Your Student Loan Debt Relief Options Explained
You've been struggling to repay your student loans for a few years now & it doesn't look like your income is enough to pay off your student loans and make ends meet. What are your options when it comes to student loan debt? Will declaring bankruptcy help? How are student loans treated in a bankruptcy?
2. Table of Contents Student Loan Debt in Ontario 1. Negotiate Payment Arrangements 2. Repayment Assistance 3. Debt Forgiveness Under BIA 3.1 File a Consumer Proposal 3.2 File for Bankruptcy 3 6 9 2 5 10 11 3. The Canadian Federation of Students estimates that the average student in Ontario leaves school with close to $26,500 in debt. It then takes the average student 10 years to pay off their debts in full. But what can you do when you are struggling to repay your Ontario student loans? 3 Student Loan Debt in Ontario 4. If you have a lot of student loan debt you may be struggling to make your student debt repayments. There are repayment assistance options depending upon how old your student debt is and your ability to pay. Let’s take a look at the debt relief options available to you: 4 Student Loan Debt in Ontario 5. One option is to try contacting your student loan lender to negotiate new payment terms that you can afford. You may have to make arrangements with the bank, the government, or the collection agency, depending on who holds your loans. This option makes sense if you: - Can afford to repay your loans in full but over a longer period of time - Need temporary relief from payments - Have been a student within the last 7 years 5 1. Negotiate Payment Arrangements 6. If you cannot maintain your student loan debt payments, you might want to consider Ontario or National Student Loan Repayment Assistance. Under these programs you may qualify for: 1) Term Revision 2) Repayment Assistance 6 2. Repayment Assistance Programs 7. If you need more time to pay you can ask for a revision of the terms of your loan including: 1) Temporary reduction in payments including interest only payments. 2) Extension of the term of you loan for up to a maximum of 14.5 years. 7 2.1 Term Revision This option is available to most student loan borrowers however be aware you will pay more over the life of your loan. More information can be found at the National Student Loan Service Centre – Revision of Terms 8. If you are having trouble repaying your loan you can apply for repayment assistance. 1) Loan payments will not exceed 20% of your income; 2) The government will subsidize interest costs for up to 10 years; 3) After 10 years you may be eligible for principal reduction as well. 8 2.2 Repayment Assistance You must meet the eligibility criteria, including income threshold, and approval is not automatic. More information can be found at the National Student Loan Service Centre – Repayment Assistance Plan 9. Certain student loans may be eliminated by filing a proceeding under the Bankruptcy & Insolvency Act (BIA). If have been out of school for more than 7 years, then your student loan can be included in a consumer proposal or bankruptcy. Note that the seven year clock does not start when you get the student loan; it starts when you cease to be a student, which generally means when you graduate from school, or when you stop attending and leave school. 9 3. Debt Forgiveness - BIA 10. A consumer proposal is a student loan debt relief option that costs less than term extension. In addition, it can help you deal with other debts like credit card debt and bank loans. A licensed Consumer Proposal Administrator will negotiate a legal settlement with your creditors that will allow you to repay only a portion of your debts. 10 3.1 File a Consumer Proposal This is a successful strategy for those who are working and have the ability to repay some, but not all of their student loan debts or have other debts that make student loan repayment difficult. 11. If you’ve been out of school for more than 7 years, and you file for bankruptcy your government student loan will be automatically discharged. You should contact a licensed bankruptcy trustee to review your options and determine how your student loan will be affected if you file bankruptcy. 11 3.2. File for Bankruptcy Bankruptcy is always an option of last resort. A bankruptcy trustee can help you explore all of the options for student loan debt relief to see which is right for you. 12. If it has been less than 7 years, your student debts cannot be automatically discharged through the BIA. However, if you have significant other debts, a consumer proposal or bankruptcy may still be a good option for you, since your other debts will be cleared and may make repaying your student loan more manageable. You should contact a licensed bankruptcy trustee to review your options. 12 3.3. Student Loans Less than 7 Years 13. Not sure which student debt relief option is right for you? Schedule Your FREE Debt Consultation Or give us a call at 1-866-747-0660 We can help.
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