Student debt involved in one in six insolvencies, study finds

Debt relief firm calls for change in laws on discharging student debt

Student debt involved in one in six insolvencies, study finds

Student debt contributes to a record-high rate of over one in six insolvencies, or 17.6 per cent, according to a study conducted by Ontario-based Hoyes, Michalos & Associates Inc., a licensed insolvency trustee firm.

The study found that the average insolvent debtor with student loans still owes $14,729 in student loans representing 32 per cent of their unsecured debt, years after getting out of school.

“Nine years ago, student debt insolvencies were just under 13 per cent of all insolvencies we filed,” said Ted Michalos, one of the firm’s co-founders. “Today, 18 per cent of the clients we see are struggling with student debt. It's an epidemic."

The increase was attributed to various reasons, such as rising tuition and residence costs pressuring students to borrow more. After finishing school, many graduates find themselves working part-time or in minimum- to low-wage jobs. They may not be able to find employment in their field of study that pays enough to repay their student loans, the study found.

In Canada, government-guaranteed student loan debt is automatically discharged in a bankruptcy or consumer proposal if the debtor has been out of school for a minimum of seven years. Meanwhile, private student loan debt has no waiting period.

“We believe it's time to eliminate the waiting period to have government student debt discharged through a bankruptcy or consumer proposal,” said Doug Hoyes, the firm’s other co-founder. “There is no such waiting period for private student loans, and there is no difference in how students use either government borrowing or private borrowing. It is inequitable to penalize a student just because they used government student loans when another student using private debt can get relief immediately.”

Related stories

Free newsletter

Our daily newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please complete the form below and click on subscribe for daily newsletters from Law Times.

Recent articles & video

Insurance lawyers reveal their referral philosophies

Court of Appeal rules auto insurer not liable for parental negligence claim stemming from accident

Refugee lawyers speak out on federal election campaign rhetoric

Employees of Aboriginal Legal Services join major union

Pro Bono Ontario to rename Ottawa help centre after David Scott

Chasm in opinions remains after statement of principles repeal

Most Read Articles

New equality measure approved by Law Society of Ontario as the statement of principles gets repealed

Judges call out lack of support for legal aid, pro bono amid MAG presence

Chasm in opinions remains after statement of principles repeal

Law students, paralegals can continue working on the same summary conviction matters