Canada Repayment Assistance Plan: how does it work?

Posted on 6 September 2022

Written by Colin Boulton

Ever heard of the Canada Repayment Assistance Plan? It is essentially support offered by the Government of Canada if you are struggling financially and find yourself unable to make your payments on your student loan debt. If you are struggling with unmanageable debts and are defaulting on your student loan payments, do not panic – thankfully there are a number of options available to you. In this article, we explain what the Canada Repayment Assistance Plan is, how it works, and who is eligible. We will also cover some other options when it comes to student loan debt relief.

How does the Canada Repayment Assistance Plan work?

If you are struggling financially and are finding it increasingly difficult to make your student loan debt repayments, thankfully there is some support available from the Government of Canada. They can help you to repay your loan through a couple of plans – the Repayment Assistance Plan, and also the Repayment Assistance Plan for Borrowers with Disabilities, also known as RAP-D. Dependent on the eligibility criteria, including income, you might qualify for support with your payments, or you may not. You may apply for the Canada Repayment Assistance Plan as soon as you begin to repay your student loans, or at any point you find difficult repaying your student loan. In order to remain eligible for the Repayment Assistance plan, you need to reapply every six months. In Ontario, the Canada Repayment Assistance Plan is available for loans including the following:

  • Canada-Ontario Integrated Student Loans
  • Canada Student Loans issued before August 1, 2000
  • Ontario Student Loans issued before August 1, 2001
  • Part-Time Canada Student Loans

There are two stages to the Canada Repayment Assistance Plan – interest relief and debt reduction. This is to assist borrowers who meet the criteria to repay their student loans in full within fifteen years, or ten years for those with disabilities. The Repayment Assistance Plan is designed to pay off the interest owed on your loan that your reduced payments does not cover, and also to begin paying down both the principal and interest after sixty months of Repayment Assistance Plan, or ten years after finishing school.

Who is eligible for the Canada Repayment Assistance Plan?

In order to be eligible for RAP, you must meet the following criteria:

  • A resident of Canada
  • Student loans in good standing, and not in default
  • No restrictions from repayment assistance for other reasons
  • An affordable monthly payment that is less than the required monthly payment, calculated based on gross family income and family size; and a required monthly payment based on the total amount of government student loans

What happens if you go back to school?

If the Canadian government has paid towards the principal payment of your student loan while you are on the Canadian Repayment Assistance Plan, you are not eligible to receive any more student grants or loans. You need to repay your unpaid student loans before you can apply for any more. If you do decide to return to school, it is possible to get interest-free student loans, except if you are on RAP-D.

How do you apply for the Canada Repayment Assistance Plan?

Most applicants for the Canada Repayment Assistance Plan will put in a single application to the National Student Loans Service Centre (NSLSC). There are, however, other application processes for those who were issues Ontario Student Loans before August 1 2001, or Canada Student Loans before August 1, 2000. In order to check the status of your application, you can receive information on your application from the agency you applied to – either the NSLSC or a different lender.

What if I am not eligible for the Canada Repayment Assistance Plan?

While many Canadians struggle with making their student loan debt repayments, not everyone qualifies for the Canada Repayment Assistance Plan. Thankfully, there are other methods of gaining student loan debt relief. There are a few different

There are a few variables that will help to determine how you can gain student loan debt relief. These include:

  • How old your student loan debt is
  • When you finished studying
  • What you are able to afford to pay off
  • Whether or not your student loan debt was private or government funded

In Canada, student loans are typically provided by a government program like Canada Student Loans, or a provincial program like Ontario Student Assistance Program (OSAP). As set out in the Bankruptcy and Insolvency Act, debt forgiveness is possible for student loan debt, provided the ‘Seven Year Rule’ applies. Types of student loan debt that do not apply under this rule include any private loans taken out, commonly for professional programs. Any other unsecured debts including credit card debt can also be cleared much faster without this waiting period.

