student debtStudent loan bad debt

Last week I received a message with several questions about her student loan debt. “I am sorry to bug you, I am looking for a correct answer and you seem to know your stuff.  I have a student loan in Collections, and the last date of a recorded transaction is April 2011.

Do Ontario student loans ever fall off my credit report as a bad debt? If they do not, and I make arrangements now to pay monthly payments, does it come off my credit right away? Or what do you think is the best way to deal with them. Thank you so much for your help, no one seems to have a solid answer for me.”

I have actually seen a couple of instances where long dormant, bad debt student loans no longer appear in a person’s credit history. It sounds like you are debating between waiting three more years and letting the bad debt “disappear” or initiating a monthly repayment plan. And the deciding factor for you might be how quickly you can restore your damaged credit history.

Related Article: Should he pay off student loan early to rebuild bad credit

Any item in a collection process, including student loan debt, will remain on your credit report even if you agree to a monthly repayment plan. The rule of thumb is everything stays on your report for six years (in Ontario). from the date of the last activity.

Beware – related Article: Student loan still on her credit report thirteen years later

There are some exceptions, but this is true in almost all cases. (Debt to the Family Responsibility Office (FRO) for example never disappears.)

You ask me what is the best way to deal with them. Simple question, but not easy to answer. It truly depends on many factors. For example:

  • How old are the student loans? For example, if it is more than severn years since you completed your studies, you also have the options of a consumer proposal or personal bankruptcy to eliminate these debts.
  • Do you have other debts you are struggling with?
  • Are you or do you think you will be in a position where you could repay them?
  • Is this loan impeding you in life (getting a mortgage or a car loan for example)
  • You mention the date of last activity was over three years ago. Was that a payment? A collection letter?

You would benefit from a free consultation to discuss these issues, and to help you figure out exactly what you should do in your unique circumstances.

Related Article: How do I repair my credit history?