Personal Finance

Student loan in default

  • Last Updated:
  • Dec 9th, 2017 11:12 pm
[OP]
Newbie
Dec 8, 2017
2 posts

Student loan in default

I have a student loan at around $25,000 combined for both federal and provincial portion. The loan went into default at the end of 2015. However, I was outside of Canada at the time and it wasn’t until 2 weeks ago when I came back to Canada that I found out about the default.

From my phone calls to CRA and my province I found out I have accumulated an interest of over $3700 total and rising still.

A little background on my situation: I left school unfinished beginning 2014. Since then I was out of Canada and with some jobs but little wage.

From 2015 to 2016 I was hospitalized twice due to health issues and could not get back to Canada during the time. I was not aware of the situation on my loan until I came back to Canada.

So now do I have no choice but pay the requested amount of interest to the agencies now for rehabilitation or is there a way to reduce the interest that was owed?
8 replies
Deal Fanatic
User avatar
Mar 23, 2008
9826 posts
6184 upvotes
Edmonton
Ok, let’s cut the crap first of all. You borrowed 25k but didn’t know you had to pay it back? Or it just slipped your mind that you needed to set up payment arrangements?

Why did you contact the CRA about your loans? Contact the lending agencies about them. The federal and provincial student loans departments in question. They can tell you what’s required to get your loans back on track. And as far as I know, you’ll have to get caught up first before you can start discussing any reduced payment options. But the student loans departments are the ones that will determine that.

C
Deal Fanatic
User avatar
Jul 17, 2008
9565 posts
2433 upvotes
CNeufeld wrote:
Dec 9th, 2017 9:53 am
Ok, let’s cut the crap first of all. You borrowed 25k but didn’t know you had to pay it back? Or it just slipped your mind that you needed to set up payment arrangements?

Why did you contact the CRA about your loans? Contact the lending agencies about them. The federal and provincial student loans departments in question. They can tell you what’s required to get your loans back on track. And as far as I know, you’ll have to get caught up first before you can start discussing any reduced payment options. But the student loans departments are the ones that will determine that.

C
I have some sympathy but pretty much this. You "borrowed" money. It's very obvious you need to pay it back. If you can't handle it then I guess your option is to leave Canada again and don't return. I'm pretty sure the goverment can easily garnish your wages or many more options to get their money back.
Banned
Jul 18, 2016
2014 posts
778 upvotes
CNeufeld wrote:
Dec 9th, 2017 9:53 am
Ok, let’s cut the crap first of all. You borrowed 25k but didn’t know you had to pay it back? Or it just slipped your mind that you needed to set up payment arrangements?

Why did you contact the CRA about your loans? Contact the lending agencies about them. The federal and provincial student loans departments in question. They can tell you what’s required to get your loans back on track. And as far as I know, you’ll have to get caught up first before you can start discussing any reduced payment options. But the student loans departments are the ones that will determine that.

C
Wow, if you're going to be condescending and judgemental, you would be well advised to be certain you know what you're talking about. Since you don't know what you're talking about, let me educate you.

1) Once you leave the country, you no longer qualify for any of the available relief programs. Therefore, there is no way to manage the loan other than to make the required payments. This person may very well have been making payments all along, and may have qualified for some relief before leaving the country. This person may have continued to make payments that had been previously agreed to, but they may have been insufficient which would result in default. This person may have left the country for A job having been unable to secure a sufficient one in Canada. We simply don't know. We have insufficient information.

2) At a certain point in the default process on the modern loans, the Canada Loan Portion of the loan is literally transferred to a branch of the Canada Revenue Agency. They collect the debt. They do not hire collection agencies. They collect on their own behalf, either directly, or indirectly via right of setoff ( HST cheques, tax refunds etc.)

3) We don't know what province the OP was in while collecting the loans, but in Ontario, the provincial portion is collected by a collection agency on behalf of the Ministry of Finance.

Therefore, the OP was correct to contact the CRA. However, the OP will also need to contact the Ministry of Finance to determine the correct collection agency being used to collect the provincial portion. If the OP did not collect loans in Ontario, the OP will need to determine the equivalent agency in their province.


For the OP: What is you current financial status? Are you working gainfully?
Deal Fanatic
User avatar
Mar 23, 2008
9826 posts
6184 upvotes
Edmonton
bewiseman wrote:
Dec 9th, 2017 12:27 pm
Wow, if you're going to be condescending and judgemental, you would be well advised to be certain you know what you're talking about. Since you don't know what you're talking about, let me educate you.

1) Once you leave the country, you no longer qualify for any of the available relief programs. Therefore, there is no way to manage the loan other than to make the required payments. This person may very well have been making payments all along, and may have qualified for some relief before leaving the country. This person may have continued to make payments that had been previously agreed to, but they may have been insufficient which would result in default. This person may have left the country for A job having been unable to secure a sufficient one in Canada. We simply don't know. We have insufficient information.

