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Student Loans Forgiveness

Student Loans Forgiveness in Ontario: A Guide to Help with Student Debt

In Canada, close to half of the students who graduate with a Bachelor’s degree owe money, with an average student loan debt of approximately $28,000. This is becoming a bigger problem, especially in places like Ontario where living costs are high.

It’s a well known fact that going to college or university in Ontario costs a lot of money. Moreover, students in Ontario hold 67% of Canada student loan debt, indicating the province’s significant contribution to the overall student debt burden. Consequently with rising inflation, many Ontarians are finding it hard to pay back their loans.

In this article, we will talk about student loans forgiveness in Ontario and give tips to help with student debt.

Understanding Student Loans

In Canada, student loans can encompass various forms of financial assistance, including government student loans, bank loans, or private financing, tailored to cover tuition fees and related educational expenses. Typically, these loans are granted based on factors such as income, duration of studies, course type, and personal circumstances.

While government-funded loans offer a grace period without interest during studies and a six-month post-graduation window, repayment eventually becomes mandatory. You have to repay your student loan through the National Student Loan Service Centre (NSLSC).

When you borrow money for schooling in Canada, interest rates will vary. Some rates are set by the federal government and some by the province you reside in. When you repay your loans, you can choose to pay a fixed amount every month or have it variable based on the market. There are also ways to pay back the money early or get some of it forgiven if you’re having trouble.

International students in Canada can have access to international student loans, including federal student loans and private student loans.

Exploring OSAP

The Ontario Student Assistance Program (OSAP) provides student aid through a combination of loans and grants to support students throughout their academic journey. Eligibility is determined based on residency, citizenship, academic performance, and financial need. OSAP covers a spectrum of expenses, from tuition fees to living costs and childcare where necessary.

OSAP repayment assistance

OSAP (Ontario Student Assistance Program) helps students in Ontario pay for their education. While OSAP is helpful, paying back the money you borrowed can be difficult, especially if you’re having money problems. There are things you can do to make paying back your OSAP loans easier.

  • Income-Driven Repayment Plans: These plans change how much money you have to pay each month based on how much you earn. This helps make sure you can afford your payments and lowers the chance of missing payments.
  • Ontario Student Loan Rehabilitation Program: This program gives you a chance to fix your loans if you’ve missed payments. If you make all your payments on time, you might get more options for paying back your loans.

Options for Student Loans Forgiveness in Ontario

Canada Repayment Assistance Plan

The Repayment Assistance Plan (RAP) is a federal student aid offering student debt relief by lowering or even eliminating monthly loan payments, based on income levels. To qualify, you must reside in Ontario, maintain a good payment record, afford reduced payments, and pass an Income Verification check.

RAP consists of two stages:

  • Stage 1 – Interest Relief: Lasting up to 60 months or until 10 years post-graduation, this stage prioritizes reducing the loan principal. Any extra funds are allocated towards student loan interest, with the government stepping in to cover the balance if needed.
  • Stage 2 – Debt Reduction: For those with a permanent disability, entry is direct; others must complete Stage 1 first. During Stage 2, no loan payments are required as the government covers them until the debt is cleared, within 15 years of leaving school (or 10 years for disabilities).

If RAP isn’t an option, refinancing may be considered, but the low-interest rates of student loans, like those from OSAP, may make it less beneficial. Refinancing also alters the loan’s status, affecting potential tax benefits and future RAP eligibility.

File Bankruptcy

In Canada, if you want to get rid of your student loans by declaring Bankruptcy, your loans have to be older than 7 years for them to be eligible to be included. Once you finish your studies, this waiting period starts. However, if you’re clearly facing financial difficulties, you might be able to shorten this period to five years.

Bankruptcy has a number of advantages, primarily in clearing all of your unsecured debts, like a student line of credit or a credit card debt. It also stops your creditors from bothering you for the money you owe. To do this, you need a Licensed Insolvency Trustee (LIT) to help you with the process. But remember, filing for personal Bankruptcy will impact your credit rating for a period of six years following discharge. There are many tips you can apply to avoid becoming one of the growing number of millennials filing for Bankruptcy.

File a Consumer Proposal

A Consumer Proposal is a popular alternative to Bankruptcy in Canada and can be a helpful way to seek student loan forgiveness in Ontario. It involves negotiating a formal debt settlement with your creditors, potentially reducing your overall debt by up to 80%. This includes not only student loan debt but also other unsecured debts like tax debt and credit card debt.

Although you typically need to have completed your studies at least seven years ago, a Consumer Proposal could still be beneficial by clearing other debts, making it easier to focus on student loan repayments. Once again, you’ll need a Licensed Insolvency Trustee to assist with the process.

Getting Help for Money Troubles

If you’re struggling with your finances, it’s okay to ask for help. Adamson & Associates are Licensed Insolvency Trustees who can give you advice and help you find ways to manage your student loan debt.

We can help you figure out how to get some of your loan forgiven or work out a plan to pay it back. It’s important to look into these options to stay financially stable after finishing school. You can book a free consultation to learn more about your options.

John Adamson, Licensed Insolvency Trustee Ontario

John Adamson, CPA, CMA

John is a Licensed Insolvency Trustee (1994), a Chartered Insolvency and Restructuring Professional (CIRP – 1994), and a Chartered Professional Accountant with a Certified Management Accounting designation (CPA, CMA – 1992). His experience includes more than 25 years of helping individuals, small businesses, their owners and even lenders, find solutions to their debt problems.

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