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Student Loans

Can You Default On Student Loans?

Now you can listen to our blog post, “Can You Default On Student Loans In Canada?” while on the go.

The concept behind student loans is that everyone should win. A student loan is a government investment in you. They lend you money so that you can continue your education. They continue their education in order to get a new job or a higher-paying job. You have a steady job, pay off your student loans, and pay your taxes. you live the Canadian dream. everyone is satisfied.

What if that doesn’t happen? What if you graduate but can’t find permanent employment in your field? What if you’re too sick to complete your degree and can’t get student loans? And what if, like many of our customers, lowering your cost of living and budget isn’t enough?

We’ll look at what happens if you can’t pay back your student loans, and what types of tuition debt forgiveness are available.

After nine months of nonpayment, the federal loan portion will be sent to the Canada Revenue Agency (CRA) for collection. After collection, you will not be able to receive research grants. You will need to renew your loan to receive student assistance again.

Payment Issues

If you are having trouble paying off your loan, you have the following options:

  • get repayment assistance
  • reduce monthly payments

Any non-payment will affect your balance. Please see the Fundamentals of Credit Reports and Rating page below for more information.

Whether or not you have defaulted on your loan payments, you can:

  • Sign in to your National Student Loans Service Center (NSLSC) account to access tools to help you find your repayment plan
  • Contact NSLSC to discuss options for getting back on track
  • Contact your state if you have student loans from Alberta, Manitoba, Nova Scotia, or Prince Edward Island.

Get a Loan from a Debt Collection

If you default on nine-month payments, the federal loan portion will be sent to the Canada Revenue Agency (CRA) for collection. After collection, you will not be able to receive research grants. You will need to renew your loan to receive student assistance again. Contact your CRA to set up payment arrangements and renew your loan.

For state or territory portions of student loans, you must contact your state or territory. A Saskatchewan borrower can contact her CRA for both the federal and state portions of student loans.

Getting Canadian student loans back in good standing

If your loan is in collections, please contact your CRA as follows:

  • Find out if you’re eligible to get federal student loans back in good standing
  • Make two recurring monthly payments and choose one of the following options:
  1. repay any accrued interest on the loan, or
  2. Add unpaid interest to the balance of the loan (this option can be used only once for him).

Please contact the NSLSC after payment has been made. You should receive a new repayment schedule within one month. 


Canadian student loans will not be forfeited if he files for bankruptcy within seven years of receiving his degree. you still have to pay it back.

How bankruptcy affects your student loan debts

The seven-year rule

A discharge from bankruptcy releases you from your obligation to repay your student loans if you filed for bankruptcy at least seven years after the date you ceased to be a part or full-time student. 

The federal or provincial student loan legislation applicable to your loan governs how you determine the date on which you ceased to be a full or part-time student.)

If you declare bankruptcy seven or more years after the date on which you ceased to be a full or part-time student, your student loan debts will be eligible for discharge, together with your other debts. (The seven-year rule applies to new filings for bankruptcy and bankruptcies that were not yet discharged as of July 7, 2008.)

However, the court can reduce this period to five years if repaying the loan will result in undue hardship.

Hardship provision

If it has been only five or more years since you ceased to be a full- or part-time student, and you are or have been bankrupt, you may apply to the court for an early discharge of your student loan debts under the “hardship provision.”

Under this provision, you will be discharged from your student loan debts only if the court is satisfied that you are.

acted in good faith in connection with your obligation to repay your student loans; and

have experienced, and will continue to experience, financial difficulty that will prevent you from repaying these debts. In reviewing good faith, the court will consider how the debtor used the student loan money, the efforts to complete an educational program, and the use of available repayment assistance programs. Consider federal repayment assistance plans available to borrowers with difficulty repaying student loans.

What are your options for student loans assistance?

Review repayment terms

The first approach might be negotiating a new repayment schedule for student loans. You can contact your lender or Canada Student Loans and ask them to reduce your monthly payments for a temporary period or extend the term of your loan permanently.

Government-guaranteed student loans can be repaid over up to 15 years. If the total term of the Canadian student loan is less than 12 months, she can also request only interest payments. You can ask private lenders to cut rates. You may or may not comply with your request, but asking is never bad.

Taking longer to pay off your student loans and reducing your monthly payments has a financial impact. You pay more interest and pay more over time. This is a good option if you are temporarily unemployed and only need a short financial break.

Student loan consolidation is not common practice in Canada. Most lenders will not approve consolidation loans to pay off state student loans. Doing so eliminates the tax benefit of deducting student loan interest on your annual tax return.

Find out about government repayment assistance programs

If you’re struggling to pay off your government student loans, your next option is to consider government repayment assistance. If you’re struggling to pay your student loans, the government will help you to some extent. This program is called Repayment Assistance Plan (RAP).

is how it works. Request a financial review. The government determines the amount eligible for student loan assistance based on factors such as income and family size.

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