Student Loans May 26, 2026 · Updated May 26, 2026

Consumer Proposal vs Student Loans Canada: What Actually Gets Forgiven

Q: Can I include student loans in a consumer proposal?

Yes, student loans can be listed as a creditor in a consumer proposal. Whether the balance is legally forgiven depends on the 7-year rule: if 7 or more years have passed since you ceased to be a student, student loans are treated as fully dischargeable unsecured debt and are eliminated in the proposal. If you are under 7 years, the student loan creditor (NSLSC or provincial authority) can vote on the proposal and accept a partial settlement — but there is no automatic discharge, and they may choose to continue collection for any remaining balance after the proposal completes.

Q: Does a consumer proposal stop student loan collections?

Yes. The moment a consumer proposal is filed electronically with the Office of the Superintendent of Bankruptcy, the stay of proceedings under Section 69 of the Bankruptcy and Insolvency Act takes effect. This stops all NSLSC and CRA collection immediately — wage garnishment, tax refund seizure, GST/HST credit interception, and collection calls all halt within 24–48 hours. The stay applies regardless of where you are on the 7-year timeline.

Q: What happens to student loans after a consumer proposal completes?

If you were 7+ years past your end of studies when you filed, student loans are fully eliminated at completion — no remaining balance. If you were under 7 years, it depends on what NSLSC/the provincial lender accepted in the proposal. If they voted to accept 30 cents on the dollar, for example, any amount above that may remain payable after the proposal completes — unless the proposal terms explicitly settled the full balance.

Q: Will NSLSC vote to accept a consumer proposal?

NSLSC (federal student loans) has historically participated in consumer proposals and in many cases voted to accept. Their acceptance threshold is typically driven by what they can realistically collect through other means. If the proposal payment equals or exceeds what CRA could recover through garnishment over 3–5 years, acceptance is likely. A Licensed Insolvency Trustee can model this threshold based on your income and province.

Q: Should I wait until I am 7 years past my studies before filing a consumer proposal?

Not necessarily. If you have significant other unsecured debts in addition to student loans, the proposal resolves all of them immediately. If CRA is already garnishing wages for the student loan, waiting 18 more months may cost more in garnished income than the benefit of reaching the 7-year mark. Run both scenarios with a LIT before deciding.

Can a consumer proposal eliminate student loans in Canada? The answer depends on timing. Here is exactly how proposals treat federal and provincial student loans in 2026.

Marcus Chen · Debt Relief Expert & Founder, CollectorHQ

Key Takeaways

A consumer proposal CAN include student loans, but whether they are legally forgiven depends on how long ago you were a student
7+ years since you ceased to be a student: student loans are fully included and eliminated in a proposal like any unsecured debt
Under 7 years: student loans can be listed in a proposal but may survive unless the proposal payment equals what creditors could collect through normal collection
Filing a proposal immediately stops all NSLSC/CRA collection, tax refund seizure, and wage garnishment — even if the loan survives post-proposal
For Canadians with student loans PLUS other unsecured debt, a proposal almost always makes sense regardless of timing

Not sure which option fits your situation? Take the 2-min assessment →

The question “does a consumer proposal eliminate student loans?” does not have a single yes or no answer. It has a timing answer. Understanding where you fall on that timeline before filing can save you from a surprise balance after your proposal completes.

Legal source: Treatment of student loans in consumer proposals is governed by the Bankruptcy and Insolvency Act, Section 178(1)(g) and Section 66.28 (consumer proposals). NSLSC procedures from the National Student Loans Service Centre.

The Core Rule: 7 Years Changes Everything

Your Timeline	Student Loan Treatment in a Consumer Proposal
7+ years since end of studies	Fully dischargeable — treated identically to credit cards and personal loans
5–7 years since end of studies	Dischargeable by court order if hardship conditions are met (Section 178.1)
Under 5 years since end of studies	Not automatically dischargeable — proposal can still include and settle it, but survival depends on creditor acceptance

The 7-year clock starts from the date you ceased to be a student, not the date you took out the loan. If you borrowed in 2019 but graduated in 2021, the 7-year clock started in 2021.

What “Including” a Student Loan in a Proposal Actually Means

There is an important distinction between listing a debt in a proposal and that debt being discharged by the proposal.

