Student Loan- What Should I do If i can not repay it

Student debt is considered a fact of life by most people. Close to half of all Canadian undergrads owe money when they graduate. With most of this debt taking the form of government student loans. The average student loan amount owed for a university bachelor degree student is around $20,000 and for a college grad the student loan is around $13,000. About 4.3 million students have received amounts nearing $32 billion in loans since the creation of the student loan program, back in 1964.

If you’re a recent graduate the best option is to try to pay down that debt immediately. For federal and provincial student loans, there is usually a grace period of about 6 months from the date of graduation where you are not required to make payments. In some provinces you will still accrue interest and in some you won’t. But any money you pay down in this period goes directly towards the principal, which lowers your interest payments.

It’s clear that this is the best time to pay off as much of your debt as possible. Many students, leaving university with massive amounts of debt, return home to their parents’ houses to minimize expenses while they work on decreasing some of that principal. Even if you pay your parents rent, your expenses will be considerably lower than if you were to live on your own. So if you get along with your parents, it’s not a terrible idea to head home for a bit and really work on hitting that debt hard. This will give you a nice starting point. You might not be the one with a sweet new apartment or a nice new car, but you will be taking care of your finances logically. Which will mean that you will accumulate these things when you can afford them, not before you can afford them.

If you didn’t do this or you are unable to do this, there are still other ways to help with your student loan repayments. The federal and provincial governments both have assistance programs for students struggling with payments. There is something called a Repayment Assistance Plan (RAP). Which makes it easier for borrowers to pay their debt, by only asking for payments the borrower can afford. These affordable amounts are based on the family income and size of family and guarantee that the borrower won’t have to make payments exceeding 20% of the family’s income.
If you have a severe permanent disability, it is possible to have your debt forgiven, assuming your disability prevents you from working.

Another option is to revise the terms of your payback agreement. This is called, rather predictably, a Revision of Terms and will extend the length of time you are allotted to repay the loan, which can lower your monthly payments. Revising the terms of your agreement can give you 14.5 years to pay the loan back instead of the standard 9.5 years. This is available on both a temporary and a permanent basis.
If you are thinking this all sounds like too much hassle and are considering. Just filing for bankruptcy and washing your hands of the whole thing, that would be a bad move. Filing for bankruptcy really destroys your credit record for one thing. But the most important fact is that, in 1998, the federal government passed legislation stating that bankruptcy will not eliminate student debt within 10 years of graduation.
As far as negotiating this type of debt, it is extremely hard to negotiate a debt with the government of Canada. However, if your loan was obtained between August 1, 1995 and July 31, 2000, your creditor will be a financial institution (like a bank) instead of the government, which could give you a chance at negotiation. Provincial government loans can also sometimes be negotiated, though this is variable.
If your only type of debt is student debt, it is probably best to go through the government-sponsored assistance programs. However, for most people, this is not the case. Most Canadians have a varying collection of debt. Some credit cards, maybe a mortgage, a student loan, perhaps a car loan, etc. If you are one of these people, your ability to pay back your secured/government loans will be affected by your unsecured debt, such as the credit cards. If you find yourself struggling to make your minimum payments, looking at something like debt negotiation (which only works for your unsecured loans) may give you the breathing room you need to regain control of your finances, especially if you couple this with government-sponsored student loan assistance.

The reason debt negotiation is a better option than bankruptcy (or other options) in this instance is because, assuming you are a recent-is graduate, you are probably at the stage of life where you will soon be wanting to buy a house, a car, or perhaps find a new job. Debt negotiation does the least amount of long term damage to your credit, which enables you to get yourself back on track as quickly as possible, as well as having the benefit of only repaying around 50% of your original unsecured debt. It is not an officially-recognized form of debt relief and therefore, there will not be a note on your credit history telling potential creditors/employers that you had to participate in a debt management program. It will simply show as a period of payment default, followed by ‘settled in full’.

If, like so many Canadians, student loans are only a part of your unmanageable debt, taking advantage of a debt negotiation program to reduce your unsecured debt as well as a government assistance program to target your student loan debt can help you eliminate your unnecessary debt problems and work on paying down your government loan as soon as possible. Debt negotiation can be a useful tool in giving you some room to maneuver.
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