Student loan debt is a significant financial burden for many Canadians.
In 2020/2021, the average student loan debt at the time of leaving school was $14,418.
And according to the CSFA Program annual report for the 2020 to 2021 academic year, 309,000 borrowers needed help to repay their loans using the Repayment Assistance Plan (RAP), a 4% increase from the previous year.
Student debt can be a massive burden on our lives, staying with us long past graduation. Fortunately, there is help available. Through the Repayment Assistance Plan, provincial programs and formal debt relief, you can benefit from student loan forgiveness in Canada.
In this guide, we will look at student loan programs in Canada, the eligibility requirements, and how each program could benefit you.
What is student loan forgiveness?
Student loan forgiveness allows individuals with student loan debt to have all or part of their debt forgiven or cancelled. The borrower no longer has to pay back the remaining debt.
Student loan forgiveness programs are typically offered by the federal and provincial governments or through Licensed Insolvency Trustees and have specific eligibility requirements that must be met to qualify.
Can I get my student loan forgiven?
In Canada, there are student loan debt forgiveness options for provincial and federal government loans.
In addition to the Repayment Assistance Program (RAP) offered by the federal government, there are provincial student loan forgiveness programs and grants.
There are also two formal debt relief programs under the Bankruptcy and Insolvency Act—a consumer proposal and bankruptcy—that release you from your obligation to repay your government student loans. These solutions can also eliminate private student loans.
Canada student loan forgiveness programs
If you need help with student loan debt, there are various student loan forgiveness options, from the Repayment Assistance Plan (RAP) to provincial student loan forgiveness.
Repayment Assistance Plan
The Repayment Assistance Plan helps borrowers manage their student loan debt by reducing or eliminating payments depending on their income. While it’s not exactly debt forgiveness, the government will pay your loan payments for as long as you are eligible for repayment assistance.
You don’t need to make repayments if you earn less than $40,000 per year, and there is a cap on monthly payments of 10 percent of a borrower’s household income. You can apply as soon you start repaying your student loan.
Canada Student Loan and Canada Apprentice Loan borrowers qualify for repayment assistance if:
- They live in Canada, are a reservist, are the spouse of a reservist deployed abroad, or are on an international internship for a year or less.
- Their loan is in repayment, and they are up-to-date on their loan payments.
You must complete an application every six months through the National Student Loans Service Centre (NSLSC). This program can provide much-needed financial relief for individuals struggling to repay their student loan debt.
Student loan debts can be forgiven through bankruptcy, alongside other unsecured debts, like credit cards, loans, lines of credit, utilities and taxes.
You receive legal protection from your creditors during bankruptcy, allowing you to freeze interest on your debts, stop legal action and lift wage garnishments.
You are eligible for student loan debt relief through bankruptcy if it has been at least seven years since you were a student. To file for bankruptcy, you must use a Licensed Insolvency Trustee.
Bankruptcy hardship provision
Typically, you must be out of school for seven years to clear your student loan debts through bankruptcy, but this can be reduced to five years under certain circumstances.
If you are currently in a bankruptcy filing or were previously bankrupt, and you’ve been out of school for at least five years, the hardship provision lets you ask the court to discharge your student loan debt early.
The court will look at several factors to determine whether you acted in good faith to repay the debt before agreeing to discharge the student loan, such as:
- How did you use your student loan funds?
- Did you complete the educational program?
- Did you take advantage of the federal government’s Repayment Assistance Plan?
If the court is satisfied that you tried to meet your repayment obligations and sees that you have experienced financial difficulties in repaying the student loan, they will discharge you.
You may qualify for bankruptcy if you cannot make payments to your creditors and your debts are worth more than your assets. Talk to a Licensed Insolvency Trustee for further advice.
A consumer proposal is a bankruptcy alternative that offers student loan forgiveness in Canada.
You make a formal proposition to your creditors to pay all, or part, of your outstanding debts, which can reduce your debt by as much as 80%. In addition to your student loan, you can eliminate other unsecured debts, including credit card debt and personal loans.
Like bankruptcy, you must be out of school for at least seven years if you want to eliminate student loan debt in a consumer proposal. If this doesn’t apply to you, you could file a consumer proposal for your other debts and free up money for your student loan payments.
Additionally, you can take a break from your student loan payments and restart payments upon completing your consumer proposal. Interest will continue to accrue during this payment break.
Provincial student loan forgiveness programs
In addition to the Repayment Assistance Plan, there are also student loan forgiveness programs available in some provinces:
- B.C. Loan Forgiveness Program
- Nova Scotia Student Loan Forgiveness Program
- PEI Debt Reduction Grant Program
- Quebec Loan Remission Program
Below, you can find out more information about each program.
B.C. Loan Forgiveness Program
Students who have recently graduated in high-demand occupations can have their British Columbia student loans forgiven by agreeing to work at publicly-funded facilities in underserved communities in the province or working with children in occupations with a workforce shortage.
If you qualify for the B.C. Loan Forgiveness Program, the province of British Columbia will forgive the provincial portion of your Canada-B.C. integrated student loan debt at a rate of up to 20% per year for a maximum of five years.
