It’s that time of the year when many young adults in our communities are commencing or continuing another year of post-secondary schooling at a university or college, either in a public or private institution.
Depending on the student’s career choice and number of years required to complete the courses, it could take, before graduation, thousands of dollars each semester to pay for tuition, books, supplies, room and board, transportation and other sundry expenses.
In many cases, neither students nor their parents have the financial resources to pay the costs up front and as a result the student must seek funding from other sources, including government-funded student loans and/or student loans from a financial institution.
In today’s society, a higher level of education is required for a young person to maintain current lifestyle preferences. When it becomes necessary to finance post-secondary education, it is imperative to realize that student loans are just that: “loans”. They require repayment after graduation.
Students should be encouraged to contribute to their formal education by working when not in school, working part-time during a school semester and, if possible, applying for scholarships/bursaries.
Should an individual be driven to seek protection from creditors by filing a voluntary Assignment under The Bankruptcy and Insolvency Act, it should be noted that student loans owing under the Canada Student Loans Act, the Canada Student Financial Assistance Act or under any enactment of a province for loans or guarantees of loans to students are not dischargeable until seven or more years have elapsed since the student’s last study date. If a student decides to return to school, after having attended an educational institution using government funded student loans, the time clock does not restart when one pays for the education without using additional government funded student loans.
Should an individual file for bankruptcy and have an outstanding student loan when the last study date was more than five years but less than seven years, an application to court under section 178 (1.1) to have the loan discharged can be made if the individual has acted in good faith and qualifies under financial hardship criteria.
In some cases, parents co-sign a different type of loan (typically called a “student line of credit”) advanced from a financial institution. Unfortunately, for the co-signer, the filing for bankruptcy protection by the student will not relieve the co-signer of his/her financial obligation.
Court decisions are mixed as to whether relief under section 178 (1.1) is available to consumer debtors who have filed a proposal.
Derrick J. Hutchens, CIRP, Licensed Insolvency Trustee has been a general member of the Canadian Association of Insolvency and Restructuring Professionals and is a Licensed Insolvency Trustee for over twenty-five years. His primary focus is providing financial and debt assistance/advice to individuals experiencing financial problems.