How big is the student loan debt problem in Canada?
Total government-backed student loan debt in Canada is estimated at more than $28 billion. About 1.7 million Canadians carry student loans at any given time, and the average graduate leaves school owing about $28,000.
Every week, I meet people carrying student debt on top of credit cards, car loans, and CRA debt. Most of them found work after graduating, but the cost of living just caught up before the loan was paid off.
The standard repayment term for a government student loan is 9.5 years (114 months), though you can extend it up to 14.5 years if you need lower payments.
Source: OSFI – Actuarial Report on the Canada Student Financial Assistance Program, July 2024 and Statistics Canada – Student Debt at Postsecondary Graduation
What happens if you can’t pay your student loans?
If you finish school, your loan repayment starts six months later. Missing a payment makes your loan delinquent immediately and is reported to credit bureaus, harming your score.
If you miss nine months of payments (270 days), the federal portion of your loan defaults and is transferred to the Canada Revenue Agency for collection. The provincial portion may be sent to a separate collection agency or to the CRA, depending on your province.
Once your loan is in default, you lose access to further student financial aid until the loan is back in good standing.
What can the CRA do?
The CRA has powers that ordinary creditors don’t. It can garnish your wages, withhold your tax refund, and intercept your GST/HST credits and Canada Child Benefit payments, all without a court order. A regular collection agency would need to sue you and get a judgment first.
I see people ignore the letters, the CRA starts withholding their tax refunds, and then the wage garnishment notice arrives at their employer. Owing the CRA money is a serious situation that can become a big problem if you don’t address it promptly.
Source: Canada.ca – Can’t Repay
What is the Repayment Assistance Plan?
The Repayment Assistance Plan (RAP) is the federal government’s main programme for borrowers who can’t keep up with student loan payments. If your income is below a certain threshold, RAP can reduce your monthly payment or eliminate it entirely. You need to reapply every six months with updated income information.
RAP works in two stages. During the first 10 years after you leave school, the government covers any interest your reduced payment doesn’t cover. After 10 years, if you’re still on RAP, the government starts paying down both principal and interest.
RAP is worth considering before anything else. It keeps your loan in good standing, protects your credit score, and costs you nothing to apply. You can apply through your National Student Loans Service Centre (NSLSC) account.
RAP only helps with government student loans, though. If you have private student debt, such as a bank line of credit, RAP won’t touch it. And if your total debt load is the problem, not just the student loan, RAP alone probably won’t be enough.
Source: Canada.ca – Repayment Assistance Plan
Can a consumer proposal or bankruptcy eliminate student loans?
Yes, but there’s a waiting period. Under section 178(1)(g) of the Bankruptcy and Insolvency Act, government student loans (federal and provincial) can only be discharged through a consumer proposal or bankruptcy if it has been at least seven years since you were last a full-time or part-time student.
The seven-year clock doesn’t start when you took out the loan. It starts when you stop being a student.
In April 2025, the Supreme Court of Canada confirmed this in the Piekut case. The seven-year period starts from the last date you ceased to be a student, regardless of how you paid for your studies. Any return to school resets the clock.
If you think you may qualify, confirm your official end-of-study date with the National Student Loans Service Centre before you file anything. The date in the government’s system may not be what you expect.
There is also a hardship provision. If five years have passed since you were last a student, you can apply to the court for early discharge. You’ll need to show that you acted in good faith and that you will continue to experience serious hardship if the loans aren’t discharged. This requires a lawyer and is not guaranteed.
A lot of people come to me thinking they can’t do anything about their student loans. The truth is, if you’ve been out of school for seven years, your government loans are treated like any other unsecured debt. We can deal with them.
What about private student loans?
Private student loans (bank lines of credit, student credit cards, loans from family) are not subject to the seven-year rule.
They’re treated like any other unsecured consumer debt and can be included in a consumer proposal or bankruptcy at any time, regardless of when you graduated.
What if you’re still within seven years?
You can still file a consumer proposal or bankruptcy to deal with your other debts. Credit cards, payday loans, lines of credit, and CRA debt can all be included. Reducing those payments often frees up enough income to make the student loan manageable on its own.
While a consumer proposal is active, a stay of proceedings protects you from all creditors, including the government. That means no collection calls and no garnishments on the student loan during the proposal period.
Once the proposal is complete, you resume payments on the student loan, but with your other debts cleared, the math usually works a lot better.
Source: Office of the Superintendent of Bankruptcy – Student Loans and Bankruptcy
How does student loan debt affect the rest of your life?
Interest: what you actually pay
Since April 1, 2023, federal student loans in Canada are permanently interest-free. Every payment goes straight to the principal amount.
