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Would you advise me to consolidate my BC student loan with other loans?

I took a BC student loan to pay for my Masters in Canada. I am now in my third month since graduating, and I’m making plans on how I will go about repaying my student loan. The student loan debt consolidation process in Canada is entirely new to me. I undertook my Bachelors in a US university using finances obtained from my mum’s student plus loan. Don’t be alarmed; I have dual citizenship. Should I consolidate my student loan balance?

Thanks.

Brandon Scott

in Student Loans

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Justin Parker on May 2, 2018

Students’ loan debt consolidation in Canada is entirely different from student loan consolidation in the US. I would suggest that you think long and hard before deciding to consolidate your BC student loans with other loans. The allure of making your life easier by paying lower interest rates due to consolidating your student loans should not hoodwink you into making this decision. Many websites, money managers, and financial experts will advise you to consolidate your loans.

They will sell you the lovely idea that is to make a single monthly payment to cover all your debts. This strategy can be quite helpful when you have other debts that seem to be overwhelming you.

However, when you combine your public student loans with other loans, you could face real trouble. Why is this trouble? Consolidating your loans combines all your loans into a single loan. Therefore, if you combine your public student loans with other loans, they are no longer public student loans!

This act will create problems because it will bar you from accessing government programs that are there to help you clear your outstanding student’s loan balance. You will be locked out of accessing crucial services such as reductions in your debts, interest relief, and loan forgiveness programs. Furthermore, you will not be able to benefit from a deduction on tax for your public student loan. Therefore, you will have to pay all your student loan interest without getting the much helpful tax breaks.

As a Canadian, you can access student loan programs from the Canadian government if you decide to take student loans in the future. Bear in mind that this is possible only if you clear all your student loans. However, if you choose the consolidation path, you will not receive any assistance.

You should never turn your government-provided loans into bank loans. This mistake is often made by students who do not have sufficient information on student loan debts in Canada. Many professionals will also point to this direction. Be extra careful before considering this advice.

With that in mind, you should consider loan consolidation if:

  • You have already exhausted all the debt reduction and interest relief that you qualify for.
  • You are in default, and there is nothing else you can do about it. For example, your mum had to be in a good credit standing to access the US student PLUS loans.

Ronald Miller2 years ago

The response above is so appropriate for Canadian students. Many of us still do not understand the dynamics of student loan debt consolidation in Canada. I will try to make a summary of this entire issue in a paragraph or so.

If you have already exhausted all the debt reduction and interest relief you are eligible for and are in severe default status, make sure that you thoroughly check the paperwork before committing yourself to this path. Get an independent financial advisor to help you calculate the math to determine your loss after denial of the tax credit.

On the other hand, if the consolidation terms provided by your loan company are favorable, you can go ahead and consolidate your money. This decision will be quite wise as it will save you a lot of stress and money too. It’s important to make sure that this money is your non-student loan debt! 


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