OSAP repayment: Unpaid student loans can haunt your credit for years

Unpaid OSAP loans can haunt your credit for years

By Special to MoneySense on September 19, 2018
Estimated reading time: 2 minutes

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Q. I defaulted on a student loan over 20 years ago. However, I eventually reached a settlement with the collection agency by borrowing money from my parents. In the past 20 years, I have tried to make a go of it by being an independent music promoter and having a few part-time jobs and some social assistance. Now that I have matured I realize the importance of having an education and a trade in order to have a stable life and a family. I have enrolled in a trade program with a registered College and applied for OSAP assistance to help me with costs and reduce my continued reliance on the generosity of my parents, who are senior citizens, living on pension income.

My application for assistance from OSAP was denied because of my previous default, even though I did repay part of the loan through a settlement agreement.

I am no longer the same, irresponsible person I was 20 years ago. This should not be held against me forever. I have a clear goal for my life and do not want to continue to be a burden on my parents or to continue to rely on social assistance. I am currently enrolled in a College Trade program, relying on continued assistance from my parents. Thank you for your assistance with this problem.
—Pat V.
A. Pat, this is an unfortunate situation and I can understand his frustration.

When a debt is settled the unpaid portion will stay as an internal record for many years. In order to borrow again from that credit source, the unpaid portion needs to be recovered. That is typical in banks and loans like this.

Pat, you will need to look at alternate ways to finance the education. You could apply for a Student Line of Credit but they may require your parents to co-sign. You may qualify for a personal loan on your own depending on your credit. Your lack of job stability will be a contributing factor in their decision.
Alternatively, you could look for scholarships and bursaries. Of course, none of these are certain but in this specific case, there aren’t many good options. But even so, I think the Student Line of Credit is your best option.

Debbie Gillis is a Credit Counselling Co-ordinator with Resolve Counselling Services Canada in Kingston, Ont.