FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 3, 1997

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone back for this round table this afternoon.

As you know, pursuant to Standing Order 83.1, the finance committee has been holding hearings across the country and here in Ottawa to seek input from Canadians as to what measures we should be taking in the upcoming budget.

This afternoon we have representatives from the Association of Universities and Colleges of Canada, from the Association of Canadian Community Colleges, from the Canadian Alliance of Student Associations, from the Canadian Association of Student Financial Aid Administrators, from the Canadian Association of University Teachers, from the Canadian Federation of Students, and from the Canadian Graduate Council.

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My understanding is that Ms. Judy Stymest will make the presentation on behalf of everyone. After your presentation, of course, every member of the panel will participate in the question-and-answer session.

Welcome.

[Translation]

Ms. Judy Stymest (Quebec regional representative, Canadian Association of Students Financial Aid Administrators): Thank you, Mr. Chairman.

My name is Judy Stymest and I am the director of the Financial Aid and Foreign Students Service of McGill University. I am also the Quebec representative to the board of the Canadian Association of Students Financial Aid Administrators.

I would first like to introduce my colleagues. They are Robert Giroux, president and CEO of the Association of Universities and Colleges of Canada and Gerald Brown, CEO of the John Abbott College of Sainte-Anne-de-Bellevue, in the province of Québec.

[English]

In January 1998, Mr. Brown will become president of the Association of Canadian Community Colleges.

Next are Jennifer Story, national deputy chairperson of the Canadian Federation of Students; Hoops Harrison, national director of the Canadian Alliance of Student Associations; Rubina Ramji, chair of the Canadian Graduate Council, and

[Translation]

Robert Léger, governmental relations officer, Canadian Association of University Teachers.

[English]

Beginning in the fall of 1996, our seven organizations began meeting regularly to discuss student assistance. We were brought together by a shared concern over rising levels of student debt and their implications for accessibility and by a shared belief in the importance of continued federal participation in student assistance, particularly through the Canada student loans program.

In January 1997 we released a package of proposed reforms entitled “Renewing Student Assistance in Canada” and have continued to work constructively for measures to address student debt and accessibility in the period since then.

[Translation]

I will now ask Mr. Gerald Brown to read, on behalf of our seven organizations, the text of our joint statement. We will then be glad to hear your comments and answer your questions.

[English]

Mr. Gerald Brown (Director General, John Abbott College): Mr. Chairman, student debt has become an issue of major concern in this country. Since 1990 the debt level of the average student who borrows to finance a post-secondary education has almost tripled. Increased federal loan limits, along with rising costs, including tuition, and most importantly, the abolition of provincial grant programs, have all fuelled this spectacular leap in the indebtedness of our youth.

As you can see from the graph we have provided, which is attached to this presentation, the average debt levels among Canadian students who borrow are now comparable to levels among graduates of four-year private institutions in the United States such as Harvard and Yale.

As the Conference Board of Canada said last month, “a lack of education is a low-income life sentence”. And we agree. It would be unconscionable if post-secondary education in this country became accessible only to those from affluent backgrounds. If we do not stop this trend towards greater student debt we will undermine the basic principles of fairness and equity in our educational system.

In recent months the Speech from the Throne, the Prime Minister's reply to the throne speech, and finance minister Paul Martin's economic and fiscal statement have all emphasized the need to deal with the student debt problem. Our associations are delighted at the government's expressed determination to reduce barriers to post-secondary education through further reforms in the Canada student loans program and through increased aid to students with dependants. A renewed Canada student loans program will enhance equality for all Canadians.

Mr. Chairman, in January we unveiled a package of reform measures which we believe are necessary to improve this country's system of student assistance. We are currently working on refinements to our proposal. A package of measures is needed to deal with the problem of accessibility and student debt. There is no single answer to these problems. Our proposal includes a mixture of grants and tax measures, with the exact policy instruments used to deliver aid varying according to whether a student is in a pre-study, in-study, or post-study period.

[Translation]

First, we urge the government to create a scholarship program that would target first and second year students. Those are students who because of their modest family backgrounds or their independent student status, need a substantial financial support.

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This is often a critical period for those students, for it is often at that moment that they realize the size of the debt they will carry when they graduate. In some cases, this realization leads them to withdraw from their program. Numerous studies show that this kind of grant help student retention. Of course, the new scholarship millennium fund may very well fill that need, if it is well set up, but in any case, we will have to think of grants based on needs assessment.

Then we think it important to create a work study program. This type of program is aimed at students with special needs and offers them a non-repayable assistance as long as they agree to perform some work, generally in an academic or professional position on campus, without taking the job of support personnel. The institution who delivers that program receives a salary grant that covers part of its cost. This of course allows the beneficiaries to get a valuable work experience but this is a secondary aspect for work study programs are not meant for training.

We recommend that the federal government starts immediately discussing with provinces and postsecondary institutions the possibility of implementing such a program at the national level. Students need those opportunities.

