How the seven-year rule works
The Bankruptcy and Insolvency Act says government student loans can only be included in a consumer proposal if seven years have passed since you stopped being a full-time or part-time student. The clock starts the day you leave school, not the day you took out the loan.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178(1)(g)
If your student loan debt is seven years old or more, it is unsecured debt like any other. You include it in your consumer proposal alongside credit cards, lines of credit, and other unsecured debts. Once your consumer proposal is complete, the student loan is forgiven.
Imagine this scenario. You graduated in June 2019. If you file a consumer proposal in July 2026, seven years have passed, and your government student loan is included. If you file in March 2026, you are still inside the seven-year window, and the student loan stays separate.
What the Supreme Court of Canada confirmed in 2025
The seven-year clock resets if you go back to school. The Supreme Court of Canada confirmed this in Piekut v. Canada (Attorney General), 2025 SCC 13, decided April 17, 2025.
The court ruled that the seven-year period runs from the last date you stopped being a student, not from each separate period of study.
Here’s what it means: If you graduated in 2015, returned to school in 2020, and completed your studies in 2022, the seven-year period starts in 2022. Your previous loans do not have a separate timeline.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178(1.1)
Government student loans vs. private student loans
The seven-year rule only applies to government-funded student loans. Private student loans follow entirely different rules. Here is how they compare.
| Government student loans | Private student loans | |
|---|---|---|
| Examples | Canada Student Loans, provincial student loans (OSAP, StudentAid BC, Alberta Student Aid) | Bank student lines of credit, private lender loans |
| Seven-year rule | Yes. Must wait seven years after leaving school. | No. Included in a consumer proposal at any time. |
| Interest rate | 0% on the federal portion since April 1, 2023. Provincial rates vary. | Set by the lender. Typically prime + 1% to prime + 3%. |
| RAP eligible | Yes | No |
| Stay of proceedings | Only if included in the consumer proposal (seven years passed) or during bankruptcy | Only if included in the consumer proposal |
Source: Government of Canada – Interest-free Canada Student Loans, April 2023
Foreign student loans are not government-guaranteed in Canada. They are treated as regular unsecured debt and can be included in a consumer proposal at any time.
Enforcing the terms of a consumer proposal internationally can be complicated if the lender is outside Canada, so talk to a Licensed Insolvency Trustee about your specific situation.
What happens when your student loan is less than seven years old
If your government student loan is less than seven years old, you keep paying it separately while your consumer proposal runs. Your consumer proposal payment is based on what you can afford after covering basic living expenses and your student loan obligation.
How the trustee calculates your proposal payment
Your Licensed Insolvency Trustee factors your student loan payment into your monthly budget before calculating your proposal offer. If your student loan payment is high relative to your income, it reduces what you can offer your other creditors.
Bear in mind that a consumer proposal for your other debts, even when it does not cover the student loan, still helps. Clearing credit cards and lines of credit frees up hundreds of dollars a month that you can redirect toward your student loan.
The Repayment Assistance Plan
The Repayment Assistance Plan (RAP) is a federal program that reduces or eliminates your monthly government student loan payments based on your income and family size. If your family income falls below a set threshold, your payment drops to zero. You apply through the National Student Loans Service Centre and reapply every six months.
Nobody tells you this, but since April 1, 2023, all Canada Student Loans are permanently interest-free. You are not accumulating interest while you repay. RAP on top of that means your payments go directly toward the principal, and the government covers any shortfall.
Source: Government of Canada – Repayment Assistance Plan
How does bankruptcy handle student loans?
Bankruptcy follows the same seven-year rule as a consumer proposal. If seven years have passed since you stopped being a student, your government student loan is discharged with your other debts.
If less than seven years have passed, the student loan survives bankruptcy, and you keep paying it afterward.
The five-year hardship exception
A court can discharge a government student loan after five years if repayment would cause undue hardship.
You must show that you cannot maintain a minimal standard of living while repaying the loan, that your financial situation is unlikely to improve, and that you have made genuine repayment efforts.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178(1.1)
Hardship discharges are rare. The standard is high, and the process requires a separate court application, usually with a lawyer.
Frequently asked questions
Can I include my student loan in a consumer proposal if I graduated six and a half years ago?
No. The seven-year rule is strict. If you graduated six and a half years ago, your government student loan is not included in your consumer proposal. You keep making payments until seven years have passed.
At that point, you could file a new consumer proposal or amend an existing one to include the student loan.
Does the seven-year rule apply to private student loans from banks?
No. Private student loans from banks or other lenders are regular unsecured debt. They are included in a consumer proposal at any time, regardless of when you took them out. The seven-year rule only applies to government-funded student loans.
What happens if I stop making student loan payments during a consumer proposal?
If your government student loan is less than seven years old and not included in the consumer proposal, you are still responsible for it. If you stop paying, your lender can take collection action against you.
That does not affect your consumer proposal, but it damages your credit further and could result in wage garnishment.
Can I file a consumer proposal if my only debt is a student loan less than seven years old?
You can file a consumer proposal for any amount of unsecured debt, but if your only debt is a government student loan less than seven years old, the consumer proposal does not cover it.
A consumer proposal is not the right tool in that situation. Look at the Repayment Assistance Plan instead.
Does the seven-year clock start from the date I took out the loan or the date I graduated?
The seven-year clock starts on the day you stopped being a full-time or part-time student. That is usually your graduation date, but if you left school without graduating, the clock starts the day you left.
Check your student loan account online or contact the National Student Loans Service Centre if you are not sure of the exact date.
What if I went back to school after taking out a student loan?
The Supreme Court of Canada confirmed in Piekut v. Canada, 2025 SCC 13, that the seven-year clock runs from the last date you stopped being a student.
If you return to school full-time or part-time after your first program, the clock resets when you finish or leave the second time.
Can I pay extra toward my student loan while in a consumer proposal?
Yes. If your government student loan is not included in the consumer proposal, you can pay as much as you want toward it.
Paying extra does not affect your consumer proposal obligations. Your consumer proposal payment stays the same regardless of what you do with your student loan.
Can I include student loans from outside Canada in a consumer proposal?
Foreign student loans are not government-guaranteed in Canada. They are treated as regular unsecured debt and can be included in a consumer proposal at any time.
Enforcing the terms of a consumer proposal internationally is complicated when the lender is outside Canada.
Will a consumer proposal stop collection calls from my student loan lender?
If your student loan is included in the consumer proposal because seven years have passed, yes. The stay of proceedings stops all collection activity. If your student loan is not included, collection activity continues because the stay only covers debts in the consumer proposal.
Are Canada Student Loans still charging interest?
No. As of April 1, 2023, all Canada Student Loans are permanently interest-free. You are still responsible for paying the principal, but no interest accrues on the federal portion of your loan. Provincial loan interest varies by province.
Source: Government of Canada – Interest-free Canada Student Loans, April 2023