2) At a certain point in the default process on the modern loans, the Canada Loan Portion of the loan is literally transferred to a branch of the Canada Revenue Agency. They collect the debt. They do not hire collection agencies. They collect on their own behalf, either directly, or indirectly via right of setoff ( HST cheques, tax refunds etc.)

3) We don't know what province the OP was in while collecting the loans, but in Ontario, the provincial portion is collected by a collection agency on behalf of the Ministry of Finance.

Therefore, the OP was correct to contact the CRA. However, the OP will also need to contact the Ministry of Finance to determine the correct collection agency being used to collect the provincial portion. If the OP did not collect loans in Ontario, the OP will need to determine the equivalent agency in their province.


For the OP: What is you current financial status? Are you working gainfully?
Right. And I’m sure the agencies involved have made absolutely no effort to get in touch with the OP over the past three years. As a borrower of thousands of dollars, one of his responsibilities (besides making payments) was making sure they were updated with appropriate contact information. So they could, you know, send him a letter or call him to let him know that he was in arrears.

Also, the CRA acts as a collector for the different student loan agencies when the loan gets in arrears. Mainly because they often have money that can be withheld on behalf of the government, and they often know where people are because most people file their taxes. The OP still only owes money to the student loan agencies, unless he also owes income tax based on his world income. But that’s a different debt.

C
Banned
Jul 18, 2016
2014 posts
778 upvotes
CNeufeld wrote:
Dec 9th, 2017 1:09 pm
Right. And I’m sure the agencies involved have made absolutely no effort to get in touch with the OP over the past three years. As a borrower of thousands of dollars, one of his responsibilities (besides making payments) was making sure they were updated with appropriate contact information. So they could, you know, send him a letter or call him to let him know that he was in arrears.

Also, the CRA acts as a collector for the different student loan agencies when the loan gets in arrears. Mainly because they often have money that can be withheld on behalf of the government, and they often know where people are because most people file their taxes. The OP still only owes money to the student loan agencies, unless he also owes income tax based on his world income. But that’s a different debt.

C
Actually, a branch of the CRA literally takes possession of the debt administration. It (the Canada loan portion) is transferred to the Canada Revenue Agency.

The OP was correct to contact the CRA.

Edit: I guarantee that they would not have made the effort to contact the OP out of country. Even accurate information would not have benefited the OP. The OP made a mistake to leave the country, however we have no idea what caused this choice. So, let's not pass judgment when we don't have all the facts.
[OP]
Newbie
Dec 8, 2017
2 posts
Thank you very much for your replies. After I stopped going to school due to poor grades I went back living with my family. Between 2015 and 2016 I was sick and had basically no income that year. Financially it was also difficult for me to return to Canada. The current job I have pays about $950 a month and the arrangement I had with CRA and the provincial agency just recently would cut almost half into the salary.

Is there any way for some of the interest to be forgiven given the circumstance I was in?

@CNeufeld
Yes, it was my fault for not being more familiar with debt repayment and default. I’m still catching up with this stuff. I made a few payments in 2014 though stopped when I did not have the income to cover for it. The default happened late 2015.
Deal Addict
User avatar
Mar 9, 2012
2678 posts
1473 upvotes
Kitchener
What province were you in?? Their are repayment assistance programs out there, whether or not you'd be approve, that's another thing.

Confused as to why you left the motherland...are you originally not from Canada? Little more details are needed.
How can we fly like eagles, when we're governed by Turkeys?
Deal Fanatic
User avatar
Mar 23, 2008
9826 posts
6184 upvotes
Edmonton
lmdeli wrote:
Dec 9th, 2017 9:55 pm
Thank you very much for your replies. After I stopped going to school due to poor grades I went back living with my family. Between 2015 and 2016 I was sick and had basically no income that year. Financially it was also difficult for me to return to Canada. The current job I have pays about $950 a month and the arrangement I had with CRA and the provincial agency just recently would cut almost half into the salary.

Is there any way for some of the interest to be forgiven given the circumstance I was in?

@CNeufeld
Yes, it was my fault for not being more familiar with debt repayment and default. I’m still catching up with this stuff. I made a few payments in 2014 though stopped when I did not have the income to cover for it. The default happened late 2015.
It’s important to keep in touch in situations like that. Many organizations are willing to work with you if they think you’re being upfront with them. But if they think you’re trying to screw around, they don’t have much mercy.

Best thing you can do now is get in touch with whoever you need to get in touch with, and figure out what you can pay. If you’re going to miss a payment for any reason, let them know as soon as you know. Get things back on track, see if you qualify for any reductions, and stay on top of it.

C

Top