David Sklar & Associates Inc.

Consumer Proposal & Bankruptcy Trustees
Serving the Greater Toronto Area

Consumer Proposals and Student Loans

After university – many former students are left with sizable student loans to pay.

What happens to student loans when a former student has masses of other unmanageable debt and is considering a Consumer Proposal?

If it has been more than seven years since the person ‘ceased to be a full-time or a part-time student’ then they might be able to include the student loans in their Proposal. However, if it has been less than seven years, they will most likely not be able to erase their student loans with a Proposal. Individuals need to speak with a Bankruptcy Trustee to review the specifics of their situation.

How does a Consumer Proposal work if the student loans cannot be erased in the Proposal?

In general, once it has been accepted by the majority of the unsecured creditors, the Proposal proceeds in the standard manner. Monthly payments are made to the Trustee, who disburses the payments to the unsecured creditors, including the holders of the student loans.

Once a Consumer Proposal is successfully completed, the former student is required to start making their student loan payments again. During the Consumer Proposal period, the interest on the student loans continues to be added to the debt, so it is likely that at the end of the Proposal, the total owing on the student loans will be more than when the Proposal started.

We suggest it might be in their best interest for the debtor to maintain a payment to the Student Loans Program, if they are able to afford this after taking into consideration their proposal payment and other obligations. Maintaining even the interest only portion, will keep the total loan within grasp.

If you have outstanding student loans and are considering a Consumer Proposal or a Bankruptcy, you need to speak with a Licensed Bankruptcy Trustee. If you live in the GTA, call David Sklar & Associates to set up a free initial consultation, where we will review your situation and explore all of your options with you.

If you are burdened with student loans here are some of the services you should check out:

• CanLearn Repayment Assistance Plan
• National Student Loans Service Centre
• Ontario’s Interest Relief Program and Debt Reduction in Repayment Program (DRR)