HUMA Committee Meeting

STANDING COMMITTEE ON HUMAN RESOURCES DEVELOPMENT AND THE STATUS OF PERSONS WITH DISABILITIES

COMITÉ PERMANENT DU DÉVELOPPEMENT DES RESSOURCES HUMAINES ET DE LA CONDITION DES PERSONNES HANDICAPÉES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 13, 2000

• 0910

[English]

The Chair (Mr. Peter Adams (Peterborough, Lib.)): Ladies and gentlemen, we will begin, pursuant to Standing Order 108(2), a study on Canada student loans, the current situation and future possibilities. This study is going to take the form of a round table. I will make an effort to explain how I think we're going to proceed.

The HRDC people here—David Good and Thomas Townsend—will make a short presentation when we begin. I know many of the witnesses who are here, and I welcome you all, but I know you all well enough to know that any one of you could speak on this topic for several hours. After introductions, which I'll explain, it is my hope that following the HRDC presentation each of the witnesses will make a very short statement.

I have some of the notes here, and I have to say to you that we appreciate receiving the notes. They become part of the committee proceedings. But I think it would be better for us all if the initial statements could be very short. We have plenty of time, but I think you'll be able to get in your other comments in an exchange that will proceed afterwards. If you could keep your introductory statements, following HRDC, to two or three minutes, I would be most grateful.

On behalf of this committee, I want to welcome you all here. As you know, we've been engaged as a committee since January in some very public hearings. As a result, we've not been able to follow many of the areas of interest of the committee as closely as we would have wished.

We seize this opportunity to look at the Canada student loan program, because it's in a process of change, as you all know. Those changes are going on, and we're going to hear where they are at. Normally this committee would have undertaken this hearing in February, but we simply could not. We're a little late.

I think you can see the names of my colleagues here. They will introduce themselves when we get to that point in the proceedings. Please say who you are. I have a couple of introductions to make, then we will proceed to the statements. I will go to HRDC and then I'll proceed through the list of witnesses, as they are on the schedule. Is that okay with everybody?

We'll start with Gerry Brown.

Mr. Gerald Brown (President, Association of Canadian Community Colleges): I'm Gerry Brown, president of the Association of Canadian Community Colleges.

Mr. David Robinson (Director, Public Policy and Communications, Canadian Association of University Teachers): I'm David Robinson, director of public policy with the Canadian Association of University Teachers.

Mr. Robert Best (Director, Government Relations and Public Affairs, Association of Universities and Colleges of Canada): I'm Bob Best. I'm director of government relations and public affairs at the Association of Universities and Colleges of Canada.

Mr. Paul Kitchin (Executive Director, National Association of Career Colleges): I'm Paul Kitchin. I'm executive director with the National Association of Career Colleges.

Mr. Brad Wuetherick (Chair, Canadian Graduate Council): I'm Brad Wuetherick. I'm the chair of the Canadian Graduate Council.

Mr. David Good (Assistant Deputy Minister, Human Resources Investment Branch, Department of Human Resources Development Canada): I'm David Good, assistant deputy minister, Human Resources Development Canada.

Mr. Thomas Townsend (Director General, Learning and Literacy Directorate, Department of Human Resources Development Canada): I'm Thomas Townsend, director general, learning and literacy, Human Resources Development Canada.

Ms. Judy Stymest (Board Member, Canadian Association of Student Financial Aid Administrators): I'm Judy Stymest. I'm a board member of the Canadian Association of Student Financial Aid Administrators.

Mr. Frank Smith (National Coordinator, National Education Association of Disabled Students): I'm Frank Smith and I'm coordinator of the National Education Association of Disabled Students.

Mr. Mark Kissel (National Director, Canadian Alliance of Student Associations): Good morning. I'm Mark Kissel, the national director of the Canadian Alliance of Student Associations.

Mr. J.T.S. (Tom) Lumsden (National Manager, Education Financing, Personal and Commercial Banking, Royal Bank Financial Group, Financial Arrangements Working Group): Good morning. I'm Tom Lumsden, national manager, education financing for the Royal Bank, co-chair of the Financial Arrangements Working Group.

Mr. Michael Conlon (National Chairperson, Canadian Federation of Students—National Graduate Council): I'm Michael Conlon, national chairperson, Canadian Federation of Students.

• 0915

The Chair: Okay. I'd like to recognize representatives sitting with the public who have an interest in the subject we're studying this morning.

Bob Ballard is the chief operating officer of EDULINX Canada Corporation. This is a Canadian-owned and operated service bureau currently servicing some 700,000 loans for over 400,000 Canadian students.

Also joining us is Mary Bushman, vice-president of government relations from AFSA Data Corporation. I understand that AFSA is in the process of establishing a wholly owned Canadian subsidiary based in Kingston, Ontario. AFSA has been in the business of serving the needs of student borrowers for some 30 years. It is the service bureau for the U.S. government programs, very similar in nature to the Canada student loans program.

Material provided by these two groups is available at the table for anyone who's interested.

I also believe that we have in the room Andrew Brouwer. Is Andrew here? I think not. Perhaps Andrew will be introduced later on.

Those are the introductions. We'll begin with HRDC and then proceed to the short statements.

David Good.

Mr. David Good: Thank you, Mr. Chairman, and good morning. It's a great pleasure to be here this morning to discuss with you the important subject of Canada student loans.

[Translation]

I'd like to thank the chair and members of the standing committee for giving us this opportunity to explain what the current situation is with respect to the implementation of the new funding system for direct financial aid to students.

[English]

First of all, I'd like to thank the committee for the report of last year on access to post-secondary education. We certainly appreciated the invitation to appear before the committee last year. I must say that the report has been useful to us in the department, as we continue to contribute to the improvement of the overall program.

I would also like to say that we have been engaged in a series of ongoing consultations with representatives from the stakeholder community who are seated here today, and with the provincial governments. We have shared documentation pertaining to the direct financing initiative with stakeholders, and we believe that sharing this information is very important.

[Translation]

Let me remind you briefly of the stages leading to the present situation.

[English]

In anticipation of the ending of our current risk-shared contract with financial institutions, the Government of Canada entered into negotiations with financial institutions for the refinancing of the Canada student loans program. As you know, these negotiations failed to produce sufficient lenders to ensure a viable national service. On March 9, 2000, the government announced it would implement a direct financing scheme to ensure continued service for students.

Given the tight timeframes for implementing the direct financing scheme, we have divided our overall implementation plan into two phases. The first phase is the transition phase from August 2000 to February 2001. Then there's a longer-term phase that will include the establishment of a service provider and improvements to the Canada student loans program.

In our view, it is very important to look at the short-term issues as well as the longer-term issues. In the short term we're focusing on a seamless transition for students and improving levels of service to student borrowers. In the longer term, our relationship with stakeholders will allow us to make overall improvements in the programs.

The work that is currently underway within the department is to ensure that there is uninterrupted delivery of the Canada students loans program. Provinces are willing to ensure that the application process, the needs assessment, and the issuance of certificates of eligibility continue to occur as they did before. The department will see that money is available to student borrowers.

