Is Credit Counselling an Option for Dealing with Student Loans?
Personal bankruptcy is only an option if it has been more than seven years since you left school (or five years if you can convince a court that you will suffer financial hardship if your student loans are not discharged). A consumer proposal is also an option, but again, if the loan is less than 7 years old it is difficult to get the creditors to accept a deal.
Another option is credit counselling, where a non profit credit counsellor contacts student loans on your behalf, and works out repayment arrangements.
This is a good option where you have the ability to repay the loans, but you need an extended payment plan. There have been cases where credit counsellors in Canada have negotiated repayment terms over many years.
However, a credit counsellor can only make a deal with a student loans lender if the lender is also willing to make a deal. In many cases the lender’s attitude is “you can’t go bankrupt on this loan, so we have no incentive to make a deal with you.” That’s the issue.
Credit counselling may help you deal with your other debts, which may free up the cash to deal with the student loans, but there is no guarantee that a debt management plan offered through a credit counsellor will deal with your student loans.
So what should you do? Start by talking to either a credit counsellor or a bankruptcy trustee or consumer proposal administrator to review your options, and then make a decision on the best approach in your situation.