Is Credit Counselling an Option for Dealing with Student Loans?
As we all sit and wait for the proposed changes to the student loans and bankruptcy laws to change in Canada (sorry, as of today, no word yet on when those changes will happen; our best guess now is late in 2007, but that is just a guess, since the government has not yet begun to hold hearings on the issue), a number of former students are looking for other ways to deal with their student loan obligations.
Personal bankruptcy is only an option if it has been more than ten years since you left school. A consumer proposal is also an option, but again, if the loan is less than 10 years old it is difficult to get the creditors to accept a deal.
Another option is credit counselling, where a non profit credit counselor 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 as long as nine years.
While I would not typically recommend that anyone enter a nine year loan agreement (unless it’s a house mortgage), for a select few this may be a viable option. A list of not for profit credit counselors can be found at Credit Counselling in Canada.
Tagged as student loan, credit counselling, consumer proposal, personal bankruptcy, bankruptcy
Beware the consumer proposal. My wife is currently under one but signed up after being lead to believe that interest would stop accumulating during the time you are protected under the proposal – WRONG!! Interest in accumulating to an amount that is greater than her monthly proposal amount that she pays. Essentially we paid over $5000 to an accounting firm to keep the Student Loans people from calling us!! Beware of these proposals – instead, keep your money and after they call you once, tell them to stop harassing you and don’t call again. Legally they can’t harass you and call again.
If your student loan is less than ten years old, the student loan will not be automatically discharged in a consumer proposal, just as it won’t be discharged in a bankruptcy. If your student loan is more than ten years old, it will be discharged if the proposal is accepted.
Most people file consumer proposals because they also have other debts, so even if the student loan is less than 10 years old, the consumer proposal may deal with your other debts, allowing you to service your student loan.
As for your comment that “tell them to stop harassing you and don’t call again. Legally they can’t harass you and call again.”; that would be great if it were true. All anyone would need to do is tell collection agents to stop calling, and that would be it! Unfortunately in real life telling a collection agent to stop doesn’t make them stop; usually it just makes them call more, which is why a consumer proposal or bankruptcy is often necessary to deal with excessive levels of debt.
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