Students with financial need will continue to receive student financial assistance through the transition period beginning August 1. The Government of Canada will also ensure that students are kept well informed on how they can continue to access the program.

Let me say a few words about the disbursement process. During the transition period there will be no effective change in the disbursement of student loans. The department has engaged in a series of discussions with financial institutions to disburse funds to students for this loan year only, and then to hold the loan until a service provider is established to manage and administer the loan.

• 0920

Therefore, under the agreement, students will continue to receive the money for their loans from the banks and the government will then reimburse the financial institutions. More specifically, the Royal Bank, the Canadian Imperial Bank of Commerce, the Bank of Nova Scotia, the National Bank, the caisses populaires, and the credit unions have tentatively agreed to disburse student loans on behalf of the Government of Canada for the period between August 1, 2000, and February 28, 2001. This will allow the government an opportunity to engage a third party service provider for the actual administration and management of these loans.

Communications is an essential feature and is very important for the successful implementation of the direct financing regime. Over the course of the next four to twelve months, our focus will be to ensure that all students understand what the new regime will mean, including their responsibilities and what they will be required to do, if anything, over the transition period.

New legislative and regulatory authorities are being put in place in order to implement the direct financing regime. To provide the Government of Canada with the basic authorities to implement the direct financing, the necessary changes to the Canada Student Financial Assistance Act have been incorporated into the budget implementation bill, which is now before the Senate.

As announced on March 9, the Government of Canada will be entering into a contractual arrangement with third party service providers to administer and manage the loans while in study and throughout repayment. Entering into a contractual relationship with service providers directly will improve service to students and will, we believe, provide opportunities for innovation and cost efficiencies.

A request for information was issued on March 20 to assess the level of interest from potential service providers. HRDC received 15 responses to the RFI. We met with respondents, provinces, and interested stakeholders in May. A request for proposals will be issued shortly by the department so that a contract can be awarded, allowing the service providers sufficient time to become fully operational by January 1, 2001.

Now let me return very briefly, Mr. Chairman, to the longer-term strategies for improving the administration and management of the Canada student loans program. The new approach to delivering Canada's student loans will provide the federal government with an opportunity to address a number of long-standing concerns related to the programs. It will also provide for opportunities to improve service levels and communications with students as well as to reduce the complexity of the current loan products.

There is, we believe, a significant opportunity for the Government of Canada to implement a government on-line strategy for managing and administering the Canada student loans program. Current loan process are cumbersome and paper-burdened.

The service levels to students could be improved through the use of technology and web-enabled processes. The Canada student loans program client population is, as many of us know, a very Internet-skilled group. Steps can be taken to alleviate a great deal of the paperwork associated with student financial assistance by moving to a series of on-line processes. However, we must be mindful of our need to also provide excellent service for those students who cannot access the Internet or who choose to use some other channel.

The decision to provide financing directly to the Canada student loans program provides the Government of Canada with an opportunity to firmly establish and put in place the principles and processes for modern public sector management. Specifically, it will provide the federal government and the responsible departments with an opportunity to link financial information with demonstrable results while providing regular and accurate reports to Parliament.

Let me just summarize and conclude, Mr. Chairman.

There are several key steps to completing the process of implementing the direct financing student loan regime. Based on our consultations with the provinces, there will be no change in the front-end process of loan administration. We are now completing arrangements with participating financial institutions to disburse funds to students for the next loan year. We are also in the process of securing a contract with service providers in the fall, thus ensuring that the service providers will be operational by January 1, 2001.

• 0925

Not only will we ensure that the short-term delivery of student loans remains uninterrupted, but we expect to see a marked improvement in service to student borrowers over time under the direct financing regime. We expect a more coherent approach to the delivery of the program and greater flexibility in tailoring the program to better meet the needs of student borrowers.

Again, I would like to thank the chair and the members of the committee for providing us with the opportunity to discuss the new direct financing program. I look forward to participating in the round table with committee members and with our stakeholders.

Thank you, Mr. Chairman.

The Chair: David, thank you very much.

I omitted to recognize that we're here today in response to a motion by Libby Davies, who's the MP for Vancouver East.

Libby, I'm sorry. I forgot to mention that when we began.

As I explained, we'll now proceed by the agenda. This helps the interpreters, but it will mean the cameras will move, so I think we need to have very clear identification.

I think everyone has the agenda. We begin with Gerry Brown. A very brief statement, Gerry.

[Translation]

Mr. Gerald Brown: Thank you, Mr. Chairman, for giving me this opportunity to speak to your committee.

[English]

Canada student loans and of course student indebtedness are important priorities within our association.

Let me speak for a few moments about our association. The Association of Canadian Community Colleges regroups the colleges, the technical institutes, and the CEGEPs. There are 175 members.

Our institutions are spread out in 900 communities. We have half a million full-time students, 1.5 million part-time students, and quite a significant component of training and industry training, so you can get a sense of the role and the importance of the student loans program to our organization.

I think if I had one message to give to you regarding our association and our members, it is the fact that the college world is a very different world from the world that most of us grew up in, which was university. It's a training world as well as an education world. It tends to attract a much older clientele and, therefore, they have greater personal commitments as students. It tends to aid the economically disadvantaged. It obviously supports and depends significantly on government programs. The fact that we're in skills leads us to be involved in skills training and leads us to the economic prosperity of the community.

Probably most important is that we were conceived as a system at about the same time as the Canada student loans program was. When the student loans program was thought about, it probably wasn't thought about with the colleges being present. We were being introduced at about the same time. That was in the sixties.

As an association, our members wish to make a distinction between the short-term and long-term issues facing the committee. In the short term, we are cautiously optimistic regarding the decision to return the Canada student loans program to the government. We believe that it must. We are sure that it will enhance our services to the students. We are encouraged to see the comments from David Good.

We continue, though, to be concerned over the notions surrounding designation policy. We feel that this again continues to unfairly penalize the institutions as a result of decisions made by past students, and there is an impact on future students. We feel that we need a lot more clarity around the issues called “default”, as to the statistics around that and how serious that whole issue really is. There are a lot of unknowns, from our perspective.

In regard to the long term, I guess we probably need to stress to the committee our concern as an association over the long-term viability of the program. Let me be cautious here when I make this comment. I understand all the work that's being done by HRDC and all the efforts being made to be responsive. We're an active player inside the stakeholders.

We have a process inside our association whereby we identify priorities. Student debt and student indebtedness continues to be a high priority amongst our members. It's coming from our administrators, our students, our faculty, and our communities.

We put together a task force. When we put it together about a year and a half ago—and unfortunately we're not at the end of the process yet, so we're not able to submit anything to this committee—we discovered four important factors.

One, of course, is what is known to all of us: the high level of debt. But my feeling and our sense, and what I'd like to caution the committee about here today, I think, is that when we look at the student loans program and at default and indebtedness, we tend to make that equation.

Our findings are discovering, however, that this is only the tip of the iceberg. We've discovered that there are many families that are “loan averse”, for instance, and therefore have put themselves into second mortgages, have maximized their credit cards, and have done a number of activities as far as the family is concerned. This is leading to a significant debt beyond just the Canada student loans program. We're not quite sure, but we believe there are long-term implications on this future generation and on the economics of the country.

