International students have special considerations to keep in mind when holding debt within Canada. This article will answer all of the common questions asked to us by international students, and how to best recover from high debts before returning to your home country and/or beginning work.
How International Students Get in Debt
International students pay approximately 4x more in tuition fees than a Canadian student. Despite this, international students are not eligible for loans or grants provided by post-secondary student financial assistance programs like OSAP.
This makes their education far more costly, and funding options extremely limited. These additional expenses cannot always be covered by their own income or by their family.
Despite not being a Canadian citizen, international students are free to get a credit card and apply for loans while in Canada. An international student can easily accumulate debt if they’re not careful.
Loan and credit cards quickly go from being a lifeline to something the student depends on, allowing their debt to grow substantially throughout their time studying in Canada.
Without a lot of other options, international students are extremely vulnerable to predatory lenders. Small loans quickly snowball into unpayable debt balances more than double of the amount they initially borrowed.
What Having Debt Means for an International Student in Canada
If you’re an international student, you’re likely wondering what effects your debt may have on your education and time in Canada. Here’s a summary of everything you should know:
- It’s important to note that not paying off a loan or credit won’t directly cancel your study permit. You may be subject to other collection actions, such as wage garnishment, which are unrelated to your studies.
- Your study permit could be at risk if your debt has made you unable to pay your tuition, in which case, your school may ask you to withdraw from your studies. If you are unable to demonstrate you are actively studying in Canada, your study permit could become invalid.
- If you plan to stay after your studies, your debt will make your life in Canada more difficult. Your debt will always be visible on your credit report, and your credit is checked whenever you do something like apply to rent an apartment or apply for a car loan. You can (and likely will) experience rejections as a result of bad credit.
How to Clean Up Your Debts in Canada
Paying off your debt may take awhile, but it’s possible, and strongly advised if you plan to live in Canada at any point in your life.
There are multiple debt relief options available for international students, you don’t need to be a Canadian citizen to be eligible. Common debt relief options for international students include debt consolidation loans, consumer proposals, informal settlement, and bankruptcy.
You can learn more about each of these options and how they work in this blog: https://www.4pillars.ca/blog/debt-relief-for-canadian-immigrants
How 4 Pillars Debt Advocates Can Help
At 4 Pillars, we’re dedicated to making debt and credit easy to understand for everyone in Canada, including international students.
We understand that international students are especially vulnerable to predatory lending, and want to make sure you have all the knowledge, resources, and information you need to get out of debt safely and legally.
By booking a meeting with one of our debt advocates, we can take you through each debt recovery process, explain how it works, and highlight special considerations for protecting your visa status.
Our consultations are completely confidential and free of charge. You will not be obligated to continue services with us after the consultation unless you wish to do so.
Book a no-obligation consultation!
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Frequently Asked Questions from International Students in Debt
Will I have to quit school if I can’t pay my debts?
No, you won’t necessarily have to quit school because you haven’t paid your debts. As long as you can continue making tuition payments, your debt shouldn’t affect your ability to attend post-secondary school.
Can an international student leave Canada without paying their debt?
Yes, an international student can leave Canada and return to their home country without paying their debt. However, this doesn’t erase the debt. You’re still legally responsible for paying the debt, even if Canadian creditors can’t force you to pay.
If you ever return to Canada, creditors, lenders, and collections will continue to pursue you for the owed debt. Additionally, your credit score will continue to be lowered by your debts, even if you are no longer living in Canada.
It’s important to clear your debt if you plan on living in Canada, as a bad credit score will significantly limit your ability to access loans and other financial opportunities.
Will I be detained for my owed debt if I return to Canada?
Unpaid civil debts like credit card debt, personal loans, or CRA debt will not be enough to have you detained while reentering Canada. You can only be detained if there is a criminal warrant out for your arrest.
Advice for International Students to Avoid Getting in Debt
- Be Mindful of Interest Rates: Generally, interest rates above 20% are considered aggressive. Before agreeing to loan terms, look for and ask about the loan’s interest rate. High interest rates make paying off debt significantly more difficult, as the debt continues to grow the longer it is not paid off.
- Calculate Annual Percentage Rates: The annual percentage rate (APR) is a percentage used to demonstrate the total annual cost of owing money. While comparing loan products, calculate the APR to truly understand how the loan will impact your financial situation. APRs of 40% to 60% (or higher) are way above market rates.
- Seek out Scholarships, Bursaries, and Grants: While you may not be eligible for government funding, other public and private funding options are available. Ask your school about what scholarships, bursaries, and grants they offer. Some of these funding options are specifically designed for international students. There may also be additional requirements like academic excellence, achievements, or demonstrated financial need.
