What Happens If You Can't Pay Your Student Loans in Canada

If your last term ended in April, the six-month break on your Canada Student Loan ran out around the end of October, and the first payment is coming due now. If you can’t pay your student loans, the loan doesn’t go to collections right away, and there’s a federal program that can drop the payment to $0 while your income is low.

Quebec runs its own loans through banks, with different rules, so it gets its own section below.

What happens if you can’t pay your student loans?

Your loan falls behind, and missed payments start to affect your credit (opens in a new tab). You can still catch up with the National Student Loans Service Centre (NSLSC), which handles federal student loans. After nine months of missed payments, though, the federal part goes to the Canada Revenue Agency (CRA) for collection, and you can’t get student aid until it’s back in good standing.

The federal part follows this timeline from the day you finish school:

The six-month clock (opens in a new tab) also starts if you drop to part time or leave school early. The NSLSC sends a repayment notice (opens in a new tab) to your online account before the first payment is due, with the amount, the date and how long the loan will take to pay off.

Your province’s part has its own rules

Most student loans have a federal part and a provincial part. Where your loan came from decides who you pay:

Is interest piling up while you’re behind?

Not on the federal part. Canada Student Loans charge no interest (opens in a new tab), so a federal balance stays the same while you sort things out. Any interest that built up before April 1, 2021 is still owed, though.

Provincial parts are different. Of the loans the NSLSC handles, Ontario’s and Saskatchewan’s provincial parts still charge interest (opens in a new tab), and it starts during the six-month break. So falling behind or stretching the loan costs more there. Quebec’s loans charge prime plus 0.5% (opens in a new tab), unless you lock in a fixed rate with your bank. With prime at 4.70% since October 29, 2026 (opens in a new tab), that’s 5.20%.

How do you lower or pause your student loan payments?

Apply for the Repayment Assistance Plan (opens in a new tab) (RAP) in your NSLSC account. It bases your payment on your family income and family size, and a low enough income means no payment at all for six months. You have to reapply every six months, and your payments have to be up to date when you apply, so do it before you miss one.

Below these incomes, you may not have to make any federal payment for six months:

If you earn more than that, you may still qualify for a smaller payment. These thresholds are for the federal part, and your province can use different ones for its part. If your loan is from Prince Edward Island, you also apply with the province. Alberta and Nova Scotia borrowers should contact their province too.

What RAP does over time

After 60 months on RAP, or 10 years after you left school, the government starts paying down the principal your payments don’t cover. In most cases, as long as you keep qualifying, the loan is paid off within 15 years of leaving school, or 10 years if you have a disability.

Once the government has paid toward your principal, you can’t get new student grants or loans until you repay what’s left, unless you’re on RAP-D. That matters if you might go back to school.

If you can pay something, just not the full amount

You can lower your monthly payment in your NSLSC account by stretching a full-time loan over up to 174 months, which is 14.5 years. On the federal part that costs nothing extra. On an Ontario or Saskatchewan part, it means paying more interest. To change a part-time loan, call the NSLSC.

If you also carry a credit card balance, the card is the more expensive debt, since the federal part of the loan charges no interest. Our guide to paying off debt or saving first explains which debts to pay down first.

If you have a disability

The Repayment Assistance Plan for Borrowers with Disabilities (opens in a new tab) (RAP-D) can lower the payment further to leave room for disability costs, and the government covers the principal and interest your payment doesn’t. If a disability limits your ability to work for the rest of your life, the Severe Permanent Disability Benefit (opens in a new tab) can have the loan cancelled.

What can the CRA do once it has your student loan?

The CRA expects the debt paid in full, or a payment arrangement you both agree on. It can also apply your tax refund (opens in a new tab) and federal credits such as the Canada Groceries and Essentials Benefit to the loan. If you still don’t pay and it believes you can, it can take legal steps and then garnish your wages or bank account (opens in a new tab).

It tells you by mail when it garnishes your pay or takes money the government owes you, and it doesn’t usually stop until the debt is paid or you can show the garnishment is causing you undue hardship. Our guide to wage garnishment in Canada explains which income can’t be garnished.

