by footloose » Thu Nov 01, 2012 01:35:42 PM
All Federal student loans are subject to a limitation provision. For those student loans that were issued up to and including July 31, 1995, the limitation provision is found in Section 19.1 of the Canada Student Loans Act. For student loans that were issued after July 31, 1995, the limitation provision is found in Section 16.1 of the Canada Student Financial Assistance Act. In both Acts, the limitation provision is 6 years.
For those student loans that have fallen into default, the Canada Revenue Agency ( CRA ) is now the official collection agency for the Federal government. As such, they are authorized to exercise their "right of set-off" under Section 164 of the Income Tax Act ( Canada) by withholding income tax refunds and the quarterly GST rebate and apply these amounts to the defaulted student loan.
However, once a student loan becomes "statute-barred", the Department of Justice ( Justice Canada ) will then issue a "Directive" to the CRA to cease using the "right of set-off". Once a student loan becomes "statute-barred", income tax refunds along with the quarterly GST rebate will be paid to the debtor upon the filing of an income tax return.
PLEASE NOTE
The limitation of the application of the "right of set-off" as it is applied to student loans does NOT apply to a debt owed to a bank. Banks can and will exercise their "right of set-off" even if a debt is "statute-barred". This practice is perfectly legal as there is no legislation preventing the banks from doing so.
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