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The cost of post secondary education has increased over 500% in the last 20 years in Ontario, but since the minimum wage in Ontario has only increased by 60% it is now very common for students to get student loans to complete their education.
What happens if you leave school but can't find a job earning enough to pay off your student loans?
You have three options.
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First, all government guaranteed student loans, including OSAP, have interest free and payment free periods immediately after you leave school. Other assistance may also be available, so contact the lender and attempt to work out payment arrangements. Even a small payment each month can keep your loan from going into default.
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Next, if your student loans have been placed with a collection agency, or if you have not been able to work out payment arrangements on your own, a consumer proposal is another option. The rules regarding student loans in a proposal are complicated, so the assistance of a licensed trustee is essential.
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Finally, bankruptcy may be an option. However, under current rules, a government guaranteed student loan is only automatically discharged in a bankruptcy if the loan is more than 10 years old. Again, the rules are complicated, particularly with respect to how the 10 year period is calculated, so the assistance of a licensed trustee is required.
I heard the student loan rules are changing?
Yes, new rules will be in place for 2009 that will allow a student loan to be automatically discharged if you go bankrupt seven or more years after you cease to be a student (as compared to the 10 year rule now). In addition, after 5 years you will be able to apply to court to have your student loan discharged.
At this time it is not known the exact implementation date of the new rules.
For up to date information, please consult the student loan bankruptcy blog, which is updated regularly.
For help now, and to discuss strategies for dealing with your student loans, click here to find a local trustee.
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