• 0930

We see issues around accessibility, the high cost of education, and the indebtedness around that. We sense—and I think this is important to say at this time—this impacts on the registration and graduation of our students. Program choices are being driven by income. Then finally, certainly for our level of programs, we see the need for coherence between federal programs, the Unemployment Insurance Act, the labour market development agreements that have been signed in the provinces. All that gravitates around our level of education.

While we need to address the short-term implications for next semester, we also encourage the committee to start thinking that while we've fixed it for the time being—I was going to use the word “tinker”, but that's probably not an appropriate word—we want to encourage the committee to start rethinking the system. The world has changed from when this system was put together in 1960, and we think we have to reassess it and look at the principles upon which it is based.

Thank you.

The Chair: Gerry, thank you very much.

We now go to Bob Best of the AUCC, and he will be followed by Mark Kissel of CASA.

Mr. Robert Best: Thank you, Mr. Chairman.

The Association of Universities and Colleges of Canada is the national organization representing Canada's universities and degree-granting colleges. We very much appreciate the invitation to be here today.

We strongly support the federal government's continuing commitment to the CSLP and to federal involvement in student assistance. We're working closely with HRDC and other members of the national advisory group on student financial assistance to try to ensure that the transition to direct lending is as smooth as possible. The department has been very good about consulting with the members of the national advisory group, and I know they're working diligently on trying to assure that the transition is as smooth as possible.

[Translation]

We hope that the passage to direct loans will provide an opportunity to improve the program as part of overall student services and transparency, particularly by increasing public access to accurate and relevant data on non-repayment of loans, data considered by the financial institutions to be exclusive information.

We are looking forward to the next consultation stage on substantial changes to the program that the department intends to make this fall. For the time being, I would like to briefly mention three points that have not been settled and that demand our attention.

[English]

I have handed out a summary. I won't go into the details at this point. Let me mention three very briefly, if I may.

The first point is with regard to the need assessment in student assistance. This committee, following its round table in 1997, recommended a particular change that we continue to support. According to current rules, students are not allowed to earn more than $600—this includes scholarship and bursary income as well as employment income—without having their loan decreased by 80% of any amount over $600. We would certainly support raising that limit, we suggest to $3,000. This would be consistent with changes announced in the last budget to a similar provision in the Income Tax Act.

Secondly, the debt reduction repayment provisions that were a major change announced in the 1998 budget are still not fully operational. I know the department is struggling with this, but it's very important that this measure be fully implemented as soon as possible. So far it has affected relatively few people.

Finally, I echo Gerry Brown's remarks about the designation issue. It's important that this whole issue be resolved. We would strongly suggest that the department consider the definition of “default”. In the United States, loans are in default only when there has been no repayment for 270 days. In Canada it's 90 days. The request for proposals last January actually suggested 450 days.

I'll stop at this point, Mr. Chairman. Thank you.

The Chair: Bob, we appreciate that. And as I mentioned, we do appreciate the notes we've received from everybody.

I go now to Mark Kissel of the Canadian Alliance of Student Associations, and he will be followed by Judy Stymest of the Canadian Association of Student Financial Administrators.

Mark Kissel.

Mr. Mark Kissel: Thank you.

Mr. Chairperson and members of the committee, my name is Mark Kissel and I'm the national director of the Canadian Alliance of Student Associations. It's my privilege this morning to represent over 300,000 post-secondary education students nationwide.

• 0935

The current situation and the future of the Canada student loans program promises to be challenging. Along with our previously submitted paper, I would like to briefly touch in these opening remarks on two topics.

On August 1 the new Canada student loans program will take effect. Our members support the government's return to being directly involved in all aspects of the student loan delivery process, administration, and collection.

The most immediate challenge facing the system is to ensure clear communication with students who are about to begin post-secondary education, as well as students currently participating in the Canada student loans program.

A strong communication plan will ensure a nearly seamless transition into the new CSLP administration system. While we have been pleased with the amount of information and opportunities afforded to post-secondary stakeholders, we are interested in the potential future of service providers and what they have to offer students of Canada.

Mr. Chairperson, CASA feels the most important characteristic of a new service provider should include the ability to provide quality service to participants in the CSLP. Students are important clients, and how the service provider communicates to students on the status of their loan, what measures are put in place for proper client care, and what interest the provider has in analysing various repayment methods that should be made available to students are very, very important.

As well, a knowledgeable and well-trained staff should be available to handle questions quickly and accurately in a variety of methods, including one-on-one interaction with students, the institution, and post-secondary stakeholder groups. Communication is the key to the future of the Canada student loans program, and CASA urges the government to take this into consideration when selecting a service provider for students.

One other point that directly correlates with the CSLP is how high interest rates are set. Currently interest rates are set at prime plus 2.5% and prime plus 5% for the floating and fixed lending rates respectively. Given that the student lines of credit from the same participating lenders offer rates of prime plus 1%, why is this not extended to the student loans program? High interest rates on student loans are a key factor in unmanageable student debt and strengthen barriers to accessibility, which in turn adversely affects the future financial prosperity of students and the ability of graduates to fully participate in the economy.

Mr. Chairperson, CASA recommends that the federal government re-evaluate the student loan interest rates. Ensuring a tolerable and commercially competitive rate of interest for student loan recipients is a tangible and effective means of ensuring a viable loan product.

Once again, thank you very much for giving me an opportunity to speak, and I look forward to our round table discussion this morning.

The Chair: Mark, thank you very much.

I will now go to Judy Stymest, as I mentioned, of the Canadian Association of Student Financial Aid Administrators. She will be followed by David Robinson of the CAUT.

Judy.

Ms. Judy Stymest: Good morning. I'm Judy Stymest from the Canadian Association of Student Financial Aid Administrators. We appreciate the opportunity to participate in these consultations.

The membership of CASFAA represents personnel and professionals from universities, colleges, and technical institutions across Canada who have direct involvement in student financial aid and student scholarship programs. Financial aid personnel design, promote, adjudicate, and disperse awards to students in the form of loans, grants, scholarships, and bursaries. Financial aid administrators at post-secondary institutions have the unique opportunity to interact with a large percentage of a diverse student population and see the impact of government student assistance programs.

Among the many important issues facing the Canada student loans program, we would like to focus on five this morning. Top among our concerns is direct financing. We are concerned that measures be put in place to ensure that the transition from current risk-shared programs will minimize difficulties to student borrowers.

For example, in the short term we would like to see a comprehensive communication strategy to keep students of post-secondary institutions informed of developments and a simplified, clearly defined process with respect to the obligations regarding non-direct loans. In the medium term, we hope to move toward electronic applications and processing systems, and in the longer term a simplified, harmonized student loan assistance system that will facilitate student access, not hinder it.

Another concern is assistance for part-time students. In the short term, we would like a comprehensive study to be initiated of the current assistance programs, CSLP for part-time students and the Canada study grant, widely recognized as significantly problematic and inadequate. The medium-term objective would be a major restructuring of these programs.

• 0940

We are also concerned about debt reduction and repayment, and in the immediate term that HRDC and the Ministry of Finance make the necessary changes to the DRR program to ensure that government meets its 1998 budget commitment to address serious student indebtedness.

