Bankruptcy and Student Loans

Recently, a friend of mine said she was considering declaring bankruptcy and that removing her need to pay her student loans would be helpful. I was pretty sure that doing so would not absolve her of her duty to pay loans. Here’s something to consider from the StudentAid BC site:

“Even if you receive a discharge on your other debts involved with the bankruptcy, federal and provincial government authorities will continue to take collection action on your student loan debts.

Under the Bankruptcy and Insolvency Act, students who declare bankruptcy after June 25, 1998, will not be able to receive a discharge on their student loan debts until 10 years after the date they last attended school.”

I also came across this interesting article from the Times and Transcript website. It discusses some proposed changes to the above-mentioned information. More specifically:

“The changes would reduce the period a borrower must wait before declaring bankruptcy from 10 years to two, including a provision that would allow an immediate application to declare insolvency for those facing long-term financial hardship.”

While declaring bankruptcy may seem like the only option for some students after accumulating mountains of student loan debt, there are many things a person has to consider before pursuing this as a serious option. It is likely that a great deal of you reading this are not considering this as an option, but the fact is that if one of my own friends mentioned it then there is a chance some of you may be thinking of it.

A great place to find answers to common bankruptcy questions is on the Industry Canada website. I sincerely hope that most of you are NOT in such a dire situation that bankruptcy is becoming an option, but there is no harm and learning a little more about the process. Better to be prepared, just in case, right?

To quote the famous British comedy sketch group Monty Python:
“NOBODY expects the Spanish Inquisition!”

Student Loan Debt Reduction in Payments

There are many initiatives to assist students who enter repayment status for their student loans. One that I stumbled on today, that I had never seen before, can be found on the Human Resources and Social Development Canada website. Here’s a snippet:

“If you have a Canada Student Loan, you may be eligible for federal Debt Reduction in Repayment Reduction (DRR), a debt management measure designed to help you manage the repayment of your Student Loan(s) if you have long-term financial difficulties. DRR lowers the principal amount of your loan and reduces your monthly loan payment to an affordable level based on your family income.

You can receive up to three reductions on your Canada Student Loan principal in your lifetime, for a total of up to $26, 000, depending on your financial circumstances.”

Another avenue to examine is whether your provincial student assistance division has any debt reduction options. Not to be Nova Scotia-centric, but I know this exists because I have researched it before. I would encourage you to look into your own province’s debt reduction strategies, because you may surprised how much help is available.

Overawards

For anyone who has not experienced this, here’s something to keep in mind. If you estimated making a certain amount of money during the school year and for whatever reason you ended up making more than your estimate, you should be proactive and contact the appropriate student loans department to inform them. This is considered an overaward. I, myself, will be doing this and plan to write further blogs about my process throughout. I would rather have them know that I made more money and hopefully settle what I may owe them than find out when applying for new loans that my awarded amount will be reduced due to an overaward.

I realize student loans might not be on your mind, but it’s almost already timeto apply for fall loans in order to get things done in a timely manner. If there is anything else you’d like to mention in regards to these topics or others involving student loans feel free to comment.