Student debt can be a burden, especially if you’re already struggling with other financial obligations such as credit card debt, car payments, mortgages or even just the increasing cost of living expenses. If you’re unable to make your student loan payments, you have a few options for relief.
Here’s an overview of the consequences of not paying your student debt, plus some options to consider.
Different Types of Student Debt
People often think of student loans as one lump sum with one creditor. However, student financial assistance in Canada can come from various sources, each with its own collection policies.
Federal student loan program. These funds are administered by the National Student Loans Service Centre (NSLSC). Most government-issued student loans in Canada are partially supported by the federal government.
Provincial student loan programs. Each province has its own policies on interest accrual, repayment and collections.
Private lenders. If you have a student line of credit from a financial institution, you likely have a co-signer, most likely your parent. Your co-signer is responsible for that debt if you can’t repay it.
Although few post-secondary institutions in Canada issue their own student loans, you may owe money to your college or university in the form of payment arrangements for tuition or other student fees.
Do Student Loans Go Into Collections in Canada?
According to the NSLSC, if you miss payments on your federal loan for 270 days, it will be sent to the Canada Revenue Agency (CRA) for collections efforts that can include wage garnishment, freezing of your bank account and withholding of tax refunds and credits.
Portions of your student debt issued by private lenders or provincial government programs may be referred to a third-party collection agency. This can impact your credit score and affect your ability to secure credit in the future.
If you’re struggling with student debt, you have a few options:
Contact the NSLSC. You may qualify for a Repayment Assistance Plan (RAP), which may enable you to repay your loan with reduced payments. In some exceptional cases, you may be excused from making any payments after explaining your situation.
File a consumer proposal. If you want to avoid bankruptcy, you can file a consumer proposal, which enables you to renegotiate your debts without having to lose your assets. Your student debt is eligible for relief if you’ve been out of school for seven years or more.
File for bankruptcy. You can also file for personal bankruptcy, whereby you hand over your unexempt assets in exchange for relief of your debts. Like a consumer proposal, student debt is eligible for discharge if your studies ended at least seven years ago.
Student Debt Help in Ottawa and Eastern Ontario
D. & A. MacLeod Company Ltd. offers debt counselling services that help you manage your finances and repay your student loans.