Urgh. Thanks.

The student loans that you received in 1996 and 1997 were made under the "Canada Student Financial Assistance Act 1994, c 28" which became effective August 1, 1995. This Act replaced the previous "Canada Student Loans Act". This Act provides the rules, under which the Government of Canada guarantees to a financial institution ( i.e. a bank ) who makes a student loan, as defined in this Act, to a borrower and who subsequently defaults on the repayment of the loan. If it wasn't for this Act, no financial institution would make a student loan because while the student is attending a post-secondary educational institution, no payments of principal and interest would be paid on the loan. While the student is attending school, the Government of Canada pays the financial institution the interest on the loan until the borrower is required to begin repaying the loan 6 months after ceasing to be a full-time student.

When a student defaults on a student loan, the Government of Canada pays the financial institution the balance of the loan owing and then proceeds to attempt to collect this payment made to the financial institution from the student.

Any time that a creditor is owed a debt ( in this case, the Government of Canada ), there is what is known as "limitation periods", which means, these are "time periods" in which a creditor can bring a legal action ( i.e. sue ) against a debtor for the repayment of this debt. Once a "limitation period" expires, the creditor can no longer sue the debtor, however, the debt does not disappear. It still exists and the creditor can continue to pursue the debtor for the repayment of this debt, albeit, the creditor has lost his right to sue the debtor.

In the case of student loans that applies to the Federal portion of the loan, the "limitation period" is provided for in Section 16.1 of the Act.

Without reproducing this entire Section, which is fairly detailed and lengthy, I will summarize it.

Under Subsection (1), no action or proceeding shall be taken to recover money owing under a student loan that is more than 6 years after the day on which the money becomes due and payable. What this means is that the Government of Canada cannot pursue you for the collection of this student loan more than 6 years after it became delinquent. Within this 6 year period, the Government of Canada can initiate legal proceedings ( i.e. sue you ) but that is not their usual practice, although it is an option. What usually happens is that this defaulted student loan is assigned to a collection agency to attempt to collect. This 6 year period is sometimes referred to as the "limitation period". If all attempts to collect this defaulted student loan have failed, the Government of Canada is barred from further attempts to collect this loan.

Under Subsection (2), money owing under a defaulted student loan may be recovered at any time by way of deduction from or set-off against any sum of money that may be due and payable by the Government of Canada to the borrower. What this means is the Government of Canada can still collect on the defaulted student loan by exercising its "right of set-off". A "set-off" occurs when you owe the Government of Canada money and they owe you money. For example, lets say that you have a defaulted student loan of $2,000 and the Government of Canada, through the CRA ( Canada Revenue Agency ) owes you an income tax refund of $500. The CRA can withhold your income tax refund of $500 and apply it to the defaulted student loan leaving a balance owing of $1,500. Also, the CRA can apply the quarterly GST ( General Sales Tax ) refund against the defaulted student loan.

Under Subsections (3) and (4), if a borrower's liability for the defaulted student debt is acknowledged within the "limitation period" ( i.e. 6 years ), the acknowledgment will re-set the "limitation period" for a further 6 years. An acknowledgment is any written promise to pay the money owing or any written acknowledgment of the debt and signed by the borrower or his/her agent, or a part payment made by the borrower or his/her agent.

Under Subsection (5), if a borrower's liability for the defaulted student debt is acknowledged outside or beyond the original 6 year "limitation period", a new 6 year "limitation period' will commence from the date of the acknowledgment. This rule is different and contrary to a commercial debt owing by a debtor. Under normal "limitation periods" any acknowledgment of a debt beyond the "limitation period" will NOT trigger another "limitation period". This is a potential trap for debtors who have defaulted on a student loan and have acknowledged the debt outside the original "limitation period".

When a student makes an application for a student loan in Ontario, the provincial portion of the student loan is handled by OSAP ( Ontario Student Assistance Program ). After receiving approval for the student loan, the student applies to the financial institution of his/her choice to receive the loan ( funds ). This becomes the financial institution's authority to release the necessary funds as stated in the authorization from OSAP. The payment of interest on this student loan is made by the Government of Ontario up to a period that is 6 months after the student ceases full-time attendance at a post-secondary educational institution.

When a student defaults on a student loan, the Government of Ontario pays the financial institution the balance of the loan owing and then proceeds to attempt to collect this payment made to the financial institution from the student. The guarantee of this student debt to the financial institution by the Government of Ontario is provided for under the "Ministry of Training, Colleges and Universities Act".

Any time that a creditor is owed a debt ( in this case, the Government of Ontario ) there is usually what is known as a "limitation period", which means these are "time periods" in which a creditor can bring a legal action ( i.e. sue ) against a debtor for the repayment of this debt. Once a "limitation period" expires, the creditor can no longer sue the debtor, however, the debt does not disappear. It still exists and the creditor can continue to pursue the debtor for the repayment of this debt, albeit, the creditor has lost his right to sue the debtor.

In the case of student loans that applies to the Provincial ( Ontario ) portion of the loan, the "limitation period" is provided for in Section 16 of the Ontario Limitations Act, 2002 effective January 1, 2004.

Pursuant to Paragraph 16(1)(k) of the Ontario Limitations Act, 2002

16(1) There is no limitation period in respect of

(k) a proceeding to recover money owing in respect of student loans, medical resident loans, awards or grants made under the "Ministry of Training, Colleges and Universities Act", the "Canada Student Financial Assistance Act" or the "Canada Student Loans Act".

What this means is that any student loan that was applied for under OSAP and guaranteed by the Government of Ontario through the "Ministry of Training, Colleges and Universities Act" is NOT bound by any "limitation period". That means there is no "limitation period" in which the Government of Ontario can initiate legal proceedings ( i.e. sue you ) but that is not their usual practice, although it is an option. What usually happens is that this defaulted student loan is assigned to a collection agency to attempt to collect. The Government of Ontario also has the option to forward this defaulted student loan to the CRA in which "the right of set-off" may be exercised as outlined previously.

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Educating one Consumer at a time

Default... March 2000.

I started making payments on the federal loan in ... 2005 I think? It was with a collection agency, and then the loan went back to the government. (That's what it looks like anyway)

The provincial loan is with ARO. I started making payments maybe in 2008.

I require one more piece of critical information. You stated in your reply that you took out 2 student loans, one in 1996 and one in 1997. I require the date of default on these loans. Also, since the date of default, have you made any payments on these loans or made any written acknowledgments. to either the original lender or to a collection agency? If so, I require the dates that such payments or written acknowledgments were made. If a payment or written acknowledgment was made, I need to know was it on the federal or provincial portion of the loans?

I appreciate that this sounds like a lot of information required, however, dealing with student loans at the provincial level in Ontario can be very tricky.

Awaiting your reply.

I got the loans in 1996 and 1997. In Ontario. As for "acts" I have no idea what you mean. I googled it, and would it be OSAP for the prov loan?

Under which legislation ( Act ) did you obtain the provincial student loan? I also need the date that you obtained the loan and in which province.

Under which legislation ( Act ) did you obtain the federal student loan? I also need the date that you obtained the loan.

If you can supply this information, I can provide you further advice.

I went to college in Ontario, and I have a prov and federal loan.

My prov loan is held by ARO in BC. (I live in BC now). They contacted me about two years ago, and I've not been able to pay anything down. I've been making token payments of 20 bucks a month to show good faith. (Her words, not mine)

I've read a lot of great advice about offering to pay a percentage of the outstanding debt. My loan is 2k. Could I offer to pay a lump sum amount and have it closed out? Is that something I can do with a provincial loan?

And is that something that can be done with federal loans? I owe 15k.