Blair Mantin Senior Vice-President at Sands & Associates, BC’s biggest firm of Licensed Insolvency Trustees, cautions that recent moves by provincial and federal governments on student loans may not be enough to entirely halt future financial challenges many people face due to student debt, nor will the elimination and reduction in interest charges prove the ultimate solution for British Columbians already in over their head with respect to their student loans.
BC’s Provincial Government recently announced that it would eliminate interest charges on BC student loans, over-awards, risk-sharing and guaranteed loans effective February 19, 2019. This change benefits current borrowers in repayment, as well as future recipients of BC student loans.
The 2019 BC Budget suggests that the average graduate will save $2,300 in interest over a 10-year repayment period, based on combined federal and provincial student loans totalling $28,000, while Federal Budget 2019’s proposed interest rate cuts and grace period (six months) before interest begins to accrue are estimated to save student loan borrowers around $2,000.
$4,300 average savings on interest / 120 months (ten years) = $35.83 per month actual impact
While the savings in provincial and federal student loan interest are a welcome benefit, broken down on a monthly basis they may be negligible for many students who often struggle with low earnings after graduation.
Due to costs of living and the province’s continued housing crisis, students may still find themselves facing a mass of debt accumulated during their post-secondary studies. Furthermore, parents funding education may continue to feel the financial pressures of supporting their dependents.
The 2018 BC Consumer Debt Study conducted by Sands & Associates found that 4.7% of respondents polled claimed that the primary cause of their debt was student loans or student lines of credit.
The student debt crisis isn’t exclusive to BC, Ontario-based Licensed Insolvency Trustee firm Hoyes Michalos also provides significant findings around the prevalence of student debt among insolvent Canadians. The 2018 Bankruptcy Study discovered that the fastest growing cohort filing bankruptcy were millennials, with more than three in ten carrying student debt.
Sands & Associates proprietary research: 22% of students polled said they use credit cards for the majority of their daily purchases. 1
How much do students expect to earn five years after graduation?
Nearly three-quarters of all students surveyed (73%) anticipated they would be earning a salary greater than $50,000. 1
Reality
- $27,500 – Median employment income of British Columbian (not in census families) in 2016 2
- $68,690 – Median employment income of British Columbian families in 2016 2
1 Source: 2013 BC Student Finances Study
2 Source: Statistics Canada
Too Little Too Late?
Mantin notes that it’s not uncommon for his firm to provide debt help to people who have been out of school for over a decade who are still carrying big student loans; sometimes even related to degrees they are unable to use for their current profession, or worse still, individuals who have found themselves unable to work at all due to health problems.
Student Debt Help
Contrary to what many believe, Canadians who find themselves no longer able to repay their debt do have options to negotiate and write off student loans besides the debt repayment programs offered through the lenders themselves. The Federal Government provides exclusive legal standing to Licensed Insolvency Trustees to offer debt help solutions that can restructure and even eliminate an individual’s student (and other) debts entirely.
- Privately held (bank) student loans will be cleared through a Consumer Proposal or bankruptcy, like any other type of basic unsecured debt.
Provincial and/or Federal student loans and interest may be managed by filing either:
A Consumer Proposal: This legal debt consolidation works to effectively combine and reduce virtually all consumer debts, even student loans and other debts owing to the Government. Debts may be reduced by up to 70-80% or more, with no interest.
A Personal Bankruptcy: Where a person is no longer able to make meaningful partial repayments on their debts, a personal bankruptcy filing will result in forgiveness of essentially all debts.
Timing is important to note with government student loans in these options:
- If it has been seven years or more since you were last a student, your government student loans and interest will be fully settled upon completion of your Consumer Proposal or bankruptcy.
- If it has been less than seven years since you were last a student, your unpaid government student loan and interest balances will need to be repaid following your Consumer Proposal or bankruptcy.
- You may however be granted relief from making payments while either option is in progress, although interest will accrue.
- Amounts your creditors receive through your proposal or bankruptcy go towards reducing the surviving balance.
- If you were a student five or more, but less than seven years ago, you can file a court application to have the student loans released (forgiven) under a special hardship clause.
Compare options to eliminate debt using our Free Online Debt Options Calculator
For those who have been to school within the last seven years, or would not qualify for the special discharge order, a Consumer Proposal or personal bankruptcy may still be advantageous options to consider. Many people find that once their other consumer debts (such as credit cards, lines of credit etc.) are eliminated, they are then in a better position to pay off their remaining student loans.
Learn more about legal debt solutions that can consolidate, reduce and write-off student and consumer debt. Book your confidential free debt consultation today!
