Congratulations! You’ve completed University.
Now that you’re done going to school you should be proud of yourself – a diploma or degree is a hard task! Before you start stressing about getting the “perfect job”, you should take some time to reorganize yourself including your finances, so you’re better prepared and informed for your next steps.
University might be over, but that means your school loans will start needing to be paid off.
Everyone finishing or taking a break from University should take a look at their entire financial situation. Studying and completing projects for class can sometimes take over and leave you in a surprising place financially. Finding out how much debt you have accrued, and in what form — credit cards, overdraft, or lines of credit, can help you make a suitable plan to pay it down.
Luckily, student loans typically carry a relatively low interest rate. This means they won’t grow in size like how a credit card balance does from month to month. Paying the monthly minimum payment will help keep balances from growing on all of your debts, and will also help you maintain a good credit score rating. With this in mind, it’s smart to consider adding extra amounts from your monthly earnings to the higher interest rate balances first and then worry about the lower interest rate debts afterward.
Do I need to pay off student loans right away?
Don’t forget about the six (6) month grace period that comes along with student loans. Your repayments don’t start until six (6) months after you finish going to University, yet your balance does accrue interest during this time. This means that although the balance grows a little bit, not paying won’t reflect on your credit score as it isn’t technically due. Of course, starting payments early will offset the interest, but might not be best for your financial situation. You can learn more about that here.
Another important fact about your student loans is that “As of Nov. 1, 2016, students who have taken out a Canada Student Loan will not have to repay their debt until he or she is earning at least $25,000 per year, Employment and Social Development Canada announced in a press release.” If you find yourself unable to find a job right after University, there is no need to stress as you can apply for either reduced monthly payments or no monthly payments at all.
Can I claim bankruptcy on my student loans?
Short answer: You can only claim bankruptcy if you have been out of school for at least seven (7) years. However, there are a few exceptions that may make you eligible before that time.
Long answer: Under the Bankruptcy and Insolvency Legislation, you must have ceased to be a full-time student for at least seven (7) years in order to have your debts discharged by bankruptcy or consumer proposal. There can be an exception if you are dealing with hardship, and if so, you should seek advice from a Licensed Insolvency Trustee (LIT).
The Student Loan Program also has options that may assist you in repayment plans. You should contact them directly if you are unable to afford payments. You may qualify for interest relief or other programs that may benefit you.
What about my other debts?
If you have debts other than your student loans, bankruptcy or consumer proposal may be necessary, and generally, Student Loans will participate. However, at the end of the process, the balance of the student loan might still be outstanding if you have not been out of school for the seven (7) years. Keep in mind that Insolvency options such as bankruptcy or a consumer proposal may not be an option for you or may not be your best option. It’s best to talk with one of our Licensed Insolvency Trustees (LITs) and find out suitable options.
Each case is different. If you don’t know where to start with your student loans and debt because they are overwhelming or stressful, it’s best to consult a professional. We have several Licensed Insolvency Trustees (LITs) to help you overcome these stresses and create a plan that works for you. To find our office closest to you, visit our locations page. Good luck!