain all of your debt relief options to help you clear your student loan debt.

How much student loan is too much?

A general rule of thumb when it comes to the amount of student loan you should borrow is to borrow less than your first graduate salary. If you limit your student loan debt to whatever you expect to earn in your first year’s salary, you should be able to repay your student loan debt in the average timeframe for repayment in Canada of 9.5 years. If you borrow any more, you could well struggle to make your student loan payments and may require an extended repayment timeframe or a reduction in repayment cost which could take many more years to repay. Although it is difficult to estimate exactly what you can expect to earn in your first graduate job, you can get a good idea by speaking to your tutors and using LinkedIn Salary. Using this tool, you can discover the average wages for different roles and career paths in your field to give you an estimation.

How can you calculate your monthly payments?

Before you take out your student loan, you should work on calculating what your monthly repayments are likely to look like. This is to help you prevent over-borrowing on your student loan. If you know what to expect when it comes to your monthly repayments, you can establish how this will look when taken from your monthly earnings in your first job. It can help to make your student loan payments seem a little more realistic, and have you thinking about the future. For example, if you are studying to be a doctor or an accountant, a higher monthly student loan payment may be feasible, although it could be more difficult for a musician or an artist. In order to calculate your monthly student loan payments, conservatively use an average graduate salary and base your monthly payments across 9.5 years, in line with the average time it takes a Canadian to make their student loan repayments.

How can you borrow less student loan?

As well as considering what you can realistically borrow for your student loan, there are some strategies you can implement to try and borrow less. For instance, it is worth comparing the cost of courses from college to college. Perhaps there are additional grants and scholarships available at some colleges which you are applicable for, but not at others. This may help to bring clarity to you on the best college for you, and the best deal. From this point, it is then important to only borrow what you need when it comes to a student loan, and not borrow further amounts for additional yet unnecessary costs like vacations or luxury items. The more you can cut back when it comes to the initial borrowing phase, the easier and more comfortable it will be for you to repay later down the line. If it is possible for you to take on part-time or temporary employment while a student, this too could prevent you from borrowing even more.

Is it possible to get an education without student loan debt?

It is of course possible to go to college without taking on a hefty student loan, but this will involve some meticulous planning. In order to reduce the overall amount you owe, or to avoid a student loan entirely, you will likely need to save for some time. Perhaps you are still in high school, and have time to consider how to save money for college. You may choose to work as much as you can throughout the school holidays and save everything that you earn to go towards your tuition. If you are a parent, you could look into education saving schemes in order to save for your children. You should also research any bursaries or additional grants that you may be able to work towards in order to reduce or cut educational costs.

What if I cannot afford my student loan?

Student loan debt has some specific rules, so it is important to understand what you are taking on when you first apply for the loan. For some people, making your monthly repayments can become a struggle, but thankfully there are options. So, how much student loan debt is too much, and what do you do if you cannot make your repayments? Your first port of call should be to speak to a Licensed Insolvency Trustee. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. At Spergel, we will look at your financial situation and recommend the appropriate action to take. If you have been out of your studies for over seven years, you may be eligible to file a form of debt relief like a debt consolidation loan, or a consumer proposal or bankruptcy. Even if you have graduated within the last seven years, we can examine your finances and it could be that a form of debt relief could ease any other unsecured debts you have in order to free up your finances for making your student loan repayments more comfortably. At Spergel, unlike other bankruptcy firms, you are assigned your own trustee to walk you through the entire debt relief process instead of being passed from person to person.

If you have more questions on ‘how much student loan is too much?’, or are struggling with making your student loan debt repayment, book a free consultation with Spergel. We will review your financial situation and work with you to run through your options to gaining debt relief. We will walk you through each of your options. The sooner you reach out, the sooner we can guide you on the pathway to debt relief.

What is a student loan?

In Canada, a student loan encompasses a number of different methods of borrowing money to cover your education costs. This loan could be funded by the government, a bank or financial institution, or even a private personal loan. Most often, student loans are issued by either the federal government or the provincial government. This loan is to cover your tuition and also any study materials you may require. The amount of student loan you receive will depend on a number of variables. These include your income, and that of your parents; the duration of your studies; the type of educational course; any dependents you may support; relocation costs; and any extenuating circumstances. All of these factors will be considered as part of your application. Any loans issued by the government do not accrue interest while you are a student. Once you have graduated, you will have a period of six months without interest or payments while you seek employment. As soon as this grace period is over, you will need to begin making your monthly student loan payments until your balance is cleared.

What is OSAP (Ontario Student Assistance Program)?

