The average cost of annual tuition for a college education in Canada is $13,000 – $20,000 and most students leave college with at least $30,000 in Canada student debt.

Starting adulthood off with such a large debt can be overwhelming. It makes it hard to settle down and buy a house, or even afford the daily cost of living. Millions of Canadians are stuck with their student loans for 10 – 20 years after they graduate, making them regret going to college.

Since student debt is a debt that never goes away, what are your options?

What Happens when you Can’t Pay your Canada Student Debt?

First, it’s important to understand what happens if you can’t pay your Canada student debt. Since not paying your debt isn’t an option if you don’t want to ruin your credit, you must figure out how to get student loan assistance.

Fortunately, the Canadian government provides several options:

• Repayment Assistance Plan
• Repayment Assistance Plan for Borrowers with a Disability

What is a Repayment Assistance Plan?

If your student loans are in repayment (you’ve been graduated for 6 months or longer) and you can’t afford your payments, you can apply for RAP (repayment assistance).

The assistance program may lower your student loan payment to make it more affordable. Some graduates may qualify for no payment required for six months. If your income exceeds the threshold, you may still qualify for a reduced payment.

During the RAP, the government covers any excess interest that your reduced payment doesn’t cover. If you qualify for RAP, your payment won’t exceed 20% of your income.

Is there Student Loan Forgiveness in Canada?

The good news is there is student loan forgiveness in Canada. The bad news, however, is you aren’t eligible unless you are enrolled in the RAP plan and make payments for 60 months or 10 years after finishing school, whichever occurs first.

After this time, the Canadian government will cover the principal and interest that exceeds your reduced payment. If you remain on the RAP plan, your payments will not go on any longer than 15 years.

Is the Repayment Assistance Plan Automatic?

Unfortunately, you aren’t automatically eligible for the rest of your life for the RAP plan. You must reapply every 6 months. As long as you are eligible, you’ll remain on the plan.

Can you Declare Bankruptcy to get rid of your Canada Student Debt?

Many people assume they can declare bankruptcy and write off their Canada student debt if they can’t afford it.

Unfortunately, this isn’t the case and is a common problem for Canadians. If you graduated less than 7 years ago, you can’t write off your student loan debt. Even if your bankruptcy is approved, you must continue to make payments on your student loan debt.

The only exception to the rule is if it’s been 7 years since you graduated college. At that point, you may be eligible to include your student loan debt in your bankruptcy.

Do Student Loans go away after 7 Years?

Some people assume since you can include student loan debt in their bankruptcy after 7 years that student loans disappear after 7 years.

They don’t.

The only way the 7-year rule plays into your favor is if you file bankruptcy and it’s been at least 7 years since you graduated. Otherwise, you must be enrolled in the RAP program to have any sort of relief from your payments.

Other Options for Canada Student Debt Payments

If you aren’t eligible for RAP but can’t afford your payments, there’s one more option – Revision of Terms.

A Revision of Terms, as the name suggests, changes the terms of your loan. Here are your options:

• Temporarily decrease your payments

If you can’t afford your payments now but know your income will increase or your payments will decrease soon, you can request a temporary decrease to help you now while you plan to afford the true payment moving forward.

• Term extension

You can extend your term by as much as 15 years. This lowers your monthly payment, BUT increases the amount of interest you’ll pay over the life of the loan. The longer the money is outstanding, the more interest you’ll pay.

• Interest-only payment option

You can request interest-only payments for up to 12 months. This allows you to keep up with your interest obligation, but it doesn’t touch the principal. You’ll have lower payments for 12 months, but the obligation to pay the principal back doesn’t disappear.

How to Handle Canada Student Loan Debt

So how do you handle your Canada student loan debt if you can’t afford it?

You have big decisions to make. Sometimes it just takes a restructuring of your budget or paying off other debts so you can free up money to pay your student loans.

Other times, you need more drastic measures, such as applying for a debt solution, the RAP plan, or possibly filing bankruptcy.

Final Thoughts

If you aren’t sure how to handle your Canada student loan debt, contact EmpireOne Credit today! Our professionals will help you determine the best plan to pay back your debt while avoiding excessive costs.

Assuming a longer term is best is often a mistake people make. Our professionals will help you determine which plan works best for you. We’ll look at the total interest costs, the fines, and even what it might do to your credit if you were to file bankruptcy.

Contact us today at 416-900-2324 to see how we can help you!