If you cannot make your student loan payments, the worst thing you can do is ignore the problem. Canada has strong repayment assistance programs that can reduce your payments to zero while protecting your credit — but you have to apply before you default. Once a loan goes to collections, your options narrow and the costs increase dramatically.
Here is exactly what happens at each stage, what it costs, and what programs are available.
Timeline: what happens when you stop paying
| Time After Missed Payment | What Happens |
|---|---|
| Day 1–30 | Payment is overdue. Late fee may apply. Loan servicer (NSLSC for federal loans) sends a reminder |
| Day 30–90 | Account flagged as delinquent. You may receive phone calls and letters. Interest continues to accrue |
| Day 90+ | Federal loan reported to credit bureaus (Equifax, TransUnion). Credit score begins to drop |
| ~270 days (9 months) | Federal loan declared in default. File transferred from NSLSC to the Canada Revenue Agency (CRA) for collection |
| Post-default (CRA) | CRA can garnish wages, intercept tax refunds, seize GST/HST credits, and garnish employment insurance (EI) payments. CRA adds its own collection fees |
| Ongoing | Interest continues compounding on the outstanding balance. Credit report shows default for 6 years from the date of last payment |
Provincial student loans follow a similar path but are handled by provincial collection agencies and the timelines may differ.
How much student loan interest costs
Since November 2023, the federal government charges 0% interest on Canada Student Loans. However, provincial loans may still carry interest:
| Loan Type | Interest Rate (2026) | Notes |
|---|---|---|
| Canada Student Loan (federal) | 0% | Interest-free since November 2023 |
| Ontario (OSAP provincial portion) | 0% | Interest-free since April 2023 |
| British Columbia | 0% | Interest-free since March 2023 |
| Alberta | Prime rate | Still charges interest on provincial portion |
| Quebec | Prime rate | Still charges interest |
| Nova Scotia | 0% | Interest-free |
| Other provinces | Varies | Some charge interest, some do not. Check your provincial student aid office |
Even with 0% federal interest, if your loan is in collections, the CRA can add administrative charges and the provincial portion may still accrue interest.
Repayment Assistance Plan (RAP): your most important option
RAP is the single most important program for borrowers who cannot afford their federal student loan payments. It is free, voluntary, and can reduce your payment to $0 per month if you qualify.
RAP income thresholds (approximate)
| Family Size | Affordable Payment = $0 if Income Below | Stage |
|---|---|---|
| Single, no dependents | ~$40,000 | Stage 1 |
| Couple, no dependents | ~$56,000 | Stage 1 |
| Single, 1 child | ~$56,000 | Stage 1 |
| Couple, 2 children | ~$72,000 | Stage 1 |
These thresholds are approximate and updated periodically. The exact calculation uses your family income and family size to determine an affordable monthly payment.
How RAP works
Stage 1 (first 60 months of assistance): Your required payment is reduced to an affordable amount. The government pays the interest on your loan. Your principal balance does not decrease, but it does not grow either.
Stage 2 (after 60 months on RAP): If you still qualify, the government begins paying both the interest and a portion of the principal. After a total of 10 years on RAP (or 15 years if you had a permanent disability), any remaining balance is forgiven entirely.
How to apply
- Log into the National Student Loans Service Centre (NSLSC)
- Select “Repayment Assistance” and complete the application
- Provide income verification (recent tax assessment or proof of income)
- Re-apply every 6 months to maintain eligibility
Critical timing: Apply before your loan goes to default (before the 270-day mark). Once the CRA takes over collection, you can still apply for RAP, but the process is more complicated and the CRA collection actions may already be in progress.
Worked example: what default actually costs
Scenario: You graduated with $30,000 in federal student loans and a $12,000 provincial loan (Alberta, which charges interest). Your combined monthly payment is $450, but you lost your job and cannot pay.
| If You Apply for RAP Immediately | If You Ignore It for 12 Months |
|---|---|
| Monthly payment reduced to $0 | 9 months: loan goes to CRA collections |
| No credit impact | Credit score drops 100+ points |
| Interest covered by government | Provincial interest adds ~$500+ |
| Can re-apply every 6 months | CRA garnishes tax refund ($2,400 seized) |
| Loan forgiven after 10 years on RAP | CRA may garnish wages (up to 30% of net pay) |
| Total cost: $0 | Total out-of-pocket cost in year 1: $2,900+ |
The takeaway: applying for RAP costs nothing and saves thousands compared to defaulting.
Provincial repayment assistance programs
Several provinces offer their own assistance programs for the provincial portion of your student loan:
| Province | Program | Details |
|---|---|---|
| Ontario | OSAP Repayment Assistance | Mirrors federal RAP for OSAP provincial portion |
| British Columbia | BC RAP | Similar to federal RAP for BC provincial loans |
| Alberta | Alberta RAP | Income-based repayment assistance for Alberta student loans |
| Nova Scotia | NS Student Loan Forgiveness | Loan forgiveness for graduates who live and work in NS |
| New Brunswick | NB Tuition Relief | Loan reduction for eligible graduates |
Check your provincial student aid office for current programs and eligibility.
Other options if you cannot pay
Consumer proposal. If you have been out of school for 7+ years, a licensed insolvency trustee can include your student loans in a consumer proposal. This reduces the total amount owed (typically to 30–50 cents on the dollar) and stops all collection action, including CRA garnishments. Cost: trustee fees are included in the proposal payments.
Bankruptcy. Student loans are dischargeable in bankruptcy if you have been out of school for 7+ years. If it has been less than 7 years, you can still file for bankruptcy to address other debts, but the student loans survive the discharge.
Hardship provisions (5-year rule). In cases of severe hardship, a court may discharge student loans after only 5 years out of school, but this requires proving that you cannot reasonably pay and that your circumstances are unlikely to change.
Consolidation. If you have multiple debts, consolidating your non-student-loan debt (credit cards, lines of credit) into a lower-interest product can free up cash flow for your student loan payment.
What to do right now
- Apply for RAP today if you cannot afford your federal student loan payment. It is free and you can do it online in 15 minutes.
- Contact your provincial loan servicer for assistance with the provincial portion.
- Do not ignore collection calls. Engaging with the CRA after default gives you more options than avoiding them.
- Check your credit report. See if any delinquency has been reported yet. If you are within 90 days of missing, you may be able to prevent a credit hit by catching up or enrolling in RAP.
- Talk to a credit counsellor. Non-profit credit counselling agencies provide free advice and can help you build a repayment plan. See our credit counselling guide.
Related pages
- Student Loan Repayment Calculator — see when your loans will be paid off
- How to Get Out of Debt — comprehensive debt payoff strategies
- Student Loans in Ontario (OSAP) — provincial loan details
- Student Loans in BC — BC student aid programs
- Consumer Proposal Guide — when a proposal makes sense
- Credit Counselling Canada — free professional debt help