Student Loan Debt and Consumer Proposals
If you’re a student, the rising costs of attending post-secondary education can put a lot of pressure on you, both in school and once you finish your studies. You may find that economic circumstances, including the job market, have radically changed from the time you began your studies.
Factor in that the maximum amortization period to retire student debt is 15 years, and every facet of your life could change before your debt is retired.
You may be considering student loan debt and consumer proposals. Using a consumer proposal to ease your federal and/or provincial student debt is an option, but there are several limitations, depending on your circumstances.
A Consumer Proposal During Your Studies
If your studies are still in progress and you need to file a consumer proposal, the consumer proposal will not eliminate the student debt. We recommend consulting with the federal and/or provincial student loans office to determine if filing a proposal will impact your ability to obtain future funding.
7 Year Limit
Student debt will be discharged if the initial claim is filed 7 years from your Period of Study End Date (PSED). It is so important to understand how this date is calculated. The PSED is defined as the last day of the month during which you completed your studies. This date is not related to your graduation date or the last day of your exams. The post-secondary institution defines the study period, regardless of when classes end.
5 Year Limit
If your claim date is over 5 years since the Period of Study End Date, then you may petition the court based on hardship provisions. However, this typically requires having already filed a consumer proposal or bankruptcy. The process varies from province to province and is highly dependant on the circumstances. It isn’t simply a given and is usually an option that doesn’t work for most people. We recommend seeking legal advice if you wish to pursue this option.
Multiple Period of Study End Dates
There is a possibility you may have gone to school multiple times and have applied and received funding for multiple periods. This is a highly debated legal topic, however, most recently as long as an individual study period meets the 7-year limit rule it can be discharged via a consumer proposal. This may change in the future as case law changes.
What If You Don’t Meet the PSED Criteria?
Even if your student loans are less than 5 years from the claim date, there can still be a benefit to filing a consumer proposal to bring your other debt obligations under control. While under the consumer proposal, collection activities are frozen. Interest will continue to accrue, but you can make interest payments to lessen that expense. Additionally, Repayment Assistance Programs are available for you, as well as other debt management tools at the service provider.
Our Recommendation
Navigating student loan debt and consumer proposals can be difficult. We highly recommend seeking professional advice whenever student loans are involved. There are a significant amount of factors that must be considered before properly restructuring. Book your free consultation with us now.