Then we should address the debtload problem after graduation. On this aspect, we urge the government to set-up a deferred grants program. A number of provinces already offer some debt relief to their graduate students. Generally, those programs aim to reduce the total debt of the students without taking into account their capacity to repay their loan.

Our approach is somewhat different because it relies on more targeted debt relief based on tables taking into account the debt income ratio. The debt relief may be partial or total, when it is clear that students who have had recurrent repayment problems during the three or four years following their graduation won't be able to repay what they owe.

Debt relief could also be offered on a more progressive basis, on a monthly basis for example, and apply to part of the interest, to the total interest and in some cases, to part of the capital. This program would be available for a period as long as five years after the loan consolidation, which are the difficult years of transition between studies and the workplace.

[English]

We also believe that some measures should be introduced in the income tax system to make education more affordable. The February budget made important strides toward meeting our recommendations concerning the tax treatment of educational savings and of compulsory fees; however, no action has yet been taken to make the interest paid on student loans tax deductible. This measure will provide borrowers with important relief as they navigate their passage through school to the working world. A similar measure recently became law in the United States.

Unlike other tax measures for education that affect the more general student population, the benefits of this measure are squarely targeted at needy students who must borrow heavily to finance their education.

So far the recommendations we have made are variations of a theme we arrived at last January. As noted earlier, we are in the midst of refining the proposals in renewing student assistance in Canada. In the process we are also examining the critical issue of how to introduce flexibility in loan repayment.

The current system of loan repayment works well for most borrowers; however, a quarter of all students experience significant difficulty in repayment over the first five years. The system should be reformed to make repayment easier and defaults less common in this crucial period of transition to the labour market.

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In principle, a retargeting of the existing interest relief program, combined with some targeted deferred grants mentioned earlier, can efficiently tie the repayment obligations to a borrower's ability to repay. Moreover, it can do so without pushing students even further into debt through the compounding of unpaid interest, which is a serious drawback associated with the so-called pure income contingency repayment plans. We are exploring practical ways of achieving this end, and plan to complete our analysis later this month. We will certainly keep your committee apprised of our work.

We welcome your questions.

The Chairman: Thank you very much, Mr. Brown. It's certainly something we would be interested in reading if prior-to-release copies are available.

Mr. Harris.

Mr. Dick Harris (Prince George—Bulkley Valley, Ref.): Thank you, Mr. Chairman. I apologize for being late.

Mr. Brown, thank you for your presentation.

As MPs, I'm sure everyone of us has dealt with people who have come into our constituency offices over the last number of years who are really having some problems repaying their student loans and who are also finding organizations like financial collection agencies—and other people trying to recover student loan moneys on behalf of the banks—giving them a lot of trouble. Hence they come to our offices seeking help.

I think you mentioned a couple of interesting points. First of all, I really like the idea that any interest on your student loans would be deductible as a tax deduction. There's probably no debate in that area. I certainly would support it.

Maybe one of you could just do a couple of things. Number one, can you tell me just how high the default rate is for student loans currently, or over the last couple of years? Also, do you know the numbers of people who are going into bankruptcy because they can't afford to pay their student loans and still eat and rent a place to live? Well, we could just stop there at those two things.

The Chairman: Mr. Giroux.

Mr. Robert J. Giroux (President and Chief Executive Officer, Association of Universities and Colleges of Canada): Mr. Chairman, I've been asked to sort of guide the question-and-answer period. Can someone answer the question about default?

I don't think we have the statistics, but while you were asking the question, sir, I was asking Jennifer to give you a sense of all of this.

Ms. Jennifer Story (National Deputy Chairperson, Canadian Federation of Students): I don't have the exact figures in front of me in terms of bankruptcy and default increases in the last couple of years, but we can certainly get those for you later today. However, I think it's important here to draw a correlation between the rise in those stats—I know that, particularly so far in 1997, they've gone up quite a bit. And the rise in the volume of debt that graduates are carrying right now has jumped to $25,000 this year, from around $8,000 in 1990. So I think it's pretty easy to draw a correlation there that defaults and bankruptcies are going up because the debt loads are rising so drastically.

Ms. Rubina Ramji (Chair, Canadian Graduate Council): The latest statistics that I've heard are one in four defaults within the first three years.

Mr. Dick Harris: Really.

Mr. Chairman, do I have a few more minutes?

The Chairman: You have a couple more.

Mr. Dick Harris: This has not to do with the budget, but I just want to maybe get a quick comment on a plan that is going on in at least one state that I know of in the U.S. There, students who are completing their secondary school level and are about to enter university or college become recipients of tuition grants based on their academic grade level upon graduation. In the one state—I think it's North Carolina—if you maintain that level throughout your university program, you can be granted a 50% reduction on your tuition. I think it starts out at a B, but if you increase it to a B plus—to use letter grades—you get another 25%. And if you can maintain an A level throughout your university or college days, you can actually go through without any tuition charges. What do you think of that idea just in concept? In other words, you're rewarding merit and hard work.

