going back to school with student loans
personal bankruptcy,  consumer proposal,  student loans

Student loans: how are they treated if you go back to school?

The Bankruptcy and Insolvency Act states that student loans under a federal or provincial student loan program are not discharged from bankruptcy if you have filed for bankruptcy within 7 years of last attending school.

So practically speaking, what this means is that you’ll have to wait for 7 years from the date you last attended school before filing bankruptcy, or else that student loan debt won’t go away after you’ve received your discharge from bankruptcy.

This is fairly straightforward. Where it gets a bit complicated is when a debtor obtains student loans to attend a program of study. She graduates from the program (or drops out) but some time later, she decides to go back to school (and completes the 2nd program) without taking out any further student loans.

So the question is: does the 7-year waiting period start from the date she finished her first program or does it start from the date she finished her second program?

Here is a recent decision (as of this writing) issued by the Ontario Superior Court of Justice in the case of St-Dennis (Re.), 2017 ONSC 2417 (CanLII) that dealt with this very issue.

  • The applicant, Nicole Jean St. Dennis, attended post-secondary studies on two distinct occasions.
    • In her first course of study, Ms. St. Dennis obtained student loans in the amount of $13,370 between August 1996 and April 2001 in connection with a Bachelor of Science program at Laurentian University. She graduated from Laurentian University in October 2004.
    • In her second course of study, Ms. St. Dennis attended Cambrian College between 2006 and 2007, but did not obtain student loans. She left the program in 2007.
  • Ms. St. Dennis filed an assignment in bankruptcy on December 3, 2011.
  • By virtue of Section 178(1)(g)(ii) of the BIA, student loan debt is not discharged by a bankruptcy if the bankruptcy occurred within seven years after a person ceased being a student.
  • This case involves a determination of when Ms. St. Dennis “ceased” to be a student for the purpose of determining whether seven years have passed.
    • Ms. St. Dennis argues she ceased to be a student in October 2004 when she graduated from Laurentian University and therefore her student loan debt is discharged. She urged the Court to adopt the reasoning in Attorney General of Canada v. Collins, 2013 NLCA 17 (CanLII), 334 Nfld. & P.E.I.R. 318 in which the court found that the seven year delay in discharging student loan debt begins to run from the date when the debtor ceased to be a student in relation to that loan: para 22.
    • The Ministry of Training, Colleges and Universities argues that she ceased to be a student in 2007 when she left Cambrian College and therefore her student loan debt survives the bankruptcy. It argued that the Court should adopt the reasoning in Mallory (Re), 2015 BCSC 5 (CanLII), 19 C.B.R. (6th) 195, where Gaul J. found that the correct interpretation was that there can only be one date upon which a bankrupt ceased being a student and that is the end of the bankrupt’s period of studies prior to their assignment.
  • The Court sided with Ms. St. Dennis in this case.
    • It held that the interpretation of Section 178(1)(g)(ii) should be guided by the overall purpose of the BIA which is to rehabilitate and reintegrate individuals to allow for future participation in the Canadian economy.
    • The Court provided that the bankrupt has to wait seven years to have a student loan debt discharged, however, the respondent is really asking that the bankrupt should wait ten years before the debt can be discharged. The Court noted that the multiple date approach is consistent with the legislative intent to discourage opportunistic bankruptcies.
    • The Court held that permitting a bankrupt to discharge her debts after seven years from the date of the program to which the student loan was connected goes some distance in promoting the intent and purpose of the BIA.

So, barring an appeal of this decision, it appears that the law in Ontario is that student loan debt will be discharged if a debtor has filed bankruptcy 7 years after she last attended the program to which this student loan debt relates.


Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With over 20 years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. in 2007 so that he could dedicate his professional life to help people from all walks of life to deal with their debt.