Provincial loans are a different story. Some provinces have eliminated interest on their portion. Others still charge it.
| Province | Provincial interest rate |
|---|---|
| British Columbia | 0% |
| Manitoba | 0% |
| New Brunswick | 0% |
| Newfoundland and Labrador | 0% |
| Nova Scotia | 0%* |
| Prince Edward Island | 0% |
| Alberta | Prime rate |
| Ontario | Prime plus 1% |
| Saskatchewan | Prime rate (floating) or prime plus 2.5% (fixed) |
*Nova Scotia: requires annual application and NS residency to qualify for 0% interest.
Source: NSLSC – Loan Repayment Glossary. Provincial rates as of February 2026.
If you’re in Ontario, Saskatchewan, or Alberta, interest is still adding to your balance on the provincial portion of your loan.
Mental health
About 70% of mental health conditions show their first symptoms before age 18, and by 25, one in five Canadians has been diagnosed with a mental illness. Add a $28,000 student loan on top of rent, groceries, and a job market that doesn’t always cooperate, and the pressure builds fast.
It’s not just the money. They can’t sleep, avoid opening the mail, and feel like they’re failing at something everyone else seems to handle. You’re not alone if that sounds familiar.
Source: Mental Health Commission of Canada – Children and Youth and CIHI – Child and Youth Mental Health
Relationships and life decisions
Student debt delays the things people plan their lives around: buying a home, getting married and having children. When you’re putting $400 a month toward a student loan for 10 years, that money isn’t going into a down payment.
If your loan goes into default and hits your credit report, the impact spreads further. A poor credit score can affect your ability to rent an apartment, get approved for a mortgage, or even pass an employer credit check in some industries.
What are the warning signs of a student loan problem?
Most people don’t come to see me when they miss their first payment. They come when the situation has been building for months or years.
The pattern is usually the same. They start missing priority bills, such as utilities or rent. They then take on credit card debt or payday loans to cover the gap. They stop opening the mail or logging into their NSLSC account. They feel anxious or stressed whenever money comes up, and they avoid talking about it with anyone.
If that sounds like you or someone you know, the sooner you address it, the more options you have. Waiting doesn’t make student debt go away, and the longer you leave it, the fewer options you have.
Frequently Asked Questions
Are federal student loans interest-free in Canada?
Yes. As of April 1, 2023, the federal government permanently eliminated interest on all Canada Student Loans, including loans already in repayment. You’re still responsible for any interest that built up before that date, but no new interest accrues on the federal portion. Provincial portions may still carry interest depending on your province.
How long does it take to pay off student loans in Canada?
The standard repayment term is 9.5 years (114 months), though you can extend it up to 14.5 years if you need lower payments. The exact timeline depends on how much you borrowed, your income after graduation, and whether you qualify for repayment assistance. If you’re only making minimum payments on a loan with provincial interest, it can take longer.
What is the 7-year rule for student loans?
Under the Bankruptcy and Insolvency Act, government student loans can only be discharged through bankruptcy or a consumer proposal if at least seven years have passed since you were last a full-time or part-time student. The Supreme Court of Canada confirmed in 2025 that the clock starts from your last date as a student, even if your later studies were self-funded.
Can I include student loans in a consumer proposal?
Yes, if it has been at least seven years since you were last a student. If you’re still within seven years, your government student loans survive the proposal, but you can include all your other debts. That often makes the student loan payments affordable on their own. A Licensed Insolvency Trustee can review your situation and explain what’s possible.
Does the 7-year clock reset if I go back to school?
Yes. The 2025 Supreme Court ruling in Piekut v. Canada confirmed that any return to school, even self-funded, resets the seven-year waiting period. The clock starts from the last date you ceased to be a student in any programme, full-time or part-time.
Can the CRA garnish my wages for student loan debt?
Yes. If your federal student loan has been in default for nine months, it goes to the CRA for collection. The CRA can garnish your wages, freeze your bank account, withhold your tax refund, and intercept your GST/HST credits, all without a court order. Filing a consumer proposal or bankruptcy triggers a stay of proceedings that stops CRA collection immediately.
What is the difference between government and private student loans in insolvency?
Government student loans (federal and provincial) are subject to the seven-year rule. Private student loans (bank lines of credit, student credit cards, private lender loans) are treated like any other unsecured debt. They can be included in a consumer proposal or bankruptcy at any time, with no waiting period.
Should I consolidate my student loans?
Be careful with this. If you consolidate government student loans into a private consolidation loan, you lose the student loan classification. That means you lose access to RAP, the interest-free status on the federal portion, and the student loan interest tax credit. In most cases, a consumer proposal is a more sensible route than consolidation.
“I’d always tell someone to exhaust the government options first. RAP costs nothing to apply for, and it keeps your loan in good standing. Once you roll government loans into a private product, you give up protections you can’t get back.”
Talk to a Licensed Insolvency Trustee
If student loan debt is weighing you down, you don’t have to figure it out alone. A Licensed Insolvency Trustee can look at your full financial picture and explain your debt relief options. Most consultations are free, and everything you share is confidential.