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Mr. Robert Giroux: I'd like to ask Jennifer and maybe Hoops Harrison as representatives of student groups to give you their impressions.

Ms. Jennifer Story: The groups at this table have a diversity of opinion on a number of issues, but one thing we have come together on are issues around the debt burden we're addressing right now.

Those are interesting options, but one thing that should be made really clear at this specific point is that we don't have a situation right now where simply smart students are facing high debt loads; we have a problem right now where a range of students, in terms of academic performance, are facing debt loads and maybe we need to look in the short run at parental incomes and personal incomes as a determinant of how we're going to relieve that debt in the short run.

Mr. Gerald Brown: As a country we're well into what is called the knowledge age. While it is certainly an advantage to recognize merit, I think it's the general consensus that to raise the educational level of our students is very important. Whether you're a brilliant student or a student who's struggling academically, you still have a debt load to carry.

Mr. R. Hoops Harrison (National Director, Canadian Alliance of Student Associations): There are already mechanisms in place in universities and colleges in this country to reward merit, such as scholarships and rewards like that. But the current crisis right now, I agree with the previous speakers, is to get assistance to those people who need it who are academically qualified regardless of merit. That's the concern.

The Chairman: Mr. Lefebvre.

[Translation]

Mr. Réjean Lefebvre (Champlain, BQ): I first wish to welcome you here.

You said earlier that the repayment of the debt could be more progressive, on a monthly basis covering part of the interest, the total interest and even sometimes part of the capital. Don't you think that this kind of program would be costly because of the accounting involved? Could you think of another way to do it? This seems very complicated to me.

Mr. Robert Giroux: If I may, Mr. Chair, I would like to ask Judy to answer this question.

Mrs. Judy Stymest: I think that the problems students encounter during the repayment period vary according to their personal situation and I think we have to take various measures to help them. It is true that the first three or five years after they leave university or college represent a period during which their income is highly variable. We could ask the banks to administer such a program. We can use various processes to deliver such a program. We could also choose a period during which the scheduling of repayments would be reviewed. We could study all these measures but there must be others too.

There is a need to help those who can't pay and find themselves in a tight situation as far as their debt is concerned. That may be the option that would best solve those problems.

Mr. Gerald Brown: I think the main idea behind all that is flexibility. No one measure will ever fill all those needs. The main thrust of my comment is really flexibility.

[English]

The Chairman: Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman.

I don't think anybody will have difficulty with some creative ways to deal with the accessibility issue, as much as if not more than the debt repayment of an average of $22,000 per year for one in four students.

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I did want to ask you about measures of success, and people coming to post-secondary education from our secondary levels when you consider the high unemployment rate of high school graduates who don't go on and the even higher unemployment rate among high school drop-outs.

Do you feel it is a sufficiently high priority for the federal government to seek ways to have an influence on better preparing, if there is a need to better prepare, young people for post-secondary education so that they can provide the stock, as it were, that we're going to need to continue to service a knowledge-based economy?

Mr. Robert Giroux: I think what you're trying to get at is what is the appropriate role of the federal government in helping develop knowledge workers. This is an issue, of course, that in our view is one of very strong collaboration with provincial governments, because the fundamental responsibility for education lies at the provincial level.

The role of the federal government, in our view, is to ensure across the country a level playing field, fairness and accessibility in terms of post-secondary education, and assuring that it provides the necessary assistance when necessary to do that. It's in that context, of course, that the federal government decided to move with the Canada student loans program in the early sixties and decided to develop these programs to assist students going through post-secondary institutions.

In our view, that's a very legitimate role for the federal government. One province has decided to opt out and to do it differently, but we feel this is a very important, basic role to ensure that the country produces the knowledge workers of the future.

Mr. Paul Szabo: One last quick one. With regard to the recommendation for deductibility of interest on student debt, would you consider amending that, having it as a basis for a tax credit as opposed to a deduction so that the value of the benefit would be equal to all students rather than more valuable to those with higher levels of income?

Do you understand...? A deduction benefits high-income earners more than low. A tax credit is the same for all.

Mr. Robert Giroux: I'll ask Rubina and Robert to comment on that question, Mr. Chairman.

Ms. Rubina Ramji: We put this in because we're trying to help students who have to borrow. They are the neediest. So by giving them the deduction afterwards, we're actually helping them specifically.

A tax credit would be good for all students, and we're trying to help the ones who actually are needy at the moment, the ones who are going to build up the debt.

Mr. Robert Giroux: I don't think you've answered the question.

Ms. Rubina Ramji: You don't think so?

Maybe Robert has a better answer.

Mr. Paul Szabo: The issue is, for all students a deduction determines your net income on which tax is calculated. A tax credit is a calculation that reduces taxes otherwise payable. So if somebody making $30,000 a year actually gets more benefit from a deduction than somebody making $20,000 a year, if you want to help the lower end, or at least not penalize them, you shouldn't base anything on your income but rather have the benefit equal across the lines.