Needs assessment is another concern. Since there has been a recent review of need assessment, the long-term goal should address the major issues identified in the study. In the short term, we also recommend that the in-study exemption be raised from $600 to $3,000, consistent with the recent changes to the Income Tax Act.

Finally, CASFAA recommends that a federal work study program be established as an integral part of the federal student financial aid system in Canada. Work study is a student aid program that allows those students with highest need to earn additional funding without accumulating further debt.

CASFAA has been a long-time advocate for work study because of the benefits to everyone involved in the program. Students benefit on two fronts. They benefit financially by means of earning non-repayable aid that addresses unmet need and limits new debt. As well, students may acquire skills and knowledge to facilitate their eventual entrance into the workforce.

Work study is the type of program that can have a major multiplier effect, supporting the government's goal of providing security and opportunity for Canadians by investing in their skills, their knowledge, and their capacity to learn.

The Chair: Thank you very much.

We'll now go to David Robinson of the Canadian Association of University Teachers. He will be followed by Michael Conlon of the Canadian Federation of Students, the National Graduate Council.

David Robinson.

Mr. David Robinson: Thank you, Mr. Chair.

On behalf of the Canadian Association of University Teachers, I want to thank the committee for this opportunity to present our views on the situation and future plans of the Canada student loans program.

For those of you who don't know, CAUT is the national voice of academic staff in Canada. Our organization represents 30,000 university teachers, librarians, researchers, and other academic professionals in the post-secondary education sector.

As those working directly in Canada's universities and colleges, we are well aware of the enormous financial difficulties facing students today. I think we can state at the outset that although a great deal has been said about the problems afflicting the Canada student loans program in recent months, our experience leads us to believe this is in fact a symptom of a deeper underlying problem afflicting post-secondary education in Canada—that is, the lack of core public funding after years of cutbacks.

The root cause of student indebtedness, excessively high university fees, must be addressed, and can only be addressed with more adequate public post-secondary education funding. The federal and many provincial governments must share the blame in this, and both levels of government must be prepared to reinvest in post-secondary education.

Although that's our principal message today, and has been for some time, we also believe significant changes must be made to the Canada student loans program. Now that the banks have withdrawn from administering the program, we have an ideal opportunity to review and retool the program, undoing much of the damage that has been done in recent years.

With the return of the program to public control, CAUT believes there is a need for government to ensure that the principle of access to post-secondary education for all qualified students is the overriding mandate of the program. In our view, that means that at least three, or possibly four, measures should now be taken. First, we believe we should eliminate the credit checks that have now been put in place. Secondly, we should repeal the provisions of the Bankruptcy and Insolvency Act that unduly punish holders of student loans. And thirdly, we should establish a debt reduction program, which we understand the government is currently working on and supports, that provides real relief for those having difficulty in repaying loans.

Finally, we want to take this opportunity to reiterate our concerns about the Canada Millennium Scholarship Endowment Fund. We believe the fund is not providing enough relief for students. Rather, we think it's important for the government to convert the fund to a fully needs-based grants program.

Thank you.

The Chair: Thank you very much, David.

We'll now go to Michael Conlon of the Canadian Federation of Students—National Graduate Council. He will be followed by Brad Wuetherick of the Canadian Graduate Council.

Mr. Michael Conlon: Good morning. My name is Michael Conlon. I'm the national chairperson of the Canadian Federation of Students.

• 0945

The Canadian Federation of Students was founded in 1981 as a means of representing both the political and service interests of students across Canada. Today our membership is comprised of 400,000 students at over 60 colleges and universities, from St. John's to Victoria.

In my presentation this morning I would like to outline very briefly the context of some of the challenges facing the Canada student loans program, as well as to point to some more positive policy alternatives opened up by what we see as an opportunity by the banks' pullout from the Canada student loans program.

From our standpoint, the single biggest problem facing the Canada student loans program really doesn't fall under the purview of that program, and that is the underfunding of post-secondary education and the skyrocketing cost of education. Since 1990, tuition fees have increased by 126%, and for professional programs, such as law, tuition fees of $10,000 are the norm. At the same time as this hike in tuition fees, most provinces eliminated their grants programs, and the much-touted millennium scholarship introduced in the 1998 budget has in many provinces, most specifically and most egregiously in Ontario and Nova Scotia, been little more than a provincial windfall of revenue for the general coffers of the provinces.

On a micro level, we see the pullout of the banks from the Canada student loans program as an opportunity to reassess the accessibility mandate of the Canada student loans program. There has been a great deal of discussion around the fiscal integrity of the program, but from our standpoint, not nearly enough discussion on its accessibility mandate, which, after all, is the reason it was instituted in 1964.

During the time of the risk-sharing agreements the federal government, to our mind, was under intense pressure to change the mandate of the program and push the program much closer toward a consumer credit environment. To that end, credit checks were introduced on student loans. In addition to several other changes, there were significant changes to the Bankruptcy and Insolvency Act.

In 1997 there were significant consultations around changes to the Bankruptcy and Insolvency Act. There were submissions from our organization and many other organizations that suggested that any change or any prohibition on bankruptcy was a bad idea. Despite these submissions, the law was changed, and students were prohibited from declaring bankruptcy on student loans for two years after graduation. In 1998, after absolutely no public consultation whatsoever, this law was amended again and the ban was extended to ten years.

I think many of the discussions we'll have this morning are honest policy discussions about where the Canada student loans program should go and what best suits the needs of students. However, I'm not going to mince words about this law. From our standpoint, it's an unconscionable attack on the principle of all Canadians' right to equality under the law. Further, it is a backward attempt to criminalize students as a means of addressing the crisis of student debt.

This is having two marked effects in Canadian society. First, it is sentencing those who cannot find the means to repay a student loan to ten years of harassment and degrading treatment from collection agents, one of whom is bidding to be a service provider on the Canada student loans program. And secondly, it is sending a clear message to those Canadians who can't afford the upfront cost of post-secondary education: Don't access post-secondary education unless you're absolutely certain you can pay this loan back.

Gerry Brown alluded to this earlier, and I'd be happy to discuss it more: Most of the sociological data that's emerging now is showing debt aversion as the number one barrier to access to post-secondary education.

As you know, the Canada student loans program was instituted as a social program designed to offer hope to those Canadians who cannot afford the upfront cost of post-secondary education. I think most of us around this table share that goal. However, if this goal is to be obtained and if the Canada student loans program is to remain a social program, the Canadian Federation of Students is recommending the following measures:

—The federal government should first restore the six-month interest-free period after graduation for student loans.

—The federal government should immediately repeal the regressive changes to the Bankruptcy and Insolvency Act.

—Human Resources Development Canada should work with the Department of Finance to implement the debt reduction program promised in the 1998 education budget. I should note that all the regressive changes introduced in that budget have been implemented and introduced, yet this remains outstanding.

—Next, in terms of the definition of “default”, we feel that this definition should be changed to at least 360 days, as opposed to the current 90. Any changes to the default definition should be commensurate with the punitive trigger that disqualifies students from the Canada student loans program and all other assistance with repayment, including interest relief and millennium scholarships. I'd be very happy to elaborate on the technical nature of that recommendation.

