Can I Get Student Loan Forgiveness?

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

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:

           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:
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© Jeannine Mitchell 2010 - 2014


Student Loan Forgiveness


 Yes, it may be a possibility - especially if you have a disability. Your health reasons might qualify.

However, each province has different rules so without knowing which one you are in (or knowing if you are talking about a federal loan), it is not possible to comment except to make a few general suggestions.

2000 (two thousand) dollars does not sound like a lot to pay off, but perhaps it is very difficult for you, because you do sound overwhelmed by this situation.

I suggest that you first contact your student loan lender and ask if your loan might qualify for loan forgiveness. Explain that you have health problems and are not able to work. If they say you might be eligible, ask for the application form as these often state information (sometimes on the back) about eligibility.

Whether or not you may be eligible for this kind of help, I also suggest you go to these 2 pages on our site: Who to Contact for Help  and Useful Links for all the contacts and low-income/advocacy resources listed.

Also, here is a link to Canada's Povnet website that will show you to find services and a free advocate in your region. It may help you to sit down with someone at one of their suggested services to discuss this situation.  

If you have general problems with debt, you may also want to speak to a (free) debt counsellor, preferably one offered as a community service.

Finally, if you are now defaulted and being chased by debt collectors, don't let them scare you. Some of them bend the truth into pretzels and make meaningless threats to reach their quotas. You can look up credit collection in our search engine to learn your rights.

I don't suggested hiding from debt collectors, as this can make them more aggressive, which adds to your stress. Instead, it is best to speak to them - briefly and firmly. Make it clear you are doing your best but you have health problems and don't have much money at this point.  



Spam Attacks... Closing Our Comments


Student Finance 101 has been hit with hundreds of spam commercial comments in just the past few weeks alone.

Our spam-blocking service has clearly lost its punch. And we can't keep wasting dozens of volunteer hours just deleting garbage. 

It's a shame, because we'd like more community engagement. But this has to stop.

 Until further notice, all comments on this website must be disabled.