[Translation]

Mr. Robert Léger (government relations officer, Canadian Association of University Teachers): I think it's a good idea. Our group will study it and we will get back to you.

[English]

The Chairman: Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): First of all, I want to say that I'm very concerned about the high level of debt students are carrying and about the number of high school students I meet who have been working until midnight or 2 a.m. to save up money for university—although when I hear what they're paying on their credit cards, I'm a little concerned that they're not doing the best financial management.

I have to question, though, the statement on page 5, and the graph. My knowledge of American universities and the tuition fees alone would suggest that there is something wrong here. American private universities have tuition fees of something like $27,000 a year, and I'm surprised that we'd have $18,000 as their debt on graduation. Or maybe I don't understand this chart.

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Ms. Jennifer Story: You're very correct on the fee side of it. This chart is specifically about the debt side, and it's important to note here that the United States actually has a national system of grants called Pell grants, and they also have a variety of scholarships and grants at the institutional level and the state level, as well as the federal level, that address the levels of fees that those students are carrying. So in actual fact, when all is said and done, at the point of graduation their debt is a lot lower than we would think it is.

Ms. Paddy Torsney: Okay. And where does this chart come from? I ask this because it's not attributed. Who's done this chart?

Mr. Robert Giroux: We have.

Mr. R. Hoops Harrison: If I may make one more comment about the comparison to the United States, the Pell grants that were previously referred to, with other assistance, amount to about $25 billion a year in the United States. If you compare that to Canada, a comparable level of assistance from the federal level would amount to $800 million a year in assistance. That would be if we were to provide the same amount of assistance to needy students as the United States currently gives, in straight grants or bursaries.

Ms. Paddy Torsney: I'm glad you brought up the system of scholarships. Certainly I know people that have gone to Princeton and they had a system of pay as you go: when you graduate if you lose your job you hang on, you don't make your payments for a while, and then you move forward. So what you pay back is in fact geared to income on graduation.

I certainly know, as a graduate of McGill, that there are very aggressive fund-raising campaigns—in which I've been a participant and a donor—and I'm wondering what is the responsibility of alumni and corporate Canada and what is the responsibility of students. What is a reasonable debt load? Everyone has told us that it's too much, but what should you be asked to participate in in terms of paying for your education? Let's not forget that taxpayers are paying for a good chunk of your education as well, and according to all statistics you do reap economic rewards down the road. So what is reasonable?

Mr. R. Hoops Harrison: The question of how much students should pay has since been overpassed by how much they can pay, because now the point is whether students can even afford the current level that they already are contributing. So we don't even consider that question any more. It's gone to the point where we are leaving people out of the system. Hopefully that answers your question.

Ms. Paddy Torsney: No, I need a dollar figure.

Mr. R. Hoops Harrison; We'd like to have that debate with you, probably in the future.

Ms. Judy Stymest: That's a very good question,and there's no answer to it in the sense that what's a reasonable debt level for a student entering the faculty of medicine as opposed to someone entering social work or another field where the remuneration is much less after graduation situates that question so that there is no real answer. That is, I think, why we're looking at debt loads after graduation as being important to look at in terms of what's reasonable at that end of it rather than initially.

Ms. Paddy Torsney: What about the responsibility of alumni and corporate Canada?

Ms. Judy Stymest: I personally think that the role of the institution is very important in all of this, although I must concede that I'm in a rather fortunate situation to be in a university that's been around for a long time and has considerable endowments. But when you look at the whole post-secondary network across Canada, not all institutions are in that lucky situation. So I think that everyone is working toward that, and there is a role to play for sure, but we cannot replace a strong government program.

Mr. Robert Giroux: There are a number of scholarship programs on the part of corporate Canada. For example, we at the UCC manage some 130 to 140 small scholarship programs; companies, for example, that will provide scholarships to the children of their employees and so forth, and some companies have larger grant programs. But in Canada we're not at the same level as the United States. Is it a question of the way we do things in Canada? It's certainly not at that level.

I sense, though, in speaking to the corporate sectors that there's a stronger feeling emerging that they need to do their part, but at the same time it doesn't solve the immediate problem. This is what I wanted to get back to when we talk about the level of debt.

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The issue for us is not what is the ultimate level of debt but to make sure that those who have debt will be able to repay it in a reasonable manner without getting themselves deeper into debt or deeper into trouble; and secondly, for those who because of labour market conditions are not able to repay that debt, that there be deferred grants or remissions to take care of that. And they're a very small number, because our feeling is that if you have interest relief measures and take some measures immediately in the five years after graduation, there will be a very small number, but we don't know the exact number who will not be able to repay the debt.

So on the issue of what is the appropriate level of debt, if you're graduating as a medical doctor it's very different from someone who is graduating with a degree—and I don't want to use this example—in philosophy. I hope you're not a graduate in philosophy, but it's one of the examples that has been put in place.

