FAQ

Student Loans

My husband and I are almost out of interest relief on our loans and are facing major financial difficulty if we are required to pay our student loans. What do you think we should do?

Talk to the student loans people. There is another program called debt reduction program. You may be eligible for the program! Information about paying your loans can be found at www.canlearn.ca

How Will Bankruptcy Affect My Canada Student Loan?

The Canada Student Loans Program (CSLP) is implementing changes that will allow borrowers who participate in a bankruptcy-related event to apply for new federal loans while in-study and for debt management measures while in repayment. A bankruptcy-related event includes acts of bankruptcy, filing a consumer proposal and/or participating in a provincial scheme for the orderly payment of debts.

These changes went into effect on May 11, 2004 and are not retroactive. This means that they will apply only to borrowers who participate in a bankruptcy-related event on or after the date of implementation.

The changes for borrowers who participate in a bankruptcy-related event include:

• Eligibility for interest free status on full-time students' loans while the borrower is in-study;
• Availability of new student loans for a maximum of three years, provided that the borrower remains in the same program of study and does not drop below full-time status; and
• Access to debt management measures, including Interest Relief and Debt Reduction in Repayment

What measures are available?

Interest Relief and Debt Reduction in Repayment are debt management measures for borrowers who are in repayment and experiencing financial hardship. These measures were previously unavailable to borrowers who participated in a bankruptcy-related event.

Interest relief "IR"

provides relief to borrowers who are experiencing temporary financial hardship. While borrowers are receiving IR, they are not required to make any payments on their student loan (interest OR principal) and the Government of Canada pays the monthly loan interest.

Borrowers may receive up to 54 months of IR. Up to 30 months of IR is available at any point in repayment. Borrowers who use up their 30 months and have not been out of school for 5 years (as indicated by the post-secondary end date specified on the initial application for IR), may receive up to an additional 24 months of extended IR.

Debt Reduction in Repayment (DRR) -

DRR is a targeted debt management measure available to assist borrowers who have exhausted IR and who continue to experience exceptional long-term financial difficulty. The measure provides a reduction in the borrower's loan principal and aims to reduce the monthly loan payment to an affordable level relative to the borrower's income.

Borrowers in financial difficulty may be eligable for an initial reduction of their loan principal of up to $10,000. Borrowers who continue to experience difficulty in repaying their student loans may be eligible for two additional reductions of up to $5,000 each. In order to be eligible, twelve months must elapse between each reduction. Borrowers will be required to make a minimum monthly loan payment of $25 in order to qualify for the second or third reduction.

New Loans and Interest-Free Status

Borrowers who participate in a bankruptcy-related event while in full-time study may apply for new Canada Student Loans for a maximum of 3 additional years. In addition, borrowers will be eligible for interest-free status on all existing Canada Student Loans. In order to remain eligible for new loans and/or interest-free status, these borrowers must remain in the same program of study on a full-time basis.