Under 7 years: Your student loan creditor (NSLSC for federal loans, a provincial agency for provincial loans) becomes a voting creditor in your proposal. If they accept, the proposal covers whatever percentage you offered — say, 30 cents on the dollar. After the proposal completes, two things can happen:

If the creditor accepted a full settlement (meaning the proposal pays the complete balance in reduced form), the debt is resolved
If the creditor accepted a partial settlement, the remaining balance may survive after your proposal completes

In practice, most LITs structure proposals to handle this clearly. Your trustee will model what NSLSC/provincial lenders can realistically collect through garnishment over the proposal period and set a payment that equals or exceeds that amount — giving creditors a reason to accept a settlement of the full balance.

Over 7 years: No distinction. Student loans are unsecured debt. They are included, voted on (NSLSC is a creditor), and fully eliminated when the proposal completes. Acceptance by NSLSC is needed (like all creditors) but they cannot demand full repayment once the 7-year threshold has passed.

The Immediate Benefit That Applies Regardless of Timing

Even if your student loans will survive a consumer proposal, filing a proposal still delivers immediate, concrete benefits:

Collection stops instantly. The stay of proceedings stops NSLSC/CRA wage garnishment within 24–48 hours of filing. If CRA has been garnishing 20–30% of your paycheque, that stops the moment your LIT submits the proposal electronically. Tax refunds and GST credits are no longer seized.

Interest freezes. Interest on the student loan balance stops accumulating from your filing date forward. If you owe $45,000 at 5.5% interest, you save $2,475 in the first year — money that funds your proposal payments instead.

Other debts are resolved. Most people with student loan debt also have credit card debt, lines of credit, and sometimes CRA tax debt. A consumer proposal resolves all of these simultaneously. Even if the student loan survives, you exit with a dramatically reduced total debt load.

The Scenarios That Drive Most Student Loan Proposals

Scenario 1 — Near the 7-year mark with other debts: Sofia graduated in 2019 and has been a student-loan-in-distress case since 2023. She is 6.5 years post-studies. She owes $38,000 in student loans and $22,000 in credit cards. Her LIT advises waiting 6 months to cross the 7-year mark, then filing a proposal that resolves everything. Cost: $18,000 over 5 years at $300/month — a $42,000 saving versus full repayment.

Scenario 2 — Active garnishment, 4 years post-studies: James graduated in 2022 and defaulted on his student loan in 2025. CRA is now garnishing $620 per pay period. He also has $14,000 in credit card debt. His LIT files a consumer proposal immediately. The garnishment stops within 24 hours. The proposal includes both the student loan and the cards; NSLSC votes to accept 35 cents on the dollar (more than they would recover if James continued to resist collection). The student loan is resolved in the proposal.

Scenario 3 — Over 7 years, clear path: Mariam graduated in 2016 and has been carrying $52,000 in student loans alongside $31,000 in other unsecured debt. She is over 7 years post-studies. A consumer proposal at 25% settles the entire $83,000 for $20,750 over 5 years. The student loan is fully eliminated on completion.

How to Decide: The Right Questions to Ask a LIT

Before filing, your trustee will answer:

Stop collections, garnishment, and interest — for free.

Free consultation with licensed debt relief specialists. One call can change everything.

Get help now

What is your exact date of last student status?
How does crossing the 7-year mark change the proposal outcome?
What payment amount would NSLSC accept given your income and province?
Does waiting for the 7-year threshold cost more (in garnished wages) than filing now?
Does a proposal or bankruptcy produce a better outcome given your total debt picture?

Use the consumer proposal calculator for a quick estimate, then book the free consultation at /find-lit/ to get the specific model for your file.

This article may include links to offers from our partners. We may earn a commission if you apply or sign up through these links, at no extra cost to you. This does not affect our editorial coverage or the rates you receive. See our editorial policy for more.

Frequently Asked Questions

Can I include student loans in a consumer proposal?

Does a consumer proposal stop student loan collections?

What happens to student loans after a consumer proposal completes?

Will NSLSC vote to accept a consumer proposal?

Should I wait until I am 7 years past my studies before filing a consumer proposal?