Ms. Paddy Torsney: I had one last question.

Mr. R. Hoops Harrison: If I could just say—and I am a graduate of philosophy—

Mr. Robert Giroux: That was a good example.

Mr. R. Hoops Harrison: —the reason we can't give you a direct answer on that is because not only is it dependent on what you're coming out with but also on what you're going in with, what your income background is and what your family's income background is. That's why you can't assign one simple number figure to all students.

Because this is a sensitive issue in terms of the contribution of students and government and the private sector, I would like to state that in this era of increasing student debts, every sector is attempting to attack this problem, including students themselves. Across the country, students have been developing access funds or student bursary funds—students helping students, putting money in themselves, helping needy students in their own areas—as well as student-run food banks. So I want to state for the record that there are contributions from all sides, recognizing the contributions from each of the three levels.

The Chairman: Mrs. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chair. Actually, Ms. Torsney asked one of my questions, so I'm going to ask one that's almost a similar theme.

We've heard some really compelling interventions, specifically around research and development and how it relates both to colleges and universities. One of the people who came before us in Vancouver talked about the fact that we should look at people who receive these as entrepreneurs because they hired the graduate students and gave them a leg up so they could afford to continue their education.

I would ask anyone who would like to speak to it to talk about the balance between the funding that the government flows, agencies that deal sort of with pure scientific research, and the role the corporate sector plays. One tends to think of pharmaceuticals in looking for that kind of eureka find, something in industry that would be a real moneymaker. Would you want to talk about that balance?

Mr. Robert Giroux: You're quite right, and you will remember a number of us were before you last week to talk about research and development. At that time we indicated quite clearly that there is a balance here that has to be maintained between contributions the federal government would make to the granting councils towards research and development and the private sector contribution.

In Canada, that balance is that the level of government assistance, either through universities or government-owned research itself that produces its own research, is different from what it is in other countries, but that the private sector itself has been increasing its contributions in the last eight to ten years. Also, there has been quite a lot more transfer of the research results from universities to companies. A lot of spin-off companies have been formed, and they are of course providing a lot of employment opportunities, and so on.

There's another dimension to this, which was mentioned last week and I'd like Rubina to add to it. It is the question that by assisting research in universities, you're of course helping graduate students. But I would like to underline that the problem we're dealing with here today applies very much also to undergraduate students. It applies to undergraduates and graduates, and as you know, undergraduates by far are the largest number of students in universities. So research can assist the graduate students, but as we pointed out last week—and Rubina, please add to this—I think there's only a portion of graduate students who are helped by research grants.

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Ms. Rubina Ramji: The federal funding that goes to the tri-councils funds graduate students and professors, but the money that actually goes to the students is actually 16% of graduate students who are actually in school at the moment. So we have a large body not funded by these tri-councils.

At the same time, these graduate students already have high debt loads, so a lot of them will actually think of not going to graduate school. The problem is, we have this large body of undergraduates who have such high loans that it affects what we do in our research in Canada.

Mr. Gerald Brown: I would just add that when it comes to the community college system across Canada, you can appreciate that there isn't too much in the way of research grants coming in there, yet we're still faced with a significant debt load. When you look at the average age of our students, it's somewhere between 25 and 26 years old. Many of them have dependants.

So the problem of that debt load is not at all affected by any kind of research grant program.

The Chairman: Mr. McKay.

Mr. John McKay (Scarborough East, Lib.): Thank you, Mr. Chairman.

The evidence presented by these witnesses shows that the debt went from about $8,000 up to about $25,000 and that the default rate is something like one in four within the first few years of graduation. It's a pretty horrifying set of statistics.

I wonder whether in fact you have a profile of the defaulter. Has a profile been developed, based on the kind of course the individual took, the number of years that student took in school, the gender, ethnicity, or any other factors? Are there any dominant characteristics to the profile so that we can get a feel for the person who is most at risk, if you will?

Mr. Robert Giroux: Yes. While we were answering the previous questions on default rates, some statistics were provided to me. The statistics that have been given to us through the Canada student loans program under Human Resources Development show that for 1990-91 graduates, the average default rate three years later was about one quarter, or 23% overall.

Very good, Rubina; you didn't have that in front of you.

It was 19% for university students; 24% for community college students; and 37% for private school students. That's about as fine a breakdown as we have. We don't have it in terms of discipline or whatever. Such information could be made available, presumably, but I don't think any of us have that kind of information available here.

I wanted to give you a bit of a sense that it does vary, depending on which kinds of institutions. When we talk about private schools, these are often institutions that provide some very specific training or qualifications that may not be that easy to take onto the labour market.

Mr. R. Hoops Harrison: Just to elaborate quickly on a couple of things here, HRDC has some statistics on the last few years' defaulters, who they are. The two major groups are students and graduates with dependants, and independents living away from home, people who have no family support and are living away from home. Students living in their parents' house and attending school have far less default rates than independents living away from home.

