How student loan forgiveness works in Canada and the best ways to pay down your student loans

Does Canada forgive student loans?

Canada has specific circumstances where student loans can be forgiven, but in general, once you take out student loans, you’re locked into a repayment plan.

However, this repayment plan can be adjusted through Repayment Assistance Plan (RAP) after you graduate. A RAP allows you to:

• Not pay interest on the federal part of your loan
• Have the principal and interest paid off after 60 months or 10-years after graduation

Those on disability may be able to apply for a Repayment Assistance Plan for Borrowers with Disabilities (RAP-D).

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Who is eligible for student loan forgiveness in Canada?

In Canada student loan forgiveness is limited to medical professionals and reservists.

However, those studying medicine need to compromise to get their loans repaid. You’ll need to work in a rural area with a population of no more than 30,000. To be eligible you’ll also need to have been employed for at least one year and have provided 400 hours of in-person service to this community, with some exceptions.

Doctors can receive a maximum of $60,000 over five years, while nurses or nurse practitioners can receive up to $30,000 over the same time period.

Meanwhile, reservists who are full-time post-secondary students are exempt from paying back student loans while serving in a designated operation. This includes operations that last more than six months.

But there are still some other ways to get your loans under control.

Provincial Loan Forgiveness Programs

RAP and RAP-D cover almost all provinces and territories in Canada. There are, however, a few exceptions.

British Columbia: Student Loan Forgiveness Program

Student loans in BC are administered by the provincial government. BC’s student loan forgiveness program offers a wider range of applicable professions. Rather than doctors and nurses, it also includes physiotherapists and some in-demand specialists in children’s medicine.

Likewise, BC offers forgiveness programs for working in remote areas with small populations.

As this is an exhaustive list, we suggest taking a look at the BC Loan Forgiveness Program if it applies to your situation.

Québec: Loan Remission Program

Québec’s Loan Remission Program drives down student loan debt by 15% provided you graduated on time and received a bursary each year that you were studying.

This applies to both technical and university programs. You can apply for this 15% windfall up to three years after the end of your program.

PEI Debt Reduction Program

PEI’s Debt Reduction Program seeks to encourage graduates to work in island communities through forgiveness incentives.

The program applies to post-graduate students who have received a degree within the last three years, borrowers from the PEI student loan program, and PEI residents. In all cases you need to have lived on PEI for at least 6-months post graduation to get the loan.

Since August 2, 2018 PEI allows $3,500 per year in aid.

Nova Scotia Student Loan Forgiveness Program

Meanwhile, graduates in Nova Scotia may also qualify for loan forgiveness depending on your graduation date. The upper limit is five years of forgiveness totalling up to $20,400. Even better, the Nova Scotia Student Loan Forgiveness Program is automatically assessed for all new graduates.

Unlike other forgiveness programs you should automatically receive a letter indicating whether you qualify. For more information, check out the program’s landing page.

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Ways to pay less on your student loans

There are two primary ways to pay less on your student loans.

First up, you can reduce your monthly payment amount. This would in turn make it take longer to pay for your loan, but give you temporary breathing room.

The second option is to make interest-only payments. This can lead to paying more in the long run.

Other options include the hard work of budgeting, or compromising on your living situation. You can also check out ways to build credit without a credit card and low interest loans to temporarily boost your finances.

Overall, paying down your student loans as aggressively as possible is often the best bet.

Conclusion

Overall, student loans in Canada have much stricter write off conditions compared to student loans in the United States.

For instance, in the US, student loans can be written off or discharged, based on your type of employment, disability status and for breaches of legal trust (e.g. being misled by a university on matters of qualification or due to forgery).

As with most loans, the best course of action is to pay them down early and as aggressively as possible.

FAQs

Do student loans get written off in Canada?

Student loans in Canada are only ever written off under extreme circumstances like bankruptcy.

If you choose to declare bankruptcy to discharge your student loans you must do so at least seven years after graduation in most cases. Even then, your debts will only be discharged for a good reason. You’ll need to prove:

• You used your loan responsibly
• Made every effort to complete your eduction
• Utilized other repayment methods (e.g. Repayment Assistance Plans)
• Acted in good faith with the intention to pay back your debts

After a court confirms your bankruptcy, your credit will take a major hit, you’ll likely be barred from taking out loans for some time and you’ll be issued a new repayment plan. Recovering from bankruptcy can easily take a decade.

Do student loans go away after 10 years in Canada?

In short, no. Student loans persist until repaid in Canada unless you take action.

However, if you’re struggling with repayment there are some options. Canada offers a Repayment Assistance Plan (RAP) and Repayment Assistance Plan for Borrowers with Disabilities (RAP-D). If you’re struggling to make payments post graduation you should immediately apply for either RAP or RAP-D depending on your circumstances.

Note that you’ll need to re-apply every six months to maintain your eligibility.

How to get rid of student loan debt in Canada?

The best way to get rid of student debt is to proactively look into RAP and RAP-D as soon as you graduate, provided you qualify.

Sometimes you study a field that undergoes job market contractions, have to take on family debt due to a death, or end up ill in a way that reduces your day-to-day capability, like with long-COVID.

No matter the reason it’s important to find a way to keep paying your debt down to avoid becoming overwhelmed by interest payments post graduation.

Sources

1. Statistics Canada: Student debt from all sources, by province of study and level of study

2. Government of Canada: Repayment Assistance Plan – Apply

3. Government of Canada: Repayment Assistance Plan – Disability assistance

4. Government of Canada: Repayment Assistance Plan – Disability assistance

5. Government of Canada: Financial assistance for reservists

6. Student Aid BC: B.C. Loan Forgiveness Program

7. Quebec: Remission of your student loan debt

8. Prince Edward Island: The Debt Reduction Grant Program

9. Nova Scotia: Nova Scotia Student Loan Forgiveness Program: undergraduate degrees