Student Loans: Debt Consolidation and Other Alternatives

For a number of Canadian students having difficulties paying off their student loans, bankruptcy might seem the only solution for this situation. But another alternative could be a student loan debt consolidation.

Most governments in Canada whether they are provincial or federal have over the past few years reduced the level of government funding for post-secondary education relative to the costs of that education. The result has been that the level of student loan debt has dramatically increased. To make this situation worse the weak Canadian economy has produced fewer well paying jobs, and students are left with student loan debts they can’t pay. Students who graduate have found no paying jobs and they now must make payments on their loans. How should students deal with their student loans?

Alternatives: Student loan debt consolidation & Consumer Proposal

You have a few options and we recommend exploring all alternatives before you look at bankruptcy.

First, you could talk to the Canadian and provincial student loans lender (the bank, the government, or the collection agency), and try to work out payment arrangements.They understand that if you have no income you can not make the payment schedule.

If that does not work, consider student loan debt consolidation as a debt management solution for your situation.

If student loan debt consolidation is not possible, it may be possible to service your debts by filing a consumer proposal. This strategy is particularly successful if you are working and have the ability to pay something, but not the full amount, and only need more time to pay off all of your debts.

Consumer proposals can only be filed by a licensed bankruptcy trustee. Each trustee on our list of bankruptcy trustees offers a free consultation, and can help you assess your specific situation and the correct strategy for dealing with your student loans.

Canada Student Loans in Bankruptcy

Your last resource for dealing with student loans – in case neither consumer proposal nor student loan debt consolidation, nor anything else works for you – is bankruptcy. However, Canadian student loans in bankruptcy are only automatically discharged if they are more than 7 years old.

These rules are changing; for up to date information on the rules for student loans in a bankruptcy in Canada, please refer to the Canada Student Loans Bankruptcy web site.