The OSAP is a type of financial support that helps you through your education at college or university. This funding is offered via a student loan which you repay once you have graduated, and via grants which you do not need to repay. You are automatically considered for both in your application. OSAP covers everything from tuition to living expenses and childcare where needed. You are eligible for OSAP if you are an Ontario resident and a Canadian citizen. You may not qualify for OSAP if you do not meet the academic requirements, have defaulted on a student loan, have failed a credit check, or have previously filed for bankruptcy or a consumer proposal. OSAP can be used for any college or university that has been approved – check for your school here. The amount you will receive depends on your education costs, the duration of your course, and your own financial situation.

What are the interest rates on student loans in Canada?

In Canada, most students will have a federal and a provincial part of their government funded student loans. Each portion will have its own student loan interest rate, although it will all be paid together. Typically, when you take out your student loan you can opt from two interest rates – a fixed rate of 2% throughout the period of your student loan repayment, plus prime rate; or a variable rate that is equal to the prime rate. For provincial portions of Canadian government student loans, some provinces will have their own interest rates and funding, while some will sync up with the federal government to make things simpler. In Ontario, for instance, OSAP interest rates are Prime + 1%. Interest rates on private student loans vary much more depending on the financial institution you choose.

How do your repay your student loan in Ontario?

If your student loan has been funded by the government, you will have a grace period of six months from graduation. After this period, you will then need to repay your student loan – you will receive a letter covering the interest rate of your student loan, and how much you will need to pay each month. Typically, you will be on a fixed interest rate, although you can change this and choose to overpay if you wish. It takes time to repay your student loan, although there is student loan forgiveness in Ontario available if you require. This is applicable to some professions in Ontario, including nurses working in rural areas. In this instance, you may qualify to have some of your student loans forgiven. This can help to reduce your overall student loan debt and so you should look into which options may be available to you in Ontario. Another option is to begin making your student loan debt payments in the grace period before it begins to accumulate interest. This is a way of eating into your debt principal, helping you to get a head start on your journey to debt freedom. If you are struggling to repay your student loan in Ontario, there are various forms of student loan forgiveness in Ontario to consider.

Student loan forgiveness in Ontario: the options

Thankfully, no matter how large the amount of student loan debt that you owe, there is always a form of debt relief for you. Below, we cover the key forms of student loan debt relief:

Voluntary Renegotiation

If you are concerned that you are unable to pay your student loan, it could be worth contacting the lender of your student loan. They may be open to negotiating new payment terms on your loan, depending on what you can commit to. It is a good option if you are able to commit to revised payments temporarily and if you think you can pay your student loan in full over time.

Canada Repayment Assistance Plan

If your student loan is a government guaranteed student loan, the Canada Repayment Assistance Program can provide some student loan forgiveness in Ontario. It works by reducing or eliminating your monthly student loan payments altogether, depending on what your income is. You may be eligible if you live in Canada, have been out of school for at least six months, and have not defaulted on your student loan. If your income falls below the income threshold for Ontario, you could qualify for full relief from your student loan payments. Although it will mean you have some relief from making your payments, it does not clear your student loan debt or the consequences that come with it. This includes a potential impact on your credit score and difficulty taking out credit.

File bankruptcy

If you have been out of school for seven years or more, your government funded student loan debt could be cleared through bankruptcy in line with the Bankruptcy and Insolvency Act. Applicable from the day you finished your studies, this period can in some circumstances be shortened to five years if you are evidently struggling with financial hardship. Bankruptcy has a number of advantages, primarily in clearing all of your unsecured debts. It will also generate a stay of proceedings, which offers protection from your creditors and collection calls. In order to file bankruptcy, you will require a reputable Licensed Insolvency Trustee to administer the process. At Spergel, our trustees have over thirty years of experience in helping Canadians gain debt relief.

File a consumer proposal

A consumer proposal is a popular bankruptcy alternative in Canada, and a great way of gaining student loan forgiveness in Ontario. It is the legal process of making a formal debt settlement with your creditors, and can reduce your debt by up to 80%. This includes not only your student loan debt, but also other unsecured debts including tax debt and credit card debt. Once again, you must have finished your studies at least seven years ago. Even if your student loan debt is not seven years old, a consumer proposal could still be a good option by clearing your other debts. This could make it easier for you to continue making your student loan debt payments. Once again, a Licensed Insolvency Trustee is required to file a consumer proposal. At Spergel, unlike other bankruptcy firms, you will be assigned your own trustee to walk you through each step of the process instead of being passed from person to person.

While student loans in Ontario are a wonderful way to fund your education when it is needed, sometimes they can be very difficult to repay. If you are in need of student loan forgiveness in Ontario, thankfully there are plenty of options. Book a free consultation with an experienced Licensed Insolvency Trustee at Spergel for support with the best way for you to reduce or eliminate your student loan debt in Ontario.

What happens when your student loan is in collections?