—Finally, in order to reduce student debt, and indeed reduce the pressure on the Canada student loans program, we recommend that the millennium scholarship, or the funds set aside for the millennium scholarship, be changed into a national system of needs-based grants.

Thank you.

The Chair: Thank you very much.

You may know I've been aware of your first recommendation for some time. This committee is already on the hook for creating two or three government departments, so I'm not sure whether we could create another.

• 0950

We go now to the Canadian Graduate Council, Brad Wuetherick. Brad will be followed by Tom Lumsden of the Financial Arrangements Working Group. He'll be followed by Paul Kitchin, and then Frank Smith will conclude.

Brad Wuetherick.

Mr. Brad Wuetherick: I would like to thank the committee members for letting us speak here today.

I represent the Canadian Graduate Council, which is an organization formed in the early 1990s to represent graduate student concerns across the country. Though there are numerous concerns and questions I would like to raise about the present and future state of the Canada Student Loans Program, in the short time permitted I would like to focus on three items.

First, there needs to be more recognition of the unique place that graduate students have in the post-secondary education system. We are students, but we are also teachers, researchers, mentors, and award winners. Graduate students are generally older, mature. Many have families and generally our costs of living are in excess of the levels allowed by the current needs assessment in the Canada Student Loans Program. This is doubly harsh when such an innovative plan as the Canada Millennium Scholarship is limited to undergraduate students only, ignoring the numerous graduate students who easily fall into the high-needs category of the loan program.

Second, with the new Canada student loans program, there must be greater transparency in the system and there must be a greater access to data for the various stakeholders and to student financial assistance, namely us on this side of the table. This problem was repeatedly raised with the financial institutions under the old system, but it was never fully addressed and it must not become an issue in the development of the new direct funding formula for the Canadian government.

Third, at numerous meetings of stakeholders and at various other presentations, people at different levels of government, both provincial and federal, have committed to attempting to solve the problem of ever-increasing student debt. This problem is compounded at the graduate level because many incoming graduate students already have high debt levels from their undergraduate degrees.

Governments must commit to better, more consistent interest relief and debt reduction policies. As well, governments should examine and implement programs like loan remission or ideally a system of up-front grants or bursaries for high-need students. On top of this, the government must also address the causes of this increased debt, in particular the rising cost of tuition and other mandatory educational costs.

For example, a graduate student's tuition at the University of Alberta has gone up by an average of 198% since 1991. Of the 4,800 graduate students at the U of A, only 1,400 receive assistanceships, the average of which is only $7,000 per year. A number of other students do receive major fellowships and awards or are funded under trust accounts from their supervisors, but this still leaves a large proportion of students unfunded or underfunded. They must rely on loans to finance their degrees. This is the root of the problem that governments and stakeholders must work to address.

To quote the national director of CASA from the 1998 stakeholders meeting,

Debt levels that we have deferred to students are now coming back to haunt us. It is important that we not blame students for this, but rather recognize that this is due to a lack of government funding and the rising cost of education.

Thank you.

The Chair: Brad, thank you very much.

We now go to Tom Lumsden of the Financial Arrangements Working Group.

Mr. Tom Lumsden: Good morning. In view of the time, I'll try to be very quick.

Educating our youth is critical to Canada's future prosperity and the financial institutions want to participate with students, governments, educational institutions, and other stakeholders in a student loan program that is commercially viable and works for all stakeholders. We are longstanding supporters of students and we have full expectation and intention of going forward to continue our support to students with appropriate financial services and advice.

We do not believe the current government-sponsored loan program design meets the needs of students who are accumulating high debt loads, resulting in a significant increase in loan defaults. It is becoming increasingly difficult for financial institutions to continue to support programs where Canadian students are damaging their future prospects with poor credit ratings. It was never intended or expected that the financial institutions would fund the losses of the program. However, losses have become excessive and we do not believe it would responsible to continue to accept losses that would not normally be borne by our shareholders.

Utilizing HRDC statistical information, a loan is considered in default when the borrower does not make any payment for a period of 90 days. Since 1992, default rates have steadily increased from approximately 20% in 1992, peaking in 1996 at over 30%, resulting in higher costs for administering and delivering government-sponsored programs.

• 0955

Over the past few years, financial institutions, other stakeholders, and government have worked closely to address the program deficiencies. Government has responded by introducing several initiatives to address the concerns, such as extension of interest relief, debt reduction in repayment, tax deductibility for interest paid on government-sponsored loans, and the Canada Millennium Scholarship.

While these measures have improved portfolio performance, there is still a significant gap that needs to be addressed. With the introduction of the direct lending program, we would offer the following four points: harmonization of the federal and provincial programs; streamlining and simplification of the extremely complex programs; introduction of designation or de-designation of educational institutions; clear, concise communication of borrower responsibilities and obligations.

In a presentation at the national stakeholders conference in 1998, the financial institutions highlighted the continuing difficulties and deficiencies with the existing programs and our concerns with their future viability. We urged government to proceed quickly with addressing these concerns and escalating the renegotiation of contracts to provide sufficient time to address the shortcomings in the programs.

We are disappointed that we could not reach agreement on the continuation of the programs; however, we believe that we have worked closely with government since the inception of the risk-shared programs, and we remain committed to working with government to meet all of our contractual requirements until their expiry in July 2000.

The Chair: Thank you, Tom. The Financial Arrangements Working Group is the group that coordinated the banks' involvement in—

Mr. Tom Lumsden: Correct. It was put together in the early stages of the risk-shared contract to address the issues that were flowing out of it. It expanded to include groups such as CASA, etc., as we moved through the program.

The Chair: Thank you very much for that explanation.

Now we'll go to Paul Kitchin of the National Association of Career Colleges.

Mr. Paul Kitchin: Thank you, Mr. Chair. I'd like to thank you and the committee for the invitation to NACC to make a presentation on this very important topic.

I have a few quick words about our organization. The NACC is a national, non-profit organization whose membership consists of privately owned and operated post-secondary institutions across the country. There would be over 500 located in small, medium, and large communities across Canada.

Career colleges are private vocational schools or trade schools, which are governed and regulated by provincial acts and regulations. Career colleges would enroll in excess of 100,000 students annually. More than half of those students would rely on programs such as the CSL program to access their courses of study.

We have basically three general, broad recommendations that we would like to make to the committee and then there are a number of other specific recommendations that we would make.

The first general recommendation would be that the federal government continue to pursue its activities in the harmonization of federal and provincial loan programs. We believe that will address a number of the issues by streamlining and making the appearance, certainly at the student level, that it's one loan for one student.

The second general recommendation would be that the federal government continue its efforts to make sure that there is good communication around the program, that it's clear, consistent, and targeted communication that really has the aim of trying to reduce debt load, reduce the incidence of defaults, and provide better overall service to students.

The third area would be to... You must excuse me, Mr. Chairman, for my visual impairment. I don't have my notes in front of me. I'll come back to that one. I'll go on to specific recommendations.