If you complete five years of work in an eligible occupation, all (or a percentage) of your student loan debt will be forgiven, including any interest.
You must work a minimum of 400 hours of in-person service every year. If you work between 100 and 399 hours, the outstanding portion of your loan will be forgiven at a prorated rate for that year:
- 0 to 99 hours: 0%
- 100 to 249 hours: 10%
- 250 to 399 hours: 15%
- 400+ hours: 20%
Eligible occupations in underserved communities in B.C.
- Nursing (licensed practical nursing, nurse practitioners, registered psychiatric nurses and registered nurses)
- Physician (including residents)
- Medical laboratory technologist
- Diagnostic medical sonographer
- Speech-language pathologist
- Occupational therapist
- Respiratory Therapist
Eligible occupations working with children in B.C.
- Speech-language pathologist
- Occupational therapist
- School psychologist
- Technology educator
- Teacher of the deaf/hard of hearing or the visually impaired
Am I eligible for the B.C. loan forgiveness program?
You may be eligible for student loan forgiveness in B.C. if you:
- Are repaying a B.C. student loan (cannot be in default, delinquent or bankrupt)
- Have graduated from an accredited post-secondary educational institution
- Are or will be employed full-time, part-time, or casual/on-call at a publicly funded facility in an eligible occupation in an underserved community or with children.
- Are not enrolled in full-time post-secondary studies.
Nova Scotia Student Loan Forgiveness Program
If you are a Nova Scotia student, you can have the provincial portion of your student loan eliminated through the Nova Scotia Student Loan Forgiveness Program. Graduates can receive loan forgiveness for five years, up to a maximum amount of $20,400.
Nova Scotia student loans issued on or after 1 August 2015 may be eligible for loan forgiveness.
Am I eligible for the Nova Scotia Student Loan Forgiveness Program?
There are eligibility criteria for the Nova Scotia Student Loan Forgiveness Program:
- You must graduate from a Nova Scotia non-professional undergraduate program at a Nova Scotia university.
- You must have an eligible Nova Scotia student loan.
- It must be your first undergraduate degree.
- You must complete your degree within eight years of starting it.
- Your degree can include credit transfers made under inter-institutional agreements (also known as a Letter of Permission).
Eligible amounts for loan forgiveness under the Nova Scotia Student Loan Forgiveness Program
- If you graduated before 1 August 2017 and took five years or more to complete your degree, you are assessed for loan forgiveness for your first four years of study.
- If you graduated after 1 August 2017 and took five years or more to complete your degree, you are assessed for loan forgiveness for your first five years of study.
- If you graduated before 1 August 2019, you must have a combined government student loan debt of more than $28,560.
- If you graduated after 1 August 2019, your student loan could be forgiven in full (up to the five-year maximum limit).
PEI Debt Reduction Grant Program
If you’re a student in the province of Prince Edward Island who borrows more than $6000 in federal and provincial student loans each year, you may benefit from PEI’s Debt Reduction Grant Program to help reduce your student loan debt.
Depending on when you started your studies, you could receive up to $2,000 or $3,500 in grants every year.
- If you started school before 1 August 2018, you could receive a debt reduction grant of up to $2,000 per year toward your student loan balance. You must apply within one year of graduation.
- If you started your studies after 31 July 2018, you could receive up to $3,500 per year. You must apply within three years of graduating.
Am I eligible for the PEI Debt Reduction Grant Program?
In addition to the application deadlines above, you must also provide the following documents:
- A completed Debt Reduction Grant application form and the Declaration of PEI Residency Document.
- A copy of your degree, diploma, certificate, or unofficial transcript.
- A printout of your current Edulinx provincial loan balance.
Lastly, you must also prove that you have been a resident of Prince Edward Island for a minimum of six months before applying for the program. Proof of residency can be provided with a bank statement, utility bill, rental agreement or a letter from the employer.
Quebec Loan Remission Program
Quebec’s Loan Remission Program will forgive 15% of a student’s loan debt if they complete a program within a set period and receive a bursary under the Loans and Bursaries Program for every year of study.
Am I eligible for the Quebec Loan Remission Program?
To qualify for Quebec’s Loan Remission Program, you must:
- Complete a program leading to an undergraduate degree or a college-level technical training program leading to a Diploma of College Studies (DCS) within the set period (some previous college studies may also qualify).
- Have received a bursary through the Loans and Bursaries Program for every year of study.
What are the time limits for the Quebec Loan Remission Program?
There are time limits for each program that must be followed to qualify for the Loan Remission Program:
- College-level technical training program: 27 months
- 3-year undergraduate degree program: 24 months
- 4-year undergraduate degree program: 32 months
- Master’s degree program (thesis): 16 months
- Master’s degree program (non-thesis): 20 months
- Doctorate program: 32 months
You can apply by completing a Loan Remission Application form.
Canada student loan forgiveness for family doctors and nurses
If you are a family doctor, resident in family medicine, nurse practitioner, or nurse, you could have the federal portion of your student loan forgiven (it does not apply to the provincial or territorial part).
