Student Loan Forgiveness

Understanding Student Loan Forgiveness

Canada lacks a blanket student loan forgiveness policy, yet avenues exist to reduce your loan burden. Delve into your choices for repaying student loans here.

Let's start from the beginning

In Canada, student loan debt is prevalent.

The country has over 1.7 million student borrowers, with the total debt exceeding $18 billion.

Given the widespread impact of debt on student borrowers, it’s understandable that many would inquire about potential loan forgiveness options, especially as additional financial obligations like credit card debt and mortgages accrue post-graduation.

However, Canada does not universally offer student loan forgiveness. Unless you’re a medical professional meeting specific criteria, full loan forgiveness is not available. Nevertheless, while complete forgiveness may not be guaranteed, there are various strategies to lessen your loan burden.

 

Does Canada Forgive Student Loans?

In Canada, there is no universal student loan forgiveness. Only medical professionals meeting specific criteria can have their loans fully forgiven.

However, while complete forgiveness isn’t available for student loans in Canada, various federal and provincial programs and initiatives have been introduced in recent years to alleviate the significant debt burden faced by students.

 

Who qualifies For Student Loan Forgiveness In Canada?

To be eligible you must:

  • Work as a medical professional
  • Work in an underserved or rural community
  • Be employed for a full year or longer
  • Provide over 400 hours of service in your community
  • Have student loans in good standing

Medical professionals who may be eligible for student loan forgiveness include:

– Family Doctors
– Registered Nurses
– Nurse Practitioners
– Registered Psychiatric Nurses
– Licensed Practical Nurses
– Registered Practical Nurses

If you meet the eligibility criteria for student loan forgiveness, you can access an application form here.

How To Pay Less on Your Student Loans

For non-medical professional borrowers, alternative options exist to decrease the amount owed on your loan. Here are three strategies to reduce your loan balance:

Student Loan Repayment Assistance Plan (RAP)

Managed by the National Student Loan Centre, the Student Loan Repayment Assistance Plan (RAP) modifies monthly payment sums based on gross family income. Individuals with higher family incomes receive proportionally less reduction, while those with lower incomes receive more.

With RAP, the federal government covers the interest on your student loans for the initial five years after graduation, while you are responsible for repaying the adjusted principal amount. If you remain enrolled in RAP for the entire five-year period, the government will then start covering both your principal and interest for the remaining duration of your participation in the program.

Furthermore, under RAP, if you consistently make payments towards your debt for 10 consecutive years, the government will clear your outstanding loans for the remaining five years.

Consumer Proposal

As Canada lacks universal student loan forgiveness, you may need to pursue more extreme measures to alleviate student debt in cases of financial hardship. Should you find yourself unable to meet debt obligations, submitting a consumer proposal or declaring bankruptcy are potential avenues to explore.

A consumer proposal entails a legal process wherein you collaborate with a Licensed Insolvency Trustee to formulate an offer to your creditors, proposing to pay a portion of your debt or extend the repayment period—or both.

If your proposal is approved, you can retain your assets provided you comply with the proposal’s terms. In the event of rejection, you’ll need to either submit a new proposal or explore alternative options, such as bankruptcy.

Bankruptcy

Bankruptcy often becomes a consideration following job loss or encountering another financial crisis. If you opt for bankruptcy, here’s what you should do:

1. Consult with a Licensed Insolvency Trustee: They will assess your situation to determine if bankruptcy is the most suitable choice.
2. Submit an application: Your trustee will file an application with the Office of the Superintendent of Bankruptcy Canada.
3. Cease payments: After submitting the application, loan payments cease, and the trustee assumes control of your finances. They will work towards settling debts, which may involve selling assets not protected by federal or provincial laws. If you have income, you may be required to make regular contributions, known as surplus income payments.
4. Rebuild your financial standing: Once your debts are discharged, you can start rebuilding your finances.

If you submit a consumer proposal or file for bankruptcy at least seven years after completing your program, your student loan debts become eligible for discharge. In instances of pre-seven-year hardships, the court can reduce the waiting period under the hardship provision.

Though unexpected financial challenges are unwelcome, it’s essential to understand your options. Declaring bankruptcy is a significant decision, but it may be a viable solution when overwhelmed by student loan debt.

Who Is Eligible for RAP?

In order to qualify for RAP, you must:

  1. Reside in Canada
  2. Have been out of school for six months
  3. Have good standing on your student loans

The assistance you receive will vary based on your income and family size. If your gross family income per month falls below the thresholds provided below, you won’t be required to make monthly payments. The thresholds for zero payment are:

  • $2,083 for one-member households
  • $3,254 for two-member households
  • $4,205 for three-member households 
  • $4,959 for four-member households
  • $5,652 for five-or-more-member households 

If your household income is above these thresholds, that doesn’t mean you don’t qualify for loan reductions. The amount you pay will simply be adjusted to reflect your gross household income. 

Additionally, as of November 2022, the zero-payment threshold for individual borrowers increased from $25,000 to $40,000, meaning individual borrowers in RAP won’t have to begin payment until they make $40,000 a year. 

Provincial Loan Forgiveness Programs

Federal funding isn’t the sole way for student borrowers in Canada to pay less on loans — there are also a variety of provincial repayment plans available to you.

These programs include:

British Columbia Loan Forgiveness Program

The Province of British Columbia will forgive student loan debt at a rate of 20% per year for up to 5 years

Click Here

Manitoba Student Aid Repayment Assistance Plan

This plan ensures the amount you pay will never exceed 20% of your income.

Click Here

New Brunswick Student Loan Interest Elimination

New Brunswick eliminated interest on the provincial part of student loans in late 2022.

Click Here

Nova Scotia Student Loan Forgiveness Program

Nova Scotian students graduating from undergrad programs can receive 5 years of loan forgiveness, or up to $20,400. 

Click Here

Prince Edward Island (PEI) Debt Reduction Act

The act gives eligible students $3,500 per year to put towards their student loans.

Click Here

Quebec Loan Remission Program

The Quebec government forgives 15% of anyone’s student loan debt.

Click Here

Saskatchewan Loan Forgiveness for Nurses and Nurse Practitioners

Nurses and Nurse Practitioners can get 20% of their outstanding loan amount forgiven.

Click Here

Frequently Asked Questions

Student loan forgiveness in Canada can be difficult to understand, so it’s natural to have lots of questions surrounding a complex topic. Here are some of the most common questions we hear from students and the answers we provide. 

Unless you’re a medical professional who fulfills the specific criteria for eligibility, your student loans cannot be forgiven. To receive assistance paying your student loans, you’ll need to enroll in a federal student loans repayment program, like RAP, or a provincial repayment plan. 

Government loans cannot be written off. If you’re unable to pay your loans and miss nine consecutive months of payments, your loans go to the Canadian Revenue Agency for collection. 

If you can’t pay off your student loans, you’ll have to declare bankruptcy. Bankruptcy only relieves you of your student loan obligations if you declare seven years after you finished your program. 

If you miss nine consecutive months of payment, your federal loans are sent to a Canadian Revenue Agency for collection. Once your loans are in collection, you won’t be able to file for student aid again until your loans are up to date.

Private student loans, like those from banks or other private institutions, are not eligible for forgiveness. Only federal student loans are eligible for forgiveness. 

If you’re nearing the end of your program and looking to enroll in a repayment plan like RAP, a Financial Administrator at Robertson can equip you with the knowledge you need to begin the process. While it can be scary to look at your debt obligations after you graduate, know that there are many options available to help relieve your financial stress. If you have questions about the student loan repayment process, reach out to Tuition Fee Funding & Assistance today.
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