Student loans have become a big problem for many. The average student debt has been climbing rapidly for years, and many graduate every year feeling like they’re being crushed under the load. It’s an unfortunate reality that many students have to go tens of thousands of dollars into debt before they can even start their careers.
For many new grads, their first financial goal is getting out of the red, but only a third of graduates will pay it all back within three years of graduation. For many others, student loans will haunt them for years to come.
Will a Consumer Proposal Help?
A consumer proposal will get you out of debt when you can’t afford to pay it off yourself. Sometimes people borrow more money than they can hope to pay off in a reasonable time frame. The easy availability of credit doesn’t help the problem; neither does the large debt load many people take on when they’re as young as 18, starting their adult life in the red.
When you file for a consumer proposal, you can wind up eliminating as much as 70 to 80 percent of your total unsecured debts, including credit cards, lines of credit, and others. But what about student loans, often the biggest single debt younger adults carry?
Can You Include Student Loans?
If you want to file a consumer proposal with student loans, you may have to wait. Student loans can only be included in a consumer proposal or discharged when you file for bankruptcy if it is at least 7 years old. That means that it has been at least 7 years since you were last a full- or part-time student.
However, this also depends on the type of loan you took out. This does not include student lines of credit borrowed from a bank, credit union, or other lender. This only applies to government-guaranteed loans.
Should You Consolidate Student Loans?
What should you do if you can’t include these loans in your consumer proposal? You may be tempted to include them in a debt consolidation loan, especially if the interest rates are lower. However, that means you will no longer be able to claim payments on your taxes, meaning they could become more expensive in the long run, even if the interest rates are lower.
Should You Still Get a Consumer Proposal?
That depends on the rest of your financial situation. If you find yourself struggling to make progress on student loan payments because you’re deep in credit card debt, or you have other sources of high-interest debt, a consumer proposal can help reduce it. Depending on what other assets you own, bankruptcy may be an even better option.
How Student Loans Are Hurting Long-Term Finances
Burgeoning student loans are hurting the long-term finances of millions. While they’re trying to get out of debt, they’re putting off important goals like building emergency savings, saving for retirement, buying a home, paying off credit card debt, and even buying a car.
Debt relief can help, but it depends on your financial situation.