Starting in 2023, doctors and residents in family medicine can receive up to $60,000 in student loan forgiveness over five years, while nurses and nurse practitioners can benefit from up to $30,000 in forgiveness over the same period.
Loan forgiveness is applied to your unpaid student loan balance after you have completed your 12 months of service. However, you must keep making interest payments.
You are eligible for loan forgiveness if you have student loan debt at the end of each year of service in an under-served rural or remote community, even if your five years of service are not consecutive.
Am I eligible for student loan forgiveness for doctors and nurses in Canada?
To qualify for debt forgiveness, you must meet the following criteria:
- You have a Canada Student Loan that is in good standing and not in default.
- Your full-time, part-time or casual employment as an eligible medical professional started on or after 1 July 2011.
- You have been employed in an under-served rural or remote community that lacks primary healthcare for 12 consecutive months (this does not apply to residents in family medicine). You can work for multiple employers during these 12 months.
- You have completed a minimum of 400 hours of in-person service in your community.
Eligible medical professionals
To qualify for Canada student loan forgiveness, you must work as a medical professional in one of the fields listed below:
- Family doctor
- Family medicine resident in training with an accredited medical school in Canada
- Registered nurse
- Registered psychiatric nurse
- Registered practical nurse
- Licensed practical nurse
- Nurse practitioner
In 2023, the federal government aims to expand the list of eligible professionals for the program and is reviewing how rural communities are defined to ensure the program does not leave out those in need.
Alternatives to student loan forgiveness programs in Canada
Revision of terms
If you need more time to pay your student loan, you can ask to have the terms of your loan changed:
- Reduce payments for a while: you can temporarily extend the terms of your loan to lower your monthly payments.
- Extend your repayment period: your monthly payments will be lower, but you will pay more interest and be in debt longer.
- Make interest-only payments: you can pay only the monthly interest on your student loan for up to 12 months during the loan’s lifetime.
Student debt consolidation
Student debt consolidation involves taking out a new loan to pay your student loan.
If it’s a government loan, debt consolidation probably won’t work because your current interest rate is typically very low. Additionally, you would lose out on tax deductions (in the form of a non-refundable tax credit) as you wouldn’t be able to claim the interest you pay on your current student loan.
You would also no longer qualify for the government’s Repayment Assistance Plan.
Debt relief for private student loans
If you took out a private student loan through a line of credit, it is not government guaranteed and, therefore, not covered under the Repayment Assistance Plan or provincial debt forgiveness programs.
However, the flip side is that the debt can be resolved in several ways.
If you’re struggling to pay back the loan, you can try negotiating with your lender to change the terms of your loan. You might need to show evidence of your financial situation, but the result can be lower payments.
Even if your lender doesn’t budge, you still have options. You could find a debt consolidation loan with a lower interest rate to roll your private student loan debt (and other debts) into one loan payment.
Alternatively, you could eliminate all your debts in a consumer proposal or bankruptcy. Private student loans are treated like any other unsecured debt, so you could potentially repay creditors part of what you owe, with the rest forgiven. Connect with a Licensed Insolvency Trustee for more information.
What is the best student loan forgiveness program in Canada?
There’s no silver bullet when it comes to student debt forgiveness in Canada. Debt forgiveness depends on your occupation or employment status, where you live and your unique financial situation.
If you earn less than $40,000 per year, the government Repayment Assistance Plan (RAP) is an excellent place to start. In addition to the RAP, British Columbia, Nova Scotia, Prince Edward Island, and Quebec also offer their own debt forgiveness programs.
There’s also federal student loan debt forgiveness for some medical professionals in Canada.
If you cannot repay your student loans and other debts, consider using a formal debt relief program such as a consumer proposal.
Each forgiveness program has its benefits and drawbacks, so it’s important to research your options carefully and determine if you are eligible.
Suspension of interest on student loan debt
You might not be aware that the federal government has frozen interest on Canada Student Loans and Canada Apprentice Loans until March 31, 2023.
Frequently Asked Questions
How can I avoid paying back my student loan in Canada?
In Canada, government student loans are not subject to a statute of limitations period and can be collected indefinitely. The only way to stop paying back student loans is to declare bankruptcy or file a consumer proposal.
Do student loans go away after 10 years in Canada?
In Canada, student loans do not go away after 10 years. Government student loans do not have a statute of limitations and do not expire. This means that the government can take legal action to collect the debt at any time.
Does bankruptcy get rid of student loans?
Yes, bankruptcy can eliminate student loan debt if you have been out of school for at least seven years. If you file for bankruptcy, your student loan will be forgiven along with any other unsecured debts.
What happens to my student loans if I die?
If you die, your student loans do not need to be repaid and won’t be passed to your family or estate.
What happens if you miss a student loan payment?
If you miss a student loan payment, you will be contacted by the loan provider requesting payment. You may also be charged a late fee and additional interest on your loan.
If you continue to miss payments on a government student loan, your account may be sent to the CRA for collection, damaging your credit score and preventing you from getting another student loan in the future.
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