How to get your loan out of collections

Call the CRA to set up a payment arrangement. To bring a federal loan back into good standing, you then do one of two things:

• pay any interest still owing and make four monthly payments, or
• add the unpaid interest to your balance (you can only do this once) and make four monthly payments.

Then contact the NSLSC to finish the process. The only federal interest that can still be owing dates from before April 1, 2021, so for many people it’s just the four payments.

Does a student loan ever go away?

Rarely, and not by waiting. Bankruptcy doesn’t clear a student loan if you file within seven years of leaving school. A consumer proposal only settles a recent one if the government votes for it. And while the government only has six years to sue, it can take your federal tax refunds at any time.

Bankruptcy and consumer proposals

The Bankruptcy and Insolvency Act (opens in a new tab) keeps student loans out of a bankruptcy discharge if you file while you’re still in school or within seven years of leaving. That covers provincial loans too, Quebec’s included. Five years after you leave school, you can ask a court to clear the loan anyway, but you have to show you acted in good faith and that money problems will keep stopping you from paying.

A consumer proposal (opens in a new tab) follows the same seven-year rule. A student loan inside those seven years is only settled if the proposal names it and the government votes yes. Our guide to consumer proposals covers the rest of that process. So if you left school recently and the student loan is your main debt, bankruptcy won’t clear it, and RAP (or Quebec’s Deferred Payment Plan) is the program built for that situation.

The six-year limit doesn’t protect your tax refund

Under the Canada Student Financial Assistance Act (opens in a new tab), the government can’t sue over a payment more than six years after it came due. That limit doesn’t apply to money the federal government owes you, like a tax refund, which it can apply to the loan at any time. A payment or a signed promise to pay also restarts the six years.

Two programs can take some or all of a federal student loan off your hands: the disability benefit above, and Canada Student Loan Forgiveness (opens in a new tab), which helps repay the loans of some professionals who work in person in eligible rural or remote communities.

How are Quebec student loans different?

Quebec runs its own program, Aide financière aux études. Your loan comes from a bank, you repay the bank, and it charges interest. If you’re struggling, the Deferred Payment Plan cuts or pauses your payments six months at a time. If you stop paying, the bank sends your file to the province’s Collection Department, which keeps your Quebec tax refund.

Your bank sends a repayment notice (opens in a new tab) six months after you finish. You can pay only the interest during those six months, or let it build and have it added to what you owe.

Quebec’s Deferred Payment Plan

The Deferred Payment Plan (opens in a new tab) lowers or suspends your payments for six months at a time, and the government pays the interest for you. You qualify if:

• your finances are precarious
• you left school more than six months ago, but finished less than 10 years ago
• you haven’t gone bankrupt, made a consumer proposal or used Quebec’s voluntary deposit
• you’ve used the plan for less than 60 months in total, and made any payments a previous application required

You can apply as soon as you know you’ll miss a payment. If you’re already behind, you can apply for up to six months back, and any payments due for those months come out in one withdrawal.

If you stop paying a Quebec loan

The bank sends your file to the Collection Department (opens in a new tab) of Aide financière aux études, which asks you to sign a repayment agreement. From then on, you can’t use the Deferred Payment Plan. Your Quebec tax refunds and solidarity tax credit go to the loan without notice, even while you’re making payments. And unless you reach a special agreement, you can’t get new loans and bursaries.

A buffer for the payment after this one

A loan payment comes due on the same date every month, whether or not the month went well. A few hundred dollars set aside in your own account is what covers it when a paycheque is late or another bill lands first.

Lodavo rewards you for building that buffer, and it costs nothing. Connect the savings or chequing account you already use, and every $25 in it earns a ticket in a weekly draw for cash prizes. At least $100 goes to a user every week, and the jackpot is $10,000. Your money stays in your own account. It won’t cover this month’s payment, but it makes saving for next month’s more fun.

Act before the due date

If a payment is due and the money isn’t there, act before the date passes. For a federal loan, apply for RAP in your NSLSC account while your payments are still up to date. For a Quebec loan, apply for the Deferred Payment Plan online with Aide financière aux études.

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