In terms of needs assessment, we again would concur with a number of the people who have testified so far that there is a need to increase the amount of in-study earnings that students can earn before it affects their assessment. Our recommendation is maybe not quite as generous as the others. We would recommend that students be allowed to make $50 per week during the course of their program so that if someone were in a 52-week program, they could earn $2,600. If they were in the traditional 34-week program, they could earn $1,700. If they were in a shorter, 20-week program, they could earn $1,000 before it affected their assessment.

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We had some suggestions and concerns around disbursement of loan funds. We were encouraged to hear there really will be no change in the way loans are disbursed up front. Of particular concern to us has been that in the past few years, under the EI program, the funds for tuitions have been handed directly to students. This has been a problem, so we would encourage that under the direct financing program there be no change—that tuition dollars continue to be directed directly to the educational institutions.

The Chair: Can I just interrupt you for a moment?

Colleagues, we'll find out what the bell means. Presumably it's quorum, but we'll check.

Sorry about that, Paul. Please carry on. The bells we hear are probably a quorum call.

A voice: No, it's the opening of the House.

The Chair: Oh, it's the opening of the House?

I'm sorry, Paul. Excuse me. I'd forgotten I got up early this morning. It's the House opening.

Voices: Oh, oh!

The Chair: Please continue.

Mr. Paul Kitchin: No problem.

In terms of disbursements, the other issue our members are particularly concerned with is for the federal government to take a serious look at the living expense portion of student loans being disbursed to students on a monthly basis, or maybe a more regular basis, to help them with the management of their finances and hopefully have a positive impact again on default levels.

There has been some talk about key performance indicators for educational institutions. The NACC is very supportive of good, reliable information going out to students when they are choosing their post-secondary studies, and we would support that, but only if that information is meaningful and relevant.

To give you a couple of examples, if we're talking about graduation rates, NACC would support that when those are calculated, they are based on all students who enrol in a program, rather than simply ignoring people who drop out of a program within the first two months, as is the practice in some jurisdictions. And around employment rates of graduates, where appropriate—and it's not appropriate for all programs, but where appropriate—those employment rates should reflect on employment that is significantly related to the types of studies the students have taken.

That reminds me of the third general point I was going to talk about, which is the government should continue with its emphasis that all the stakeholders involved are accountable for the aspects of the CSL program that are within their direct control. There is a role for all the stakeholders, and they should be accountable for the things they can directly affect.

Very quickly, around service providers, again we would echo the comment that the definition of “defaults” should certainly be extended beyond 90 days. Our recommendation was going to be a minimum of 270 days, but we'd certainly support extending that to 360 or 450, as has been mentioned.

The NACC would also encourage that a study, and a comprehensive study, of the causes of defaults be done, not just to identify the primary causes, whether it's debt load or information or whatever, but to go deeper and go to secondary causes—What are the causes of those debt loads?—so that we better understand exactly why it is people are defaulting on their student loans.

The last point I would make is that the NACC, for a number of years, has supported the concept of an income-contingent repayment plan, where the repayment level for students is geared to their income at that particular time. We know that basically has come off the shelf, and expanded interest relief and debt reduction have stepped in, but our members have asked that a call be made to take a look at income-contingent repayment again.

Thank you very much, Mr. Chairman.

The Chair: Thank you very much, and I'm sorry for my interruption in the middle there.

Now the last short presentation will be from the National Educational Association of Disabled Students, represented by Frank Smith.

Mr. Frank Smith: On behalf of the National Educational Association of Disabled Students, NEADS, I would like to thank members of the committee for the opportunity to participate in this important round table on the Canada student loans program.

Our association represents post-secondary students and graduates with disabilities across Canada, and our members want to pursue a fully accessible college and university education.

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In order to participate in post-secondary study, disabled persons must have access to funding that recognizes there are often extra costs involved in pursuing higher education. It can also take longer for a student with a disability to complete an academic program, because of disability.

In the 1993 NEADS report, Study of Financial Assistance Available to Post-Secondary Students with Disabilities, 44% of 384 respondents indicated that their total income from all sources, including financial assistance programs, was not sufficient to cover their education-related services and/or equipment costs, considering their disability. In the 1996 NEADS study, Employment Opportunities for Post-Secondary Students and Graduates with Disabilities, 59% of 424 respondents indicated that their student aid was not sufficient to cover the costs of their education.

During the last NEADS national conference held in Ottawa in November 1998, student delegates from across Canada addressed the subject of financial assistance as a central aspect of the conference agenda. In one workshop, students explored funding issues and concerns by focusing on key programs, including Canada student loans and Canada study grants; provincial grants and loans; employability assistance for persons with disabilities, EAPD; and the Quebec loans and bursaries program. The millennium fund scholarship was also addressed.

A number of areas of concern were identified at the meeting. Financial assistance programs are often not adequate to meet educational costs, including disability-related costs of pursuing education. There's a lack of portability of funding from one part of the country to another, which limits academic options. There's confusion about how to obtain funding or information on funding programs and about which programs students are eligible to access. There are still far too many students with disabilities graduating with high student loan debt loads, an issue that is of real concern to disabled graduates, who have greater difficulty obtaining employment to repay their loans.

As a member of the national advisory group on student financial assistance, we have, since 1995, with the introduction of the Canada study grants for students with permanent disabilities, seen efforts on behalf of the federal government to recognize the unique funding difficulties of disabled students within the Canada student loans program. We were pleased with some of the measures announced in the last federal budget. The announcement of the coverage of diagnostic assessments for students with learning disabilities as an eligible expense under Canada study grants is encouraging. Also the increase in the tax exemption on income from scholarships, fellowships, and bursaries from $500 to $3,000 is a step in the right direction.

Having said this, funds to students with disabilities received through Canada study grants are provided to support education-related expenses because of disability. Therefore this government and the Department of Finance should be working towards ensuring these grants not be treated as taxable income, as recommended in the 1997 federal task force on disability issues report. This was also recommendation 11 in your committee's report, Ensuring Access: Assistance for Post-Secondary Students.

We are also concerned with the impact of the EAPD as a successor to VRDP. While EAPD has been designed as part of a larger process of so-called social policy renewal between the federal government and the provinces, there is real concern that EAPD will not be as supportive of post-secondary education as VRDP was previously. In most cases the EAPD bilateral agreements signed between Ottawa and the provinces do specifically refer to post-secondary education support. In some jurisdictions, however—Ontario, for example—they are electing to fund post-secondary education through regular student assistance programming. We will need to carefully monitor the effectiveness of these programs during the transition period.

Recommendation 10 in your Ensuring Access report is relevant today:

The Government of Canada should work with the provinces to ensure that the successor to the Vocational Rehabilitation of Disabled Persons Program provides support to individuals to pursue post-secondary education and training and that it continue to assist them in covering their disability-related costs that are not supported elsewhere.

Our association is making efforts to provide students with as much information as possible with respect to funding for college and university study. Recently we published a national directory of financial assistance programs for post-secondary students with disabilities, which is available from our office at no cost to students. The entire directory can be accessed online on the association's website, with relevant links to the websites of provincial funding authorities, the federal Canada student loans program, and non-governmental organizations that offer scholarship or bursary programs for disabled students.

