Can I Get Student Loan Forgiveness?

 
Here is a second in our 'people's question' series in the blog. 
 
Question:

Who do I contact to arrange for student loan forgiveness?
 
My loan is 10 + years old; not accredited (can be forgiven through the regular
channels; and in default. Single parent with [number of children deleted] on an [office-worker’s] salary.
 
There is no hope for repayment. I have no savings and no assets. Who
can I ask to be discharged from my loan based on hardship?
 

Jeannine Mitchell answers:
 
Start by asking whoever gave you the loans - federal and/or provincial governments or other lenders. These lenders can tell you specifics about your case.
 
You say you are in default. That would normally make you ineligible for aid - unless you can pay off your interest owing to get out of default). But even if you are in default, contact your original lenders just in case there is some help for you.
 
If they all say there is nothing you’d qualify for, you may have only 3 options left: a Settlement Offer, a Statutes Barred claim or Bankruptcy.
 
 
     Making a Settlement Offer:

With some lenders, if you have a long-defaulted loan and poor financial prospects, you can negotiate with the original lender (such as Canada Student Loans) to pay a cash lump sum that is equal to a large portion of your defaulted loan amount. Don’t take the first ‘no’ you get from a call centre clerk. Ask for someone in management to look at your case. You may have to be persistent, but at writing, these offers were still being accepted by Canada Student Loans, for example.

For example, you might be allowed to settle the debt with a settlement offer of 60% or 70% of the amount still owing.
 
In such cases, the lenders have been convinced you are unlikely to ever be able to pay in full, so they will settle for something close to the original amount you borrowed (the principal) and perhaps some extra money in recognition of the interest still owing. Keep in mind that many old and defaulted loans are now more than half interest, so this really is a savings for you.
 
It sounds as if you wouldn't be able to come up with this much money, but people who end their student loans with a settlement offer usually borrow the money elsewhere, since that’s the only way they can pay that big lump sum. They then pay back that second lender over time.
 

           Statutes Barred:

You may qualify to have the loan written off after a long time period has gone by without activity on your student loan account.
 
This is often much more complex than people realize. In fact a book could be written about the complexities involved. However, it works for the occasional person, so you should certainly check it out.
 
You might start by reading the Statutes Barred discussions on the forum website below, which is also listed with our Student Finance 101 links: www.Canadastudentdebt.ca
 

           Student Loan Bankruptcy:

Bankruptcy may be your most realistic option if you can't get out of default, borrow enough to settle the loan or qualify for Statutes Barred.

Remember the timing issue with student loan bankruptcy. It's not how old your debt is, but how long you have been out of school.
 
Canada's student loan bankruptcy rules have changed recently. Update yourself by reading articles like these on our Student Finance 101 website:
 
_http://www.debt101.ca/content/new-student-loan-bankruptcy-rules-shorten-wait_
 
_http://www.debt101.ca/student-loan-advice/bankruptcy-the-real-7-year-rule_ _
 
 
© Jeannine Mitchell 2010 - 2014