If you can’t pay back your student loans, act quickly—look into repayment assistance programs, talk to your lender, and if needed, explore legal debt relief options like a consumer proposal or bankruptcy with the help of a Licensed Insolvency Trustee.
Around 1.9 million Canadians have student loans, and sometimes they can feel like a weight you can’t shake. You worked hard to get through school, but between rent, bills, and trying to get your career started, making those monthly payments can be overwhelming. If you’ve been thinking, “I can’t pay back my student loans”, you’re far from alone. Thousands of Canadians run into the same problem every year.
The good news? You have options. From government repayment programs to legal debt relief solutions, there are paths forward depending on your situation. Let’s walk through what you need to know, so you can make a confident decision for your financial future.
Jump to:
- How do student loans work in Canada? Federal vs. provincial
- What happens if you can’t pay back student loans in Canada?
- How does the Repayment Assistance Plan (RAP) work?
- What if your student loan is already in collections?
- Can student loans be included in bankruptcy or a consumer proposal?
- Can you go back to school if you still owe student loans?
How do student loans work in Canada? Federal vs. provincial
Most Canadians have a mix of federal student loans (managed by the National Student Loans Service Centre) and provincial loans (like OSAP in Ontario or StudentAid BC). These may show up together in your account, but each has slightly different rules for repayment, interest relief, and collections. That’s why it’s so important to know exactly who holds your loan before you look at the next steps.
First steps to take if you can’t pay back student loans this month
If you think you can’t pay back student loans, the key is to act quickly, as ignoring the problem can make it harder to fix later. Here are some immediate steps you can take:
- Log in to your NSLSC account (and your provincial portal if you have one) to get a clear view on your balance and repayment schedule.
- Apply for RAP. This program can drop your monthly payments significantly—or even to $0—depending on income and family size. You’ll need to reapply every six months, but it keeps your loan in good standing.
- Check provincial relief programs. For example, Alberta and Ontario offer their own support alongside the federal RAP.
- Call your lender if you’re already late. Sometimes they’ll work with you before things spiral.
Did you know? Over 60% of Canadians say they regret the debt they took on through education. If you’re feeling weighed down and can’t pay back student loans, our team of Licensed Insolvency Trustees can help. Reach out for a free confidential consultation today.
What happens if you can’t pay back student loans in Canada?
If you can’t pay back your student loans, here’s a quick overview of what could happen:
- 1 missed payment and your loan is considered delinquent. Your interest will start building, and that can begin to impact your credit score.
- After 270 days (9 months) of missed payments, your loan will be in default. You’ll lose access to programs like RAP, and your loan will no longer be handled by the NSLSC.
- Federal loans are handed to the CRA, who can garnish wages, keep tax refunds, and withhold benefits without a court order.
- Provincial loans may go to collection agencies, who can contact you and report missed payments to the credit bureau.
Whether federal or provincial, defaulting will push your credit into “serious delinquency” territory, which can make it difficult to qualify for a car loan, mortgage, rental application, or even some jobs that require a credit check.
Bottom line: The sooner you deal with delinquency, the more options you’ll have, and the easier it will be to avoid the heavy consequences of default.
How does the Repayment Assistance Plan (RAP) work?
The Repayment Assistance Plan (RAP) is the federal government’s main support program for borrowers who can’t pay back student loans. It’s available on federal loans and most provincial loans. Your monthly payment is calculated based on your income, family size, and province. If your income is low enough, your required payment can be reduced to $0.
To stay eligible, you must reapply every six months with updated income details. The program is designed to keep your loan in good standing, which means you avoid default, protect your credit score, and prevent collections from the CRA.
If you have a permanent disability, there’s also a version called RAP-PD, which provides additional relief tailored to your situation.
- Stage 1 (first 10 years): The government may cover part of the interest while you pay what you can afford.
- Stage 2 (after 10 years): If you still can’t fully repay, the government begins covering both the principal and interest.
What if your student loan is already in collections?
If your loan has gone to the CRA and is already in collections, you can still bring it back into good standing. Usually this involves:
- Making two regular monthly payments.
- Paying any outstanding interest.
- Contacting the NSLSC once you’ve caught up.
Can student loans be included in bankruptcy or a consumer proposal?
Yes, student loans can be included in bankruptcy or a consumer proposal, but with important conditions:
- The 7-year rule: If it’s been 7+ years since you left school, government student loans can be wiped out in bankruptcy or a consumer proposal.
- The 5-year hardship rule: After 5 years, a court may allow discharge if you can show good faith and ongoing financial hardship.
- Consumer proposal: Stops collections and lets you repay a portion of your debts over an extended period—usually 5 years. The 7-year rule still applies.
- Bankruptcy: A more serious step that clears most unsecured debts if you meet the 7-year/5-year rules.
Before you make any decisions, you’ll need to talk to a Licensed Insolvency Trustee. They can assess your financial situation, help you find the best path forward, and support you throughout the entire process.
What if it’s been less than 7 years since you left school?
Even if your government student loans can’t be discharged yet, a consumer proposal or bankruptcy can still deal with other debts like credit cards or personal loans. Clearing those makes it easier to manage your student loan payments.
Can you go back to school if you still owe student loans?
Yes, but there are limits. If you’re on RAP and the government has started paying principal on your behalf, you may not qualify for new student loans or grants until your balance is under control. Always check with the NSLSC before applying for more funding.
Can’t pay back your student loan? Talk to a Licensed Insolvency Trustee
If RAP isn’t enough, your loan is already in collections, or other debts are making things impossible, it’s time to reach out.
Licensed Insolvency Trustees are the only federally regulated professionals who can file consumer proposals and bankruptcies. At Harris & Partners, we’ve helped thousands of Canadians take back financial control with debt relief options that work for them. We’re ready to do the same for you. Give us a call, and we’ll review your situation, explain your options, and help you find the right path forward.