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Thank you once again, members of this committee, for the opportunity to appear before you today. We look forward to contributing to the discussion around this table.

The Chair: Thank you very much, Frank.

Thank you to all for keeping to the time. As I mentioned earlier, we normally would have conducted this meeting in February or so, and likely then we could have broken it up and had two or three meetings about it. What we're trying to do today is to condense and get an update on where we are in the transition of Canada student loans and to get this process going of how we can enrich and further strengthen Canada student loans.

I'd like to mention that I tried previously to introduce Andrew Brouwer. Andrew is with the Maytree Foundation, and his particular interest is Bill C-487, a private members' bill, an act to amend the Canada Student Financial Assistance Act in terms of financial assistance relating to convention refugees and their education needs.

Andrew, we welcome you here. If I get a chance I myself might ask a question about this topic.

Colleagues, I'm going to proceed in the traditional fashion. We'll start with the Canadian Alliance.

John Williams, we welcome you here today.

John's just getting up to speed on this matter. We will then go to Judy Sgro, Paul Crête, Bryon Wilfert, and Libby Davies, in that order.

John Williams.

Mr. John Williams (St. Albert, Canadian Alliance): Thank you, Mr. Chairman.

Welcome, all. Thank you very much for the enlightening opening remarks. I appreciate it very much.

I'd like to start with you, Mr. Good. As the chair said, I'm just getting up to speed here, but it seems to me the government has made a conscious decision to say to the banks we're not going to pay you any... what they figure is sufficient to cover their cost of administering the student loan program, and you're going to do it yourselves.

What makes you think you're going to be able to provide a better service—and I think that was your own words—through a service provider as opposed to banks, which have financial institutions in all metropolitan areas and can follow the students after they graduate and so on? Just quickly, how can you tell me this is going to be better, going to be an improvement?

Mr. David Good: Mr. Williams, the answer is basically the following. Under the previous risk-shared arrangements, we did not have in those arrangements proper service standards. We believe, with a service provider and with a mechanism that we can set out with a service provider, we can provide the requirements for communication that are absolutely essential.

Our experience is very clear: The sooner the student is advised of the situation in a communication, the much less likely the student is to get into default, into difficulty. The key to it is communication. It's our belief very strongly that with a proper arrangement worked out between the Government of Canada and the service provider, setting out what those requirements are, that kind of communication can be written into the contract and clearly specify the kind of arrangement we need.

Mr. John Williams: So it seems to me—

Mr. David Good: Just to finish, in that context the federal government will, of course, be putting up the equity and the requirements for the financing.

Mr. John Williams: I can't buy the argument that a government can communicate better to students than can financial institutions that have thousands of locations right across the country and experienced financial people right on the spot in every place.

Mr. Lumsden, who's representing the banks, the financial institutions, indicated that they felt they weren't being adequately compensated for the losses and so on. How do you feel, apart from better communication, you're going to be able to minimize the losses as compared with what the banks have currently been experiencing? How are you going to improve loan losses? Obviously you're not prepared to compensate the bank for the losses they've currently been finding.

Mr. David Good: As I indicated earlier, the key to what we have found in the loan loss is to really ensure that communication takes place between the financial institution and the actual borrower, the student individual. Basically, with the kind of communication that we think is required there in order to ensure... We've certainly seen in the past that the inability to have the proper communication has really been one of the key problems in the high default rates.

It's not the only answer—other suggestions have been put on the table by others—but we think that will help us to move in the areas of improving service and making inroads into decreasing default rates.

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Mr. John Williams: Okay. I think you—

The Chair: While I'm not as tense as I have been the last four months, I would encourage the witness and the questioner to address their remarks through the chair.

Mr. John Williams: Thank you, Mr. Chair.

I'd now like to ask you, Mr. Lumsden, whether, as a representative of the financial institutions, you feel your communication hasn't been adequate enough, or could improve. Do you feel that communication with students is how you would reduce the loan losses? Why do you feel you had to withdraw from the agreement? As well, do you feel the government can communicate better, doing it directly?

Mr. Tom Lumsden: First of all, my answer would be yes, there's always room for improvement. We've made significant changes to that whole process as we've gone through, but it's a very difficult group of clients. They're very transient by nature. They're often in communities away from home. It's always been a challenge to try to maintain that contact.

We've instituted several things—i.e., trying to catch them before they've left school, during the summer—as well as post-consolidation.

Could you repeat the second part of that question for me? How do I feel the government could improve over our communication?

Mr. John Williams: Do you feel the government can communicate better?

I don't know how many thousands of locations the financial institutions have, Mr. Chair, but the government, I would imagine, under these service providers, singular or plural... and I hope it's plural. I don't know how they're going to find these people if the banks tell us that these students are transient by nature.

Mr. Tom Lumsden: I would presume that through the use of a service provider they would be instituting many of the same things we have currently done, so I would expect that, or believe, they would have the same success ratio in trying to improve that communication.

The Chair: Mr. Williams.

Mr. John Williams: And I would hate to think of the cost the government's going to incur, Mr. Chair, trying to duplicate what already exists through the financial institutions.

I just want to put on the record one point, Mr. Chair, that really didn't come up this morning. A constituent of mine who contacted me at tax time found that while student loans are tax deductible, the fact that his son did not qualify, and he had to borrow the money to pay for his child's education... He was denied a tax deduction as well. So (a) he had to put up his own money to fund the child's education, and (b) he was denied a tax deduction that others were entitled to under the CSL program. I just want that on the record.

The Chair: Thank you, John.

As this is a round table, are there any other comments from anyone else on the topic that's been raised? If you can, follow the questioning, and bear in mind, a short remark would be quite useful.

I'm going to proceed, then, to Judy Sgro—

Mr. John Williams: Mr. Conlon had a comment.

The Chair: Sorry, Mike, I didn't see you; please.

Mr. Michael Conlon: From our standpoint, there are a couple of issues bound up in the questions, which I'd like to respond to. To be totally frank, I think the issue of communication is critical, and I think it's important, but I think it would be misleading to say that's the number one issue around the issue of default. The number one issue is the amount of debt students are carrying.

I also want to respond to the notion of the banks' involvement. Our standpoint around the banks has been that the banks have always been transparent about where their interests lie. Their interest is in accountability to shareholders, not to the citizens of Canada. We should always remember that the risk-sharing agreements had a cost built into them that a program administered by the Canadian government will not have built into it, and that is a profit margin.

It seems to me this is a point that needs to be made about where there may be cost savings in transferring the program back to a publicly accountable body.

The Chair: Paul Kitchin, Gerry Brown, and then I'll cut this one off and we'll go to the next questioner.

Paul Kitchin.

Mr. Paul Kitchin: Thank you, Mr. Chair.

On the topic of communications, one of the things certainly our membership is interested in when we move to the service provider methodology is that there be provisions in there for those service providers to contact our institutions—they tend to be smaller, they tend to know the student base, and they tend to keep contact with the students after leaving the school—in the hope that they would be able to assist in tracking down those students. We've been asking for this for a number of years, to have better communication between the lenders and our institutions. Hopefully in this case, with service providers, our institutions are prepared to take a role in trying to find those people so that they do not go into default situations.