There are two primary types of student loan – government student loans, and private student loans, which typically include a student line of credit with a bank. If you have a private student loan, you might expect to receive collection calls from an agency. If your student loan debt remains within the Statute of Limitations period, your creditor can also pursue legal action against you. In Ontario, the Statute of Limitations period is two years. On the other hand, you may well have a government student loan. For these loans, CRA collections on student loans can have much more severe consequences. Generally speaking, government student loans are separated into both a provincial portion, and a federal portion. Your overdue federal student loan will likely be sent to the CRA for collection if you have missed payments for around nine months. The provincial portion of your student loan can also be sent to a collection agency if you are several months in arrears. Where the CRA is concerned, they boast strong powers when it comes to collection. Consequences include freezing your bank account, and a wage garnishment without even needing to take you to court beforehand. They can also prevent you from getting your tax refund and any other federal benefits you may be owed. The chances are that CRA collections on student loans will continue until your debt is paid in full.

What powers does the CRA have for collecting on student loans?

Given the powers of the government, the CRA unsurprisingly has collection powers that go beyond anything any other creditor can do in order to collect their debts. For this reason, student loan debt owed to the government must be taken seriously, and you need to act quickly. While a regular creditor will have to take you to court in order to obtain a judgement before pursuing a wage garnishment against you or freezing your bank account, the CRA does not need to. Equally, where a regular creditor will only be able to garnish 20% of your wages, the CRA can garnish 100% of your wages. As part of the powers of CRA collections on student loans, they also have the power to withhold any federal benefits or credits you may receive. They can even put your income tax refund and/or GST refund towards your student loan. Another note to be aware of is that there is no limitation period for federal student loans. Typically for debts owed to creditors other than the government, there is a limitation period which acts as a window within which creditors can pursue legal action against you. Anything beyond this time limit, and they cannot. In Ontario, the limitation period is two years. The CRA, however, does not need to abide by this period – they can collect at any time.

How can you stop CRA collections on student loans?

When it comes to stopping CRA collections on student loans, thankfully there are a few options available to you:

Repayment Assistance Plan (RAP)

If you are current on your student loan payments, you may be eligible for a Repayment Assistance Plan (RAP). This is supported by the Canadian government, and is helpful if you are struggling to make your student loan debt repayments. You can simply log in to your National Student Loans Service Centre (NSLSC) account to find the tools needed to find an appropriate repayment plan. You can also contact the NSLSC directly to learn more about the options available to you. If you have a student loan from Alberta, Manitoba, Nova Scotia, or Prince Edward Island, you can reach out to your province directly for support. If, however, you have missed several payments and are in arrears while there are CRA collections on your student loans, you may need to find another solution.

File a consumer proposal

Your first step here will be to book a free consultation with a reputable Licensed Insolvency Trustee. Filing a consumer proposal is a way of reducing your student loan, and getting you on the path to a fresh financial future. You must note that there is a seven year rule for any government student loans. According to the Bankruptcy and Insolvency Act, any debt under the Canada Student Loans Act or the Canada Student Financial Assistance Act can only be filed as part of a consumer proposal if there has been more than seven years since your end of study date. For this reason, you will need to confirm your end of study date with the Canada and provincial student loan departments. Private loans, however, do not incur the seven year rule. Consumer proposals are a great way of reducing your debt by up to 80%. It is essentially a legal debt settlement whereby a Licensed Insolvency Trustee will negotiate an affordable monthly payment for you with your creditors. There are many advantages of a consumer proposal as a bankruptcy alternative, including the ability to keep your assets. As soon as you file, a stay of proceedings will be triggered. This will immediately protect you from CRA collections on student loans, including stopping any wage garnishments.

File bankruptcy

If a consumer proposal is not quite right for your financial circumstances, or perhaps you do not have many assets to lose, bankruptcy could be a good option for stopping CRA collections on student loans. To file bankruptcy, you will need to consult a Licensed Insolvency Trustee, the only professionals in Canada legally able to file all forms of debt relief. Once again, the seven year rule will apply for any government funded debts. Bankruptcy is the process of assigning any non-exempt assets over to your trustee in exchange for clearance of any remaining unsecured debt, including student loan debt. This allows for a fresh financial future, free from the stresses of overdue debt payments or collection calls. Much like filing a consumer proposal, bankruptcy will trigger a stay of proceedings to offer immediate protection from collection calls and wage garnishments pursued by the CRA. Learn more about the advantages of filing bankruptcy.

How will CRA collections on student loans affect my credit report?