Mr. John McKay: The response is curious. The reason the response is curious is that both the comments you made with respect to students having dependants as a matter of choice and where you live away from home is partly a matter of choice as well. But in other respects, I would have thought that, say, students who graduated out of a computer science program would have a very low rate of default—that there would be a discipline breakdown. I would have thought that certain elements of family background would be a contributing factor to whether there is a profile with respect to default.

You're telling me that information is not available at all. Or has it simply not been done?

Mr. Robert Giroux: I'm not aware that the information is available, but if we have it, we'll certainly be pleased to send it to you. I haven't seen it.

Do any of you know if that information is available?

Ms. Judy Stymest: I'm sure it has not been done.

Mr. John McKay: It's pretty hard to fashion a response unless you have a profile to work with.

Thank you.

The Chairman: Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you, Mr. Chairman.

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On your chart here, I look at 1990 and I see that student loan debt was approximately half of what it was in 1996. In the early 1990s, we were going through a big recession, a lot of downsizing by companies, and all of that, so it was a different scenario then. In 1996, though, we were supposed to be in booming times. What has happened here? What caused the doubling of the student loan debt from 1990 to 1996?

Ms. Jennifer Story: Well, there were a few things. The costs of education are multiple; tuition fees are a part of the growing size of debt. Another issue is that the burden that students are paying out right now for their education is higher than they would reasonably be able to save during the summer employment period. Especially this past summer, we've seen that youth unemployment rates are actually rising. I think that is definitely a large factor.

Ms. Judy Stymest: There were also major changes to student loan programs when borrowing limits were raised from $105 a week to $165 a week. There was one period when borrowing doubled in one year just because of the amount of money that was available, and it coincided with provincial governments counselling or limiting their grant programs. There has been a tendency for loans to go up while bursaries and grants are decreasing at the same rate.

The Chairman: Did you want to make a point, Mr. Brown?

Mr. Gerald Brown: I guess your observation is a very good one, because, in reality, we're probably ourselves a little baffled with some of the answers that we're trying to put together for you. Maybe we should also look at this as the fact that we're on the advent of a much bigger problem if we don't act. Something has definitely happened in the last five years, and I'd hate to be back here five years from now to see what that chart is going to look like then. I think it's telling us something very significant here.

Mr. Robert Giroux: And, Mr. Jones, there's also another phenomenon. The level of personal income in the country—the disposable income that parents have, for example—hasn't been growing during the 1990s. It has been pretty well stable. This therefore means that the ability of families to assist students is not as it was in the seventies, for example, or even in the early eighties, when there was growth in student income. So as you can see, there are a lot of factors that can account for the increase in student debt.

The Chairman: Thank you, Mr. Jones, Mr. Giroux.

I have just a couple of questions. Remember that last term, the federal government increased the Canada student loans by approximately 57% over five years—$2.5 billion, if that's correct. I think we also introduced the interest relief, increased it from eighteen months to thirty months. Also, part of the Canada student loans reform was deferred grants and the introduction of special opportunities grants for women pursuing doctoral studies and for students in need.

I remember that back then, that was a pretty impressive agenda. A lot of changes took place. Yet in listening to you today—and listen, this is a very important issue you're dealing with—we're facing a very serious challenge here.

I remember that when I was chairing a national youth task force, one of the issues that we were promoting was the whole introduction of an income-contingent repayment scheme. From what I hear from the panellists, it's not that everybody is against ICR, you just want some modifications to it. Is that correct?

Ms. Judy Stymest: Well, yes, our groups have had some differences on this issue in the past. Even today, I don't think we are completely with one voice on this, but some consensus has formed over the last month. I think one part of that is that our group as a whole is not for the pure ICR model, in which there is negative amortization and extremely long repayment periods. I think we are all looking for a system in which the ability to pay loans will be linked to income levels. I think there's some consensus around here that we should develop a system whereby the ability to pay is a factor in the debt.

The Chairman: So you want some linkages to income level.

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Ms. Judy Stymest: There should be some sensitivity to it, yes.

The Chairman: What it comes down to is if you get paid $50,000 or $100,000 a year and you have a job, you should be able to pay that loan off at a fairly quick pace. Is that correct?

Ms. Judy Stymest: Yes.

The Chairman: Okay, so where does ICR go wrong?

Ms. Judy Stymest: ICR goes wrong in one instance. For students who have very low incomes, because of the negative amortization, if interest is compounded they end up owing more each year than they did the year before.

The Chairman: If we could introduce an interest relief measure within that framework, would that be acceptable to you?

Mr. Robert Giroux: Yes. It's exactly that point. The pure ICR means certain things to certain people. It means you're gearing the repayment to income over a long period of time. In some ICR programs, if I'm not wrong, they're up to about 25 years.

