Can I pay off my student loan in a consumer proposal?

Possibly!  Student loan debt is an eligible debt in either a bankruptcy or a consumer proposal provided it has been 7 years since you’ve been a student.  That aspect of the Bankruptcy and Insolvency Act (BIA) was changed by the government in July 2008 (prior to that the law stated it had to be 10 years since a student).

What this means is that such student loan debt is considered the same as all other unsecured debts (credit cards, lines of credit, personal loans, retail cards, payday loans, etc.).

We have many clients whose student loans are significant and have put them in a position of being cash-strapped every month for years. They say they would be fine had they not had these student loans, but the jobs they were able to get after college or university did not provide the income they had hoped for.

A bankruptcy is not for everybody, obviously, but a Consumer Proposal is a very effective way of eliminating debt and avoiding bankruptcy to do so.

A proposal effectively consolidates all of your unsecured debts but without a loan involved. So you make one low monthly payment, usually on a percentage of the total debt (20-30% typically), and ALL of your unsecured debts are paid off within 5 years or less. No interest. Yes, I said NO INTEREST. Which means your payments actually have mileage toward eliminating your debt. You get a fresh start, cleared of debt.

The other nice thing about a proposal is that it is open. Which means there are NO PENALTIES for paying it off earlier than the established timeframe if you are able.

Most people don’t know about consumer proposals. And even more people are unaware that they can include student loan debt in a proposal or a bankruptcy provided the 7-year rule applies.

Student loan debt is at an all-time high in Canada. Latest data from the Canadian Federation of Students says the average student in Canada now comes out of university has almost $30,000 in student loans. The total student loan debt in Canada is almost a whopping $20 BILLION, and it reached that level far in advance of predictions. Two million Canadians have student loan debt making up this total.

And with interest rates set only to rise, this will further burden these graduates. They do have a way out, however, without filing a bankruptcy:  a Consumer Proposal.