Only about one-third of graduates manage to clear their student debt within three years of their graduation, with the average post-secondary student taking more than a decade to do so. A significant number of these individuals often find themselves seeking a solution to their debt burdens, such as student loan forgiveness programs. Let’s dive into the details of these financial relief options.
Understanding Student Loans
A student loan, like any other loan, begins to accumulate interest once it is initiated. Many students are aware of the six-month grace period following the conclusion of the academic year but are often unaware that interest accrual begins during this period. This is particularly true for federal student loans.
Provincial student loan regulations can differ vastly. For instance, in Ontario, interest charges are waived for the first six months for students who graduate or leave their full-time studies before September 1. However, those who graduate or leave school after this date are charged interest.
Difficulties in Repaying Student Loans
In the modern world, finding stable, long-term positions that compensate adequately enough to cover student loan obligations has become increasingly difficult for graduates. Coupled with additional financial responsibilities such as rent, mortgage payments, credit card debt, or starting a family, repaying student loans can be a daunting task. If you’re struggling with student loan debt, exploring options for student loan forgiveness, repayment assistance, or debt relief could be beneficial.
Your Guide To OSAP Forgiveness
In this comprehensive debt relief guide on student loan forgiveness, we’ll cover the following aspects:
- How to negotiate new payment arrangements
- How to use government repayment assistance programs
- Student debt relief options for deferring payments
- Using the Bankruptcy and Insolvency Act to eliminate student loan debt
- Understanding the seven-year rule
- Handling private student loan debt
Government Repayment Assistance Program
The Canadian government provides repayment programs to assist with student debt. These programs offer benefits such as reduced monthly payments, payment deferrals, interest relief, and in some cases, outright loan forgiveness.
Revision of Terms
If your current student loan payments are challenging to maintain, you can request to modify the terms of your loan. This could involve extending the repayment period or increasing the payment frequency. By contacting the National Student Loan Service Centre (NSLSC) and your financial institutions, you can evaluate your options and potentially decrease your monthly payments.
Repayment Assistance Plan (RAP)
If you’re struggling with your monthly financial obligations or unable to make your student loan payments, you could be eligible for assistance from the federal and provincial or territorial government. The RAP program offers interest relief, debt reduction, or debt forgiveness depending on your financial circumstance and income status.
The Bankruptcy And Insolvency Act
The Bankruptcy And Insolvency Act (BIA) states that government-guaranteed student debt can be discharged under certain conditions. The act includes the seven-year rule, which means that individuals can include their student loans in a bankruptcy or consumer proposal if they have been “out of school” for more than seven years.
What Does The Seven Year Rule Mean?
The seven-year rule refers to the period following your “end of study date” or the “date you ceased to become a student.” This date is used by the government to determine your eligibility for discharge as stated in the BIA.
The Five Year Rule – Student Debt During Financial Hardship
If you can prove that repaying your student loans will cause “undue financial hardship,” you can have your student debt discharged in a bankruptcy or consumer proposal proceeding starting five years after your end of study date.
Options For New Student Loans
Even if your student loan does not meet the seven-year rule, bankruptcy and consumer proposals can still be considered viable options for your student loan debt problems.
Private Student Loans
Private student loans, such as a student credit card, line of credit, or overdraft, must be repaid directly to your lender. If these loans are causing you financial difficulties, you should renegotiate them with your loan provider.
Consult a Licensed Insolvency Trustee
Licensed Insolvency Trustees are federally regulated debt advisors in Canada who can review your financial situation to determine if you qualify for student debt relief. They can help you discover the best options to eliminate your student loan debts.
Conclusion
Student loans are a significant burden for many individuals. However, understanding the various options available for student loan forgiveness and debt relief can lead to a more manageable financial situation.
Remember, seeking professional advice from a Licensed Insolvency Trustee can help you make the best decision for your financial future.
