Student Loan Debt Consolidation

By pursuing higher education, you’ve made a huge investment; not only in yourself but in the country as well.

College and university graduates are more likely to get employed, pay taxes, and participate in community volunteer programs.

In return, many students face an insurmountable load of student debt.

Although the Canadian government allows a six month grace period before students have to start repaying their loans, many are unable to find work or earn sufficient income to pay off this loan right away.

Are you thinking about using student loan debt consolidation to pay off your student loan?

Before considering this option, know what student loan consolidation means and whether it can help you.

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Why is student loan debt difficult for some people?

Firstly, the majority of student loan recipients are young adults.

The amount of student loan debt they’ve acquired is usually significant.

Most of these students don’t have the experience to comprehend how credit works.

As a result, many students don’t have a repayment plan in hand.

Secondly, the student’s ability to make loan repayment depends on them getting employed after graduation.

However, this doesn’t happen immediately for the majority.

Lastly, student loans differ from other forms of debt.


You can only pursue insolvency solutions like consumer proposal or bankruptcy seven years after leaving full-time studies.

Lenders are aware that the loan cannot be eliminated by filing for bankruptcy.

As a result, it is difficult to come to negotiable payment agreements with these parties.

Therefore, student loan debt consolidation is the best option.

What is student loan debt consolidation and how does it work?

This is a process of amalgamating two or more types of government-issued student loan amounts into one manageable, easy payment.

The eligibility criteria for student loan debt consolidation vary across provinces and territories.

In case you have several debts along with your student loan, student debt consolidation is the easiest option to help save you money.

It is also easier to manage one payment compared to several.

In student loan debt consolidation, there are two options:

In both scenarios, you must have other types of debts along with a student loan.

There are many pros and cons to obtaining student loan debt consolidation.


  • When your government student loan is consolidated with a lender or a bank, you will owe money to the lender or bank, instead of the government. This is a big benefit because in case you’re unable to make a payment, the bank won’t be able to confiscate your tax refunds for fees non-payment. The government has the right to seize your tax refund.
  • It is easier to negotiate for favorable interest rates with a lender.
  • If you already have a bad credit report due to overdue loan payments, this type of loan debt consolidation can help you repair your credit history.
  • You can also negotiate a repayment plan that spans over a longer period. This would equal to smaller monthly payment amounts.


There are a few drawbacks to obtaining a student loan debt consolidation loan to pay off your federal student loans:

  • If you decide to retain your loan with the Canadian Government, you will qualify for their Repayment Assistance Plan. This enables repayment over an extended time frame. You may not have this option with a private lender;
  • The interest incurred on your student loan is tax-deductible. However this is not the case on a debt consolidation loan. If you choose student loan debt consolidation, you may not be eligible for tax breaks;
  • If you have minimal work experience of poor credit history, the lender or bank may charge higher interest on the loan than what you would pay for with the government.

There are clearly pros and cons to getting a student loan debt consolidation.

It can get complicated at the time, but this is when you need to obtain more information.

What steps can you take if you’re interested in obtaining student loan debt consolidation?

After determining that debt consolidation is suitable for your situation, speak to your own bank.

Find out what interest rate they charge and whether you’re eligible for their consolidation loan.

Now compare their plan to your current one.

If it has been seven years or more since you left post-secondary education, and you’re still having a hard time making payments towards your student loans, then speak to a Licensed Insolvency Trustee today.

A LIT can help you figure out whether bankruptcy or consumer proposal is the best option for you.

He or she will be able to provide several debt solutions.

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