Canada Student Financial Assistance Regulations

42 (1) If, on the application of a borrower who is not indebted to the Minister under any direct loan, a lender has reduced, on a prorata basis, the amount of the outstanding principal of all the borrower's risk-shared loans and guaranteed student loans, the lender is entitled to a gratuitous payment by the Minister in respect of the reduction in an amount calculated in accordance with this section if, at the time the application for reduction was made,

• (a) the borrower was not subject to a measure taken in accordance with subsection 15(2) due to the occurrence of an event referred to in paragraph 15(1)(a),(b), (h) or (i);

• (b) the borrower had ceased to be a full-time or part-time student at least 60 months before making the application;

• (b.1) for a borrower that had previously been granted a reduction in the principal amount of a student loan or a guaranteed student loan under section 42.1 or a risk-shared loan or a guaranteed student loan that entitled the borrower's lender to a gratuitous payment under this section or section 30.1 of the Canada Student Loans Regulations,

  • (i) at least 12 months had elapsed since the day on which that previous reduction had been granted,

  • (ii) the borrower had ceased to be a full-time or part-time student at least 60 months before making the application,

  • (iii) the monthly payment made by the borrower after the last reduction in the principal amount of the student loan or guaranteed student loan was at least $25 unless the Minister concludes that the borrower, under a repayment arrangement entered into with the Minister or the lender, made a monthly payment of less than $25 on the basis that the borrower could not pay that amount owing to the borrower's family income; and

  • (iv) since the previous reduction was granted, an event referred to in paragraph 15(1)(a), (b), (h) or (i) has not occurred in respect of the borrower's student loans or guaranteed student loans.

• (c) the borrower had been granted all of the special interest-free periods that may be granted;

• (d) the borrower has not been granted more than two reductions in the principal amount of

  • (i) a risk-shared loan or a guaranteed student loan that entitled the lender to a gratuitous payment under this section or section 30.1 of the Canada Student Loans Regulations, or

  • (ii) a student loan or a guaranteed student loan under section 42.1;

• (e) the monthly payment on the loans is greater than the monthly payment corresponding to the borrower's monthly family income as indicated in the Debt Reduction in Repayment Income Table in Schedule 2; and

• (f) the borrower resided in Canada.

(2) Subject to subsection (4), the amount of the gratuitous payment shall be determined in accordance with the following formula, rounded to the nearest dollar:

(3) In determining the amount of the gratuitous payment in respect of a second or third reduction, the monthly payment due on the loans as this amount is calculated in C of the formula set out in subsection (2) is based on the portion of the 15 year period remaining after the previous reduction.

(4) The gratuitous payment shall not exceed

• (a) $10,000, in the case of a first reduction in the principal amount of a student loan or a guaranteed student loan;

• (b) $10,000, in the case of a second reduction in the principal amount of a student loan or a guaranteed student loan; or

• (c) $6,000, in the case of a third reduction in the principal amount of a student loan or a guaranteed student loan.

(5) [Repealed, SOR/2004-120, s. 9]

(6) The Minister, on being notified of the reduction by the lender in the prescribed form, shall pay to the lender the amount of the gratuitous payment that has been calculated in accordance with this section.