The Loan Wars

WARNING!!! This applies only to the Canadian Student Loan system. Citizens of other places: YMMV.

There’s a myth in Canada that you can’t get rid of your student loan debt by declaring bankruptcy, and it just that – a myth,

You totally can, but only after 7 years (or 5 in some exceptional cases subject to some arcane rules I won’t go into here.)

But over and above this, there used to be a way to pay the loan off at lower rates. It involved essentially defaulting, and it isn’t something that works now, but worked when the (Tory) government (big surprise) tried a failed (Shockers!) experiment of having the loans be issued by banks instead of the Canada Student Loan department, which merely sorta-kinda “guaranteed” the loan, but left the bank to collect however it could.

True story – I know the person involved, and I watched as this went down in real life.

Let’s call her Betty (because I know of zero people actually called “Betty”).

She graduated from art college in 1990. The only jobs she could find were minimum wage, and rents were high. Even though she shared a basement suite with a friend, she found it increasingly hard to make her payments. She applied for the moratorium period, but, because she had a job, was denied.

Over the next 4-5 years, Betty really struggled. I mean, really, really struggled. Friends resorted to buying her groceries anonymously, because she often had no money left for eating well before the end of the month.

Then she got laid off. The bank basically said “Why the hell should we care? Pay up.”

But she couldn’t. You know what I mean? Her roomie was kind enough to exchange rent for household chores for a couple of months, with the understanding that Betty would try to pay back some of this when she got on her feet again, and Betty did find another low-paid job, but by the time she had repaid her roomie and felt like she could start working on that loan again, the bank decided to sell the debt to a collection agency.

You all are probably pretty aware that those collection people are relentless, so Betty got one of those cordless phones with call display (the 90s lack of ubiquitous cell phones was not totally a bad thing) and simply ignored the whole thing. The agency even tried phoning her at work (which they are NOT – by law – allowed to do), but her boss was a fairly good dude, and invested ten minutes of his day yelling at them and threatening legal action if they EVER tried that stunt again.

By now, Betty was physically and emotionally exhausted, she was clinically depressed and had developed an anxiety disorder, and since she had zero hope that she would ever be able to rent on her own EVER, let alone buy a house or anything else costing more than $20 at one sitting, she started looking into bankruptcy laws.

But before she had gotten very far, the collection agency went to court and her wages were garnisheed.

And this, folks, is where things get either horrifying or hilarious, depending on your point of view.

There are rules to garnishees – the court decides how much you can reasonably live on, and do not allow the payments to leave you homeless or starving.

Betty discovered that the garnishee payments were far, far less than what the bank had been demanding she pony up every month. Not only that, but the collection agency wasn’t able to collect interest, so the amount she actually owed – not the amount the bank had been getting in pure profit, but just the amount remaining on the original sum she had borrowed -was all she had to pay back.

Two years later, she was debt-free.

True, her credit rating was lousy (one of the weird things in Canadian Student loans is that while paying off a student loan is not permitted to enhance your credit rating in a positive way, FAILING to pay it gives you a negative one) but she found a slightly sketchy credit card company and got a card, using it seldom and religiously paying it off every month before interest payments kicked in. Eventually, she wound up with a fairly good credit history, and lived more or less as happily as anyone probably can in a predatory capitalist society.

The point is that if you think people should starve to feed a predatory loan system, you’re an asshole.

Betty, if you’re out there: I have always been proud that you beat the system.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s