Solutions for students overwhelmed with student loan debt
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Student loans, like many other debts Canadians hold, were deferred for the last six months since the start of the global pandemic, but the grace period is over now, and millions of students are expected to start making payments again even if they are out of work.
Young workers have been some of the hardest hit by the pandemic and according to a recent national survey by Bromwich + Smith, young people are also the most concerned over the lasting impacts of the economic woes.
According to the Money, Fear and Stigma poll conducted by Bromwich+Smith, 76% of Canadians aged 18-34 fear that the pandemic has created permanent impacts to our society and 74% fear the unknown.
And students in these categories have good reason to be concerned. Billions of dollars in student loan debt is one again being collected, and some students left jobless by the pandemic are struggling to pay.
That said, student loans guidelines have changed over the years. In the 1990s, once it became clear that some students were getting hundreds of thousands in loans to pay for their schooling, and going bankrupt the moment their loans became due, Ottawa tightened the restrictions around student loan debt, making it more difficult to include in an insolvency.
Students must be out of school for at least seven years before their student loan debt can be completely forgiven in a proposal restructuring. However, once the 7-year period is up, student loans can be restructured and forgiven just as any other debt.
If you haven’t been out of school for 7 years you may be wondering where this leaves you? Well, while the debt cannot be forgiven, you can still include it in your restructuring. The benefit here is that it will stop your required payments and collection activity on the student loans during the term of your proposal allowing you up to 5 years of payment deferrals. Your payments will resume at the end of the term but it will provide a deferral in the meantime.
But guess what? If you are still having trouble you can look at filing another proposal on the student loan debt and settle it once and for all (assuming that you have now been out of school for seven years). Or you could look to make an application to the Court under Section 178.1 of the BIA to have the student loan debt forgiven in the proposal that you just completed.
There is an old saying, “Where there is a will, there is a way.” Recent graduates, don’t lose hope, Bromwich+Smith will show you the way.