It’s now a norm for many Canadians to take a student loan in order to finance their higher education. Implementing an effective debt repayment strategy is crucial to paying off this loan on time before it gets out of hand. However, issues like unemployment, unexpected life events and the ever-changing economic conditions can cause one to default on these loans. This student loan is part of your credit history and late repayments can have a negative effect on your credit score. We’ll go over some debt relief options for student loans.
A debt repayment assistance plan
This is a viable option if you want to reduce the amount that you pay every month. There are requirements to qualify for a debt repayment assistance plan, also known as RAP. First, you must be living in Canada 6 months after completing your studies; your student loan must also be up to date. This means you may not qualify for a RAP if you already have missed payments.
Revision of terms of the student loan
The other option is to request for a revision of the terms of the student loan. This may allow you to pay for the loan for a longer period, which means more flexible monthly repayment terms. You can extend the loan term to up to 15 years. Your monthly loan repayment amount may end up being less than the previous installments. However, this could mean that you pay more interest in the long term and end up paying for the loan for much longer.
Consider a consumer proposal
If you haven’t been able to pay for your student loan 7 or more years after leaving college, perhaps it’s time to file a consumer proposal. A consumer proposal works by combining all your different credits into a single payment that you can make every month. You also get a reasonable timeline to pay all the debt. For instance, if you are struggling with a student loan and credit card balances, filing a consumer proposal can help you secure a single monthly payment within a certain timeline.
Consider filing for bankruptcy
Filing for bankruptcy is often the last resort if you’ve exhausted all other viable options. If you are struggling to pay for your student loan and you’ve tried all the other options but none of them suit your financial situation, bankruptcy may be the way to go.
When should you file for bankruptcy?
- If you are earning way less than what you owe your creditors
- If you are unable to pay off your bills without having to apply for more credit.
- You have creditors who are garnishing your wages
- You are looking to start afresh by seeking credit relief
A bankruptcy filing can help you to begin from a clean slate even though the records will remain in your report for several years. If you are currently struggling with your student loan, talk to a licensed insolvency trustee who will advise you on the best steps to take depending on your financial status.