Student debts

What is a student loan?

The student loan program is a form of financial aid provided as a loan per academic term. The Government of Quebec supports students by allowing them to obtain a loan from financial institutions during their studies.

One of the advantages of a student loan is that no interest is charged during the period of study and for six months following the end of studies. After that, since the loan is guaranteed by the government, it benefits from a favorable interest rate.

What is a student line of credit?

A student line of credit is a financial product offered by banks. Unlike student loans, the student line of credit is not guaranteed by the government. It is generally available to students enrolled in programs that lead to well-paid professions (doctors, dentists, lawyers, engineers, etc.).

During the period of study, a relatively low interest rate is applied to the amounts used. For banks, this strategy aims to build a long-term relationship with future professionals who have strong financial potential.

What happens if it becomes impossible to repay a student loan?

Sometimes, a student is unable to complete their studies or ends up in a field with limited job opportunities. If there is a default on a student loan, the government will reimburse the financial institution, then initiate collection measures against the borrower, such as seizing tax refunds, solidarity credits, wages, and bank accounts.

A government-guaranteed student loan enjoys certain protections against consumer proposals or bankruptcies. Specifically, a person who files a proposal or bankruptcy less than 7 years after finishing their last studies will not be discharged from their student loan. Although protected from seizure during the process, interest will continue to accrue.

However, the law provides that 5 years after the end of studies, a person may apply to the court for discharge from the loan if they can demonstrate good faith and that they will be unable to repay the loan even after a proposal or bankruptcy.

What happens if it becomes impossible to repay a student line of credit?

Student lines of credit do not have the same protections. However, courts will be strict with individuals who, upon completing their studies, have strong earning potential but make no effort to repay their line of credit. In such cases, one should first try to negotiate a viable and good faith agreement before considering bankruptcy.

Tailored solutions for student loan and line of credit debt

Meeting with a licensed insolvency trustee when dealing with student loan or line of credit debt is a step toward a solution tailored to your situation. Even at the beginning of a career, it is possible to regain financial stability, most often through a consumer proposal. During a free informational meeting, the trustee is there to listen without judgment, assess your situation, and propose available options to lighten your financial burden and help you start anew on stronger financial footing.