A government student loan that goes unpaid follows a set path: first it is delinquent, then after nine months it is in default and is sent to the Canada Revenue Agency (or the province) for collection, and from then on you lose access to repayment help and new student aid until the loan is brought back into good standing. Before default, the options for lowering the payment are wide; after it, they narrow.
This page covers each stage, what collection involves, how to get a loan back into good standing, and how student loans are treated in bankruptcy and consumer proposals. The other student loan guides are listed on the student loans hub.
The path to default
| Stage | What happens |
|---|---|
| Behind on payments | The loan is delinquent. To be eligible for most repayment supports, you first bring the payments up to date. All repayment activity is reported to the credit bureaus, so missed payments affect your credit rating. |
| 270 days (nine months) without payment | The loan is in default. In an integrated loan the federal and provincial parts are separated: the federal part goes to the CRA for collection, the provincial part to the province’s collection office. |
| In collection | Tax refunds and credits can be withheld and applied to the debt, you can’t use the Repayment Assistance Plan, and you aren’t eligible for more federal or provincial student aid. |
(Sources: NSLSC, stages of a loan; StudentAid BC, if you miss loan payments and rehabilitation after default; Government of New Brunswick, repaying your student loans.)
What the CRA can do to collect a debt it holds, beyond offsetting refunds, is explained in what happens if you don’t pay the CRA. Quebec loans follow their own path: an unpaid loan goes from the bank to the AFE’s Collection Department, which applies Quebec tax refunds to it; see Quebec student loans.
Before default: ways to lower the payment
While the loan is delinquent but not yet in default, the options are the same as for any borrower in repayment, and they are arranged through your NSLSC account:
- The Repayment Assistance Plan bases the payment on family income and family size, down to $0 below a threshold, six months at a time. In Ontario the same application covers Ontario’s provincial plan, and Alberta runs its own plan for Alberta loans through the same application (Alberta student loans).
- Revision of terms stretches the repayment period (up to 14.5 years), which lowers the payment.
- The Severe Permanent Disability Benefit cancels the loans of borrowers whose disability prevents them from working, and other cancellations are covered in student loan forgiveness in Canada.
Nova Scotia’s provincial loans are handled by Resolve and PEI’s by Edulinx, so help with those provincial balances is arranged with them; the province pages (Nova Scotia, PEI) have the details. Interest on the provincial part, which can make a missed period more expensive, varies by province; the interest-by-province table compares them.
After default: loan rehabilitation
Rehabilitation brings a defaulted loan back into good standing, which restores access to repayment assistance and new student aid. StudentAid BC describes the usual ways to do it for a B.C. loan (BC student loans):
- repay the whole loan, including outstanding fees and interest; or
- repay the outstanding fees and interest, then make two monthly payments; or
- make one payment covering the outstanding fees, the interest and two monthly payments.
Once the loan is rehabilitated, the NSLSC sets out the new monthly payment and repayment period. Rehabilitation isn’t available in every case (for example after a third default on a B.C. loan, or when the balance is being collected under a court decision). The federal part is rehabilitated through the NSLSC and the provincial part through the province’s collection office. (Source: StudentAid BC, rehabilitation after default.)
Student loans in bankruptcy and consumer proposals
Government student loans get special treatment under the Bankruptcy and Insolvency Act:
| Situation | Effect on the student loan |
|---|---|
| Bankruptcy while still a student, or within 7 years after you stopped being a full- or part-time student | Not released: the student loan survives the bankruptcy discharge |
| Bankruptcy 7 or more years after you stopped being a student | Released with your other debts at discharge |
| 5 or more years after you stopped being a student | You can apply to the court for a hardship order releasing the loan, if you have acted in good faith and have and will continue to have financial difficulty to the extent that you can’t pay it |
| Consumer proposal | A student loan covered by the 7-year rule is released only if the proposal explicitly compromises it and the student loan creditor voted to accept the proposal |
The release isn’t automatic at the seven-year mark: it comes with a bankruptcy discharge, for a bankruptcy filed after that date. (Source: Bankruptcy and Insolvency Act, sections 178 and 66.28.) Private student debt, such as a bank student line of credit, isn’t covered by the rule and is treated like other unsecured debt. How bankruptcy and consumer proposals work, and what a Licensed Insolvency Trustee does, is in the insolvency guide.
Getting help
A non-profit credit counsellor can review a budget and all your debts, including student loans; see credit counselling in Canada. Moving abroad doesn’t end a Canadian student loan; what happens to Canadian debts when you go is covered in leaving Canada with debt.
Sources
The figures and rules on this page come from these sources, last checked against them on September 28, 2026. How we check facts.
- Employment and Social Development Canada: Canada Student Financial Assistance Program annual report 2023 to 2024