That is not what this group is seeking. There are those who can repay their debts under the traditional methods through the Canada student loans program or programs that are available in the provinces, and that's fine. But for those who have serious debt problems, usually in the first five to seven years after graduation, there should be mechanisms in place to provide interest relief and also to tackle the problem of those who will never get out from under. In the negative amortization period there should be measures to tackle those problems and develop the debt repayment mechanisms that are appropriate for the graduates.

The Chairman: It's interesting that you said between year one and year five is a really crucial period in a graduate's life. Is that correct?

Mr. Robert Giroux: Yes, that is a crucial period. There's also the length of the period of repayment. You should be able to repay that debt over a period of ten, twelve, or fifteen years, but the first five years is very important.

The Chairman: If that's indeed the fact and we have already introduced interest relief for thirty months, the real challenge we face is in the final two and a half years.

Mr. Robert Giroux: Yes, and there's also the eligibility. From my understanding, and I'm not a specialist on it, you have to have a specific level of income in order to get that thirty-month relief, but if you're $1 or $10 above that level you won't get it. We're looking at these kinds of things.

I think Mr. Harrison would like to add to this.

Mr. R. Hoops Harrison: The answer is far more than just simply repayment or needing longer periods of time to effectively pay off your loan. It's debt reduction that is needed. HRDC has come out with statistics stating that the average income three years after graduation is not enough to support a repayment of the current levels of debt in addition to other purchases and living standards. So you need to reduce that debt before you can go into the repayment area, and that's one of the things we're all discussing right now.

The Chairman: You said you're refining certain aspects of your proposal. What exactly are you refining?

Mr. R. Hoops Harrison: On targeted remission or deferred grants, we're discussing the entire package of goods in terms of the upfront area, the deferred area. But the government needs to recognize that the focus should be on debt reduction, so students who cannot pay at that time will have the ability to pay what they can, and then on transition into the cycle.

The Chairman: How different is your deferred grant system from the one the government already has?

Mr. Robert Giroux: There is no deferred grant system. There is an interest relief period you mentioned, which was raised in the last budget, but to our knowledge there are no deferred grants under the Canada student loans program.

The Chairman: I believe it was introduced in the last changes to the act. We'll double-check that.

Mr. Robert Giroux: Someone just told me there was a promise in one of the budgets, perhaps two years ago under Bill C-28, to introduce deferred grants, but they were never put in place.

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The Chairman: Bill C-28 is exactly the bill I was referring to, and my question still remains: how different will it be? How far is the government definition of deferred grants from your definition of them?

Mr. R. Hoops Harrison: We have discussions with human resources and the symposium that's going to be coming up in mid-November. I think we're very close in coming to a compromise.

Mr. Paul Szabo: I just want to pursue the dimension aspect. My recollection is that the unemployment rate of youths with university graduation is about 6.8% and the unemployment rate of all Canadians with university degrees is about 4.5%. If only one in four students has any debt, how many students are we talking about? I ask this since even a student with debt probably can have the means to repay when they get a job. How many people are we really talking about who cannot help themselves? Let's get a dimension on this thing as a number relative to the total number of people who go through our post-secondary system.

Mr. R. Hoops Harrison: While they're looking right now, I'm still trying to remember the statistics that HDRC formulated on October 30. If I remember correctly—and if I'm wrong, please excuse me—something like over 18,000 independents living away from home defaulted in the previous period. But that's 18,000 loans. If you take an average $10,000 debt, that's a very low debt. Let's say they defaulted $10,000 each. That's $180 million in defaults alone, and debt levels are a lot higher for those that are defaulting. But there are also something like 2,500 students with dependants. There are single students with dependants, there are married students with dependants still living at home—

Mr. Paul Szabo: What I'm trying to understand is whether or not the approach to this situation, which in maybe many cases is a very legitimate concern—whether or not a targeted, as opposed to a universal, approach to it would be more effective in dealing with the real problems, rather than muddying it up by saying, here are some people who have debt but I also have a very good job.

You have to segregate. I think Mr. McKay was raising this issue about how you segregate legitimate need: I can't help myself, my family can't help me, and somehow I'm unemployable.

Mr. Robert Giroux: I should point out that we are saying it has to be a targeted approach, not a general approach. It's related to ability to repay the debt. It's related to the level of the debt. It's related to what happens in the first five years.

I was given some statistics. I'm told that every year some 50,000 to 60,000 graduates, of both community colleges and universities, are covered under the interest relief payments. So that gives you a dimension. Those have to be targeted. Some of them may need more interest relief. Some of them may need partial interest relief. Some of them may need to get deferred grants for part or all of their debt. That's what we mean by targeted.

I understand that Mr. Brown also wants to add something.

Mr. Gerald Brown: I'd doing quick math here to try to get you an answer with some concrete numbers. If I look at the college institutions that we represent, we have approximately 400,000 students that are enrolled in our programs and we know that about 120,000 of these students are on some form of assistance. We know that the default rate is about 25%, as we mentioned earlier. So that would be one-quarter of about 120,000, which is roughly 30,000 students as far as those we represent goes, in that ballpark, that we're talking about that need help and assistance.