Unfortunately, if you have late payments on your student loans, it will be reflected on your credit report. Canada Student Loans will report late payments to the major credit bureaus, Equifax and TransUnion. If your student loan is private, your bank or lender can also report arrears to the bureaus too. For this reason, your credit score will likely be negatively impacted. The important thing to remember is that no matter how bad your credit score may be, you can always work to rebuild it. Typically, late payments will stay on your credit report for six years. Filing a consumer proposal or bankruptcy will freeze any late payments, and these can be erased once you are discharged from bankruptcy or complete your consumer proposal. This will have a positive impact on your credit score. At Spergel, our Licensed Insolvency Trustees have been helping Canadians become debt free for over thirty years, and we can assist you in rebuilding your credit score. You should note that if you are intending on going back to school, having late payments on your student loans could have an impact on your ability to receive new loans. This can be changed by making your loan current on payments, although there are further implications if you are receiving collection calls from the CRA. Speak to your Licensed Insolvency Trustee for further advice on your options for getting another student loan despite ongoing financial difficulty.

If you are struggling with CRA collections on student loans, you need to act fast. If you are not eligible for a Repayment Assistance Plan, book a free consultation with an experienced Licensed Insolvency Trustee at Spergel. We will share options and recommendations with you, no matter what your situation. Reach out to Spergel today – you owe it to yourself.

Understand exactly how much debt you owe

It is difficult to create a student loan repayment plan without knowing the precise numbers. With the average student loan taking graduates ten years to repay, it is important to get your figures in check so that you know exactly what you are working towards. As soon as you possibly can, you should create a spreadsheet to capture all the student debts you may have. Include the numbers you owe for any government loans you took out, any student lines of credit, credit card debts, and any informal debts like money owed to your family members. While student loan debt can seem daunting, documenting the reality can be helpful in ensuring you have the right strategy in place for repayment.

Prioritize your student loan debts

Once you know exactly how much you owe, you should then prioritize your student loan debts. Rank each of them from top priority to lowest, based on the amount of each, the interest rates, and the time period for which you are able to repay your loan. In most cases, it makes sense to order them from the highest interest rate to the lowest to reduce the overall amount owed. It can sometimes take a while to find a job in your field as a graduate, so any reductions in the student loan debt you owe can go a long way. The Canada National Student Loans Service Centre clearly depicts the interest rate on any government student loans. In order to start paying down your debts, you will need to make payments that are greater than the interest rate.

Create a student loan debt repayment budget

Now that you have a student loan repayment plan, the next step is creating a budget to help you pay it off. If you are already out of school and are fortunate enough to have employment, begin by making a monthly budget for your student loan repayment that you can stick to. Knowing exactly what money is coming in and exactly what where it is going is critical. Use your budget to see how much disposable income you have at the end of the month that you may be able to put towards your student loan repayment. Check out our guide on how to budget. If you need to cut costs, there are age old tricks that work for cutting costs on your budget every month, like using coupons for groceries, using cash instead of credit cards, and sticking to lists for shopping.

Investigate the Repayment Assistance Plan

If you are struggling with making a student loan repayment of even a small amount per month, look into the government Repayment Assistance Plan. If you are eligible, the government is willing to help you with your student loan repayment. After all, they want you to pay back your student loan, if possible. If you do not ask, they will not help you so it is worth investigating this option. Depending on your income, the government may only need you to make payments of 20% of your income, if any payments at all. You can apply for the Repayment Assistance Plan any time during your repayment. Should you be eligible and accepted, the Canadian government will pay any interest that you cannot cover until your student loan is either repaid or written off.

Pay as much student loan debt as you possibly can

The first step is to ensure you are never late with your student loan repayments, as this can negatively affect your credit score. It is important you begin repaying your student loan as soon as you possibly can too – right after graduation, or before – in order to set yourself up with the best financial future possible. Once you have met your minimum requirements, making extra repayments where you can (even if they are minimal) can make a huge difference. Overpayments can be made on student loans without penalty, and mean you do not accrue as much interest over time. All you need to do with repayments is include a letter to your lender explaining what the money is for so that it is not applied to your next month’s repayment.

Gain student loan debt relief

If your student loan repayments are simply too much, you may be eligible for student loan debt relief. You will need to speak to a Licensed Insolvency Trustee, the only professionals in Canada legally able to administer all forms of debt relief. At Spergel, we have been helping Canadians gain debt relief for over thirty years, and we can help you too. Should you meet the ‘Seven Year Rule’, we will review your student loan and explore solutions including student loan debt consolidation, a consumer proposal, and even bankruptcy. Even if you have had your student loan for less than seven years, we can help you to take care of other unsecured debts you may have to free up your budget for student loan repayments.

Student loan repayment is a growing issue in Canada, especially around an increasingly expensive cost of living. At Spergel, we can help you to create a repayment plan and help you gain debt relief on your student loan repayment where needed. Simply book a free consultation with one of our reputable Licensed Insolvency Trustees to discuss your circumstances today – you owe it to yourself.