Starting a new career is challenging enough without a large student loan debt hanging over your head. It’s even harder if you struggle to pay back your student debt. If your income, or situation, makes paying off this debt challenging or impossible, you have options available to you.

Student loan debt Repayment Assistance Plan (RAP)

RAP is a two-stage repayment program that can assist borrowers in repaying their loans over a maximum of 15 years. How the program works is based on the borrower’s family income and size. Stage 1 applies to the first five years, in which loan payments not exceeding 20% of family income are applied to the principal amount of the loan while the Government of Canada covers the interest portion. If repayment difficulties persist beyond five years, stage 2 sees the government continue to cover the interest portion and, eventually, a portion of the principal amount along with the borrower’s loan payments, which will continue to be based on income level and family size.

Student loan debt and bankruptcy

Student loans will be discharged (forgiven) in a bankruptcy as long as it has been seven years since you last attended school at the time you file for bankruptcy. The same seven-year cut-off applies for consumer proposals.

New loans and interest-free status to help with student loan debt

Borrowers who participate in a bankruptcy-related event (including bankruptcy, filing a consumer proposal and/or participating in a province’s Orderly Payment of Debts) while in full-time study may apply for new Canada Student Loans for a maximum of three additional years. Also, borrowers will be eligible for interest-free status on all existing Canada Student Loans. Borrowers must remain in the same program of study on a full-time basis.

If you’re struggling with student loan debt and aren’t sure about the best way to proceed, meet with a Grant Thornton debt professional for a free, confidential consultation to learn more about your options.

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