With what many would consider being unfair changes to the student loan process in Ontario, more students will be faced with the challenges of financing their education. Whether you had benefited from student loans prior to the amendments made to the student loan program or are looking at your current financial situation as a student today, student loan repayment is something you will eventually have to face. Paying back student loans can be a challenge, especially if you are trying to establish a career living in an expensive area like the GTA. If you are facing financial hardship due to your student loans, you might be looking for assistance to help reduce your debt burdens. Here, we explore the impact that bankruptcy has on student loans, as well as your options before bankruptcy is necessary.
Consider Your Payments
If you have found you aren’t able to meet your required payments each month, look at your budget to determine how much you think you can afford to pay. Don’t worry if it turns out that you can’t afford to pay anything! Once you have an idea, you will be in a better position to speak to your creditors, whether it is the government or a bank that provided your student loan. You can explain your situation and see if you can come up with a more manageable repayment plan.
Government Repayment Assistance
If your loan was through the government, you might be surprised to hear that they tend to be far more forgiving when it comes to loan repayment options.
The government views getting back any amount of money from student loans preferable to having to write them off altogether. Therefore, they are happy to discuss your options. They even have a repayment assistance department for this sole purpose. They have flexible terms and even offer support to students in need. However, it is also important to be realistic and know when you may need more help than their repayment assistance can provide.
Repayment assistance can be a real lifesaver for you if you are struggling financially. In Ontario, the Ontario Student Assistance Program (OSAP), will allow for reduced payments. In some cases, they will even completely defer payments for as long as six months when necessary. In certain scenarios you aren’t charged interest during this period as well.
Your best first optionis to call OSAP to make arrangements, as the online process does not allow you to enter all the personal details of your situation. Speaking with a live person makes it easier to review your issues and come up with a solution that is a little more customized.
They will review your monthly income, your necessary expenses, and discuss possible payment terms that are realistic based on your overall financial situation.
Student Line of Credit
If your loans came from a bank, you are going to have fewer options. Banks are not as forgiving, as they are all about the bottom line. However, these types of debts are dischargeable in a bankruptcy or a consumer proposal as the funds did not come from Student Loans. They don’t offer a formal repayment assistance program like the government but you can still gain from a conversation with your bank. When you are strapped for cash, even though paying more interest is never a good idea, if you can negotiate a longer payment plan, you can reduce the amount owed each month. You can hope to improve your financial situation over time and increase your monthly payments. You will then end up paying less interest. This way, you have better cash flow and can have a more manageable monthly budget that also reduces stress! Be honest and provide a new monthly payment you can afford and, hopefully, they will work with you to help make your repayment schedule work.
Consumer Proposal
If you don’t have any luck with settling your debt issues, speak to our team at Kevin Thatcher & Associates. As Licensed Insolvency Trustees, we can discuss the possibility of a consumer proposal.
A consumer proposal is a negotiation process to reduce debt. We try to propose a repayment plan on your behalf that will significantly reduce your debt. Student loans are unique as they will only be completely wiped out if you have been out of school for more then 7 years however at the very least they can buy you time and get your life and income on track.
If you do file a consumer proposal, it will show up on your credit record. This will be a negative mark that will impact your ability to get any further loans, including a mortgage or auto loan however if you are dealing with an unmanageable debt situation your credit is already being effected.
A consumer proposal stays on your record for three years following the completion of your proposal. That means you could have the mark on your record for up to eight years. You can take steps to get your credit score back up to good standing by ensuring all payments for s your rent, utility bills, and cell phone bills are paid in full and on time each month.
Bankruptcy
Last, but not least, your final option is bankruptcy. We consider this to be the last resort, however, it can wipe your debt clean, allowing you to start to rebuild your finances. For Student Loans it is important to understand that the debt is only wiped out if you have been out of school for more than 7 years. If you have not been out of school for that period of time then a bankruptcy can provide relief from required payments, garnishees, and harassment but the debt will survive. A trustee can explore this with you and what your options will be to deal with the debt if it is not wiped out.
After 10 Years
For OSAP loans, if you remain in debt beyond 10 years of completing your studies, you can review your situation with the government again. They call this “stage two” of debt repayment. Depending on your finances, they may negotiate the best terms to help you pay off the principal (your loan balance sans interest). You pay what you can afford, and they handle the rest. When you are truly strapped, they will forgive the debt but this is not a guarantee
As you can see, although student loans can create unmanageable debt situations, you always have options. We can help you find the best solution, so you can focus on your career and rebuilding your financial stability.
At Kevin Thatcher & Associates, we offer consumer proposal services and bankruptcy student loans that Ontario clients need to get their finances back on track. Contact us here for more information.