The Chair: Thank you, Paul.

Gerry Brown.

Mr. Gerald Brown: Mr. Chair, the comment made by Mr. Williams regarding one of his constituents who had to borrow money, etc., has to be recorded. It speaks to the kind of concern we're seeing in our association's task force, that although we look at the student loan program as being the tip of the iceberg, we think there are a lot of loan issues out there and a need to get a better sense of what the issues are.

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The Chair: Next is Judy Sgro, followed by Paul Crête.

Ms. Judy Sgro (York West, Lib.): Thank you, Mr. Chairman.

The issue before us is a very complicated one. After hearing so many different parts of this issue raised this morning, it's unfortunate that we are trying to focus on finding a way of dealing with the issue with the banks and having a different delivery service model when there are so many other issues that need to be addressed. I don't know who's addressing all those other issues, but I certainly hope that today is not going to be the end of discussions on how we can improve the system of education.

I'm very concerned about rising education costs. Many of the comments made around this table this morning were on the fact that at the rate we're going, the only children going to school in our country will be the children of the rich. That's not the kind of Canada that I think any of us want to live in, and that's not the direction I want to go in.

I'll start first with a question to Mr. Good on the issue of the service bureaus. Are you talking about having one service bureau for all of Canada, or a variety of them? We've heard the comment about bigger doesn't mean better and more opportunities for direct service delivery. What are your ideas as you go forward with this program?

Mr. David Good: Mr. Chairman, with your permission, I'll ask Mr. Townsend to respond.

The Chair: Mr. Townsend.

Mr. Thomas Townsend: Thank you, Chair.

The principal consideration in selecting a service provider has to be service to the client group. It's essential that the service provider be able to provide service on a national level, but equally important is that the service provider be able to provide service through a number of service channels that would help student borrowers.

We've mentioned in our opening remarks that clearly this is a population that likes being informed by and doing business over the Internet. In fact, we know that among student borrowers, four out of ten of them use the Internet more than once a day, and nine out of ten are using the Internet at least once a week. So that's a channel of communication and service that would be very important in the capacity of the service provider. To provide service along an Internet channel would be important to us. But it's important to underscore that a large number of our borrowers equally need to be able to get immediate, accurate information either in person, over a telephone, or through some other means, as other people here this morning have mentioned. Those are the principal considerations in selecting the service provider.

The Chair: Could I interrupt? Would it be possible for the members of the committee to receive a copy of the request for proposals? Could that be sent to us, so that we have some sense of how that's proceeding?

Mr. Thomas Townsend: We can make arrangements to do that. The request for proposals is handled through Public Works and Government Services Canada, and it becomes available over their system. But we can take the necessary measures in order that copies will be available to you.

The Chair: I'd be grateful. As I mentioned, the committee is very conscious of the fact that we're behind on this, for good reason, and that would bring us up to date.

I'm sorry, Judy, to interrupt.

Ms. Judy Sgro: Are you aware of any significant plans in the near future to make changes in the definitions and how we deal with some of the other issues that some of our representatives from the colleges mentioned?

Mr. Thomas Townsend: Chair, if I may respond, we have been consulting extensively with stakeholders, such as these groups here, as we have proceeded in direct financing. There are a number of things we need to do on an urgent basis to ensure that loans are available for students in the next semester. Our undertaking during those consultations was that with regard to issues such as the period of time that defines a default, we would open discussions with stakeholders in the fall on specific issues like that.

We can't make changes to our regulations other than those that are absolutely essential to implement the act, in the first instance, to ensure that loans will be delivered. But we've taken note of a large number of comments for improvement that were made by stakeholders during the consultations, and we'll engage those as soon as we have the program in place and the loans issued for the next semester.

Ms. Judy Sgro: I have just one other very short question.

The Chair: Yes, go ahead.

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Ms. Judy Sgro: Do you expect that there will be a higher chance of recovering some of these debts that students are unable to pay as a result of service bureaus dealing with them versus the financial institutions?

Mr. Thomas Townsend: Our first instance is to ensure that loans stay in good standing. One of the very sad facts of the program as it currently exists is that large numbers of the loans actually go into repayment without a great deal of contact between the institution with the loan and the student. In fact, nearly 50% of those loans go into repayment in what we refer to as a passive sense. Those loans that are not actively managed much more frequently go into default and in many cases without the financial institution being able to make contact with the student borrower prior to that default occurring.

One of the solutions to that would be to allow a longer period for the service provider, in our case, and the student so that they can take much better advantage of very generous programs, such as interest relief, that are available to student borrowers if they're having difficulty repaying.

So the first instance is let's keep the loans in good standing and stop defaults from occurring. In the second instance, it's clearly to work with borrowers to ensure that the government loan is repaid but that it is done under terms and conditions that are appropriate to the circumstances of the borrower.

The Chair: Judy, is that okay?

Ms. Judy Sgro: Yes.

The Chair: With regard to Judy Sgro's point about these other issues that have been raised—and I certainly see no objection to them being raised, and as I've explained, we should have done this before—it's my hope that the committee will encourage me at the end of today to write a letter to the minister raising not only the specific issues we're dealing with on the Canada student loans program but also other issues that have been raised.

Our colleague John Nunziata is here with some guests. We're very pleased to see you here.

Does anyone have any comment on matters raised by Judy Sgro? Bob Best.

Mr. Robert Best: Thank you, Mr. Chairman.

I'd like to raise a question that arises out of Mr. Townsend's comments about defaults and what he called passive defaults. I think there's a concern as well this fall during this transition period that we may in fact see an increased number of what are sometimes called technical defaults; that is, people going into default because of the short 90-day period without realizing that they are in a position where they have to consolidate their loan. This may arise, for example, where a student has had a risk-shared loan. They may now continue their studies but not require a new direct loan, not realizing that they have to inform the lender of their risk-shared loan, the bank in most cases, that they in fact are continuing their studies. I think many of the stakeholders have a concern that we're going to see an increase in defaults not because people are being necessarily irresponsible, but because they are simply confused by adding on another layer.

I'd be interested in knowing how the department sees this issue and how they would propose to deal with it in this transition period.

The Chair: We'll go to Judy Stymest first, and then we'll come back to Thomas Townsend. Judy.

Ms. Judy Stymest: I just want to add my concern to Bob's. Not only during the transition period, but also the post-study period, when students will have to repay both direct loans and risk-shared loans in a parallel fashion and the number of programs that are in place to help students in difficulty, I'm interested in knowing how students will have to go about it. Will they have to do everything in duplicate? I certainly would hope there's some tangible show of flexibility for students who in good faith on one level carry out all the proper processes to repay their loans but who are negligent on the other level perhaps because of a lack of information.

The Chair: We'll go to Thomas Townsend, and then this will conclude Judy Sgro's questions. Sorry, we'll go to Brad Weutherick.

Could you be brief, Brad, please? I'm sorry, I didn't see you earlier.

Mr. Brad Wuetherick: I just wanted to reiterate one other point. Not only will there be these two parallel federal loans, but in almost every case there's going to be a matching provincial loan. For my constituents' case, many graduate students started getting loans prior to risk-shared loans coming into effect, so a lot of them have an extