Dealing with Student Loan Debt

Student loan debt is on the rise in Canada and in Alberta. As a result of changes to the economy and fewer jobs, it is becoming more difficult for people to make their regular payments. The policies and information surrounding the repayment for student loans are not always clear. This page is a ressource to help you navigate your options to find an appropriate solution to settle your outstanding student loan debt.

Knowing what your options are can save you thousands of dollars and a great deal of stress.

• Formal Debt Settlement Options
• Student Loan Assistance
• Student Loans & Consumer Proposals
• Student Loans & Bankruptcy
• Talk To A Licensed Trustee!

What Are My Options To Get Rid of Student Debt?

The options that are available depend partly on your current situation and partly on the government policies surrounding student loans and student loan debt forgiveness. If you are struggling with debt and can no longer afford to make payments, a major consideration is how long ago you completed your studies.

Has it Been More Than Seven Years?

If it has been more than seven years since you completed your studies, then you can be discharged from student loan debt by filing for personal bankruptcy, or you can have a large amount forgiving by filing a consumer proposal. These are the two formal debt settlement options that are regulated by the federal government and administered by Licensed Insolvency Trustees.

Student Loans and Consumer Proposals

Following the initial seven-year waiting period it is easy to include student loan debt as part of a consumer proposal. In this case, your student loans would be included with all of your other unsecured debts and the provincial and federal government will be included among your creditors. With a consumer proposal you agree to repay a portion of what is owed, and your creditors agree to forgive the balance. You could end up paying as little as 20% of the original amount, interest free, depending on your situation. With the additional benefit of consolidating all unsecured debts, you would only have to make one payment each month. These payments can be spread out over a maximum period of five years. If your situation changes you can pay off the remaining amount on your proposal at any time, getting out of debt even sooner.

Key Points:

• student loan debt is consolidated with all other unsecured debts
• up to 80% of your total debtload may be forgiven
• the new amount owing can be paid over time with affordable monthly payments
• there is no interest
• once creditors representing at least half of your total debt agree to the proposal, all other creditors are also bound to it
• you are legally protected from your creditors
• all collection calls stop and wage garnishment ends
• you are not required to surrender any assets (unless you choose to as part of the proposal)

Student Loans and Bankruptcy

The seven-year policy also applies if you would like to be discharged completely from student loan debt by filing for bankruptcy. After seven years, you can easily include student loan debt in a bankruptcy and, depending on your current situation, be discharged in as little as nine months. When filing for bankruptcy, your other unsecured debts will also be included, giving you a fresh start. There are some differences between bankruptcy and consumer proposals, with additional obligations to fulfil. You would be required to report your income each month and make supplement income payments, if necessary, based on your family size and situation. You would also be required to surrender any non-exempt assets to your Trustee with any additional funds being distributed amongst your creditors. Bankruptcy is often a last resort, but sometimes it makes the most sense for dealing with student loan debt. To find out if it makes sense in your situation, talk to one of our Licensed Insolvency Trustees for a free consultation.

Key Points:

• you are legally discharged from student loans and other unsecured debts
• you are protected from any further collections or legal action for those debts
• no more collection agencies or wage garnishement
• you can be discharged in as little as nine months
• you report on your income each month during the term of your bankruptcy
• you make a base payment each month, plus any supplemental income payments
• any significant non-exempt assests are surrendered to the Trustee

Has it Been Less Than Seven Years?

If you completed your studies less than seven years ago, then it is unlikely that you can include your student loan debt in a consumer proposal or bankruptcy filing. This is based on the current policies that govern student loan debt repayment. In these situations there are two common questions we get:

1. Should I file a bankruptcy/proposal now for all of my other debts?
2. Should I try to wait until seven years have passed and then file a proposal/bankrupcy?