What is the ‘Seven Year Rule’?

The ‘Seven Year Rule’ is a compulsory waiting period laid out by the Bankruptcy and Insolvency Act. This legal time period must have passed before a government student loan can be discharged in a consumer proposal or a bankruptcy. The seven years begins when you have ceased to be either a full-time or part-time student, whether this is the date of your last exam or your graduation. It is important to note that if you have gone back to education after your graduation, this may affect the timing of your seven years. If you have been a student in the last seven years, you will not automatically gain debt relief from a consumer proposal or bankruptcy.

Forms of student loan debt relief

The first step in gaining student loan debt relief is to speak to a Licensed Insolvency Trustee. They are the only professionals able to administer the two legal forms of debt relief – consumer proposal and bankruptcy. At Spergel, our team of experienced Licensed Insolvency Trustees have helped over 100,000 Canadians gain debt relief. We will work with you to discuss your financial circumstances and advise you on the best form of student loan debt relief for you. Here are the primary forms of student loan debt relief:

Student loan debt consolidation

Although not the most common form of debt relief, it is possible to consolidate your student loan debt. A debt consolidation loan is a new loan that is taken out to combine various other loans, typically into one more manageable monthly payment with a lower interest rate. There is a key issue with this in that it can essentially be swapping out a student debt loan for another, newer loan. There are further implications, in that this would no longer mean it is a student loan. This would mean any student debt tax benefits would likely be eliminated, and often student loans have lower interest rates than debt consolidation loans anyway. This often makes a consumer proposal a much more appealing and sensible form of student loan debt relief.

Filing a consumer proposal for student loan debt

A consumer proposal is a legal debt settlement administered by a Licensed Insolvency Trustee. A trustee will work with you to determine a reasonable repayment term, then negotiate with your creditors on your behalf to reduce your debt by up to 80%. Student loan debts are to be included in a consumer proposal, regardless of how long you have been out of school. If, however, you have not been out of school for over seven years, you will need to repay the remaining balance when you have completed your consumer proposal. It is best to speak to Spergel for advice on moving forward based on your financial circumstances. As a consumer proposal is legally backed, an automatic ‘stay of proceedings’ is issued, meaning you have protection from creditors contacting you or pursuing a lawsuit against you. Your debts will be cleared once your consumer proposal is complete. Even if your student loan is less than seven years old, no-one – including the government – is able to contact you for payments while you are in a consumer proposal. Once filed, your loan provider will receive their stake of your consumer proposal payments, which will help reduce your overall debt.

Filing bankruptcy for student loan debt

Filing bankruptcy is the process of reassigning any of your non-exempt assets to a Licensed Insolvency Trustee. They will use these assets to go towards repaying your debts in exchange for the clearance of all of your remaining debt, including student loan debt. Filing bankruptcy will also clear other unsecured debts including credit card debt. In fact, even if you do not qualify for the ‘Seven Year Rule’, clearing any other unsecured debts can help make repaying your student loan more affordable. Private student loan debt from banks or credit cards will also be included without a waiting period. Much like filing a consumer proposal, bankruptcy automatically generates a stay of proceedings to protect you from your creditors.

What if I was a student in the last seven years?

Even if you do not meet the ‘Seven Year Rule’, it is still possible for you to gain student loan debt relief. Here are some options for you to discuss with a Licensed Insolvency Trustee in order to attempt to gain student debt forgiveness:

  • Contact your student loan provider to try and negotiate your repayments
  • Request a temporary payment reduction, for example, just paying off interest
  • Request a longer timeframe to pay back your student debt
  • Apply for a hardship reduction, whereby the government lowers your interest rates

At Spergel, our team of Licensed Insolvency Trustees have years of experience in assisting with student loan debt relief. We can help to point you in the right direction to a fresh financial future.

Looking for more information on the Canada Repayment Assistance Plan? Book a free consultation with


Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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