Mr. John McKay: Just to follow up here on whether what you're addressing is a debt problem or an interest problem, we had some conversation about whether it's better to have a tax deduction or a tax credit. I wonder if you're just shuffling deck chairs on the Titanic with issues on that. Really, what you have is closer to an overall debt problem where the debt problem has overwhelmed a certain percentage of your students. Isn't that closer to the real problem here?

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Mr. Robert Giroux: Yes.

Mr. John McKay: I'm trying to get some handle here on the numbers, and 30,000 students out of your 400,000 students, a little less than 10% of the student body, have a problem. Is that approximately 10% a true statistic right across the board?

Mr. Robert Giroux: It's not that far off, because one out of two students at the university level is borrowing. Of those who borrow, a quarter, roughly 20%, are in a default situation, have difficulty meeting their loans. So you're not far out with 10%, yes, at the university level also.

Mr. John McKay: It would be interesting to know whether a bank would experience a similar default rate on unsecured loans, because that's what these things are. They're nothing other than glorified unsecured loans.

Mr. Robert Giroux: Yes, except when the banks provide the loans they do get a payment on top, a margin to allow them to take care of the risk they take. As you probably have seen in the past summers, one bank has come out, the Canadian Imperial Bank of Commerce in Nova Scotia, to say the risk premium they're getting when they get into these loans is just not high enough any more for them to do it and they have withdrawn, I think, from the Nova Scotia portions of the loans.

The Chairman: Mr. Adams.

Mr. Peter Adams (Peterborough, Lib.): Thank you, Mr. Chair. I'm sorry I was late and at risk of you ruling me out of order.

I read the presentation and I realize we're focusing on immediate problems, but at the same time it seems to me that—and I'm hoping we're going to deal with this problem, the immediate problem, as soon as possible—we should think about prevention in the future. For example, I think it is desirable that some students borrow to take on the responsibility themselves, but that in the future we would like to reduce this number that, through no fault of their own, very often experience these problems.

I think we have to think about, as we're tried to do, the financing of the families when they're planning. We have to think about work that's available for students who are in the later years of high school, when they're in college and university, not just in the summers, but actually while they're in school, all of that kind of thing, and then the internship-type jobs that are available immediately following when you graduate, when you're in this critical period where you're getting yourself established.

I wonder if any of your groups have given thought to this, the longer-range, prevention side of this, so we don't get ourselves—let's assume we can sort this one out—back in the same position.

Ms. Jennifer Story: Your point about prevention is very well put, and I think that's why we've been talking most recently here about deferred grants. But it's also why we're talking here about work study and why we talk about upfront grants, because it would be more beneficial in the long run for us to come back five years from now and be talking about how we got those debt loads down than to talk about the continuing problem of bankruptcies and defaults.

Maybe Judy can talk more about work study.

Ms. Judy Stymest: I certainly agree there's a lot to be done during the high school years to educate the student as to what debt is and how much they can take on, as well as encouraging parents to save for their children's education. The work study program is a very nice program to integrate students into the university or college milieu so that they become comfortable with the establishment where they are, with the rules, and to at the same time make money and feel a part of the experience.

The Chairman: Thank you very much, Mr. Adams.

This has been a very interesting round table. This is a very important issue to this committee, the whole issue of student debt.

From what I gather—and tell me if this is right or wrong—you would favour an ICR, but a modified ICR. It would take into consideration things like deferred grants, interest relief, and incorporate the whole issue of work study. Of course you favour some of the changes we made to the registered education savings plan. You believe we should continue on that road. Is that correct?

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Mr. Robert Giroux: We will probably be sending to you within the next couple of weeks what we call our package of measures. What we favour is a package of measures to deal with this issue.

The solution is not in an ICR plan. The solution is a series of measures that include upfront grants, work studies, targeted relief, deferred grants, and of course some measures like interest deductibility or tax credits that are out there, which can stimulate savings or which can provide relief as you are repaying your debt. There is a package of measures we will be providing you, and we hope to be able to give you that within a couple of weeks.

The Chairman: That would be great.

Ms. Jennifer Story: Just to clarify, what we have found consensus on is that debt loads are too high and that we need to look at ability to repay when considering new forms of repayment.

We have not come to any consensus on either peer or current models of ICRPs. We can't speak to that in unison, but we can speak clearly to the fact that we're hopeful about addressing the debt problem with deferred grants, maybe work study, or other opportunities. The work we've done with HRDC so far has been relatively promising in that regard.

The Chairman: I really thank you for the effort you're making, because every day that goes by there are more students coming into the system, and the longer we take to find consensus the worse off the students will be in the long run. So I'm quite happy to hear that I'll be getting some proposals in the next couple of weeks so that we can alleviate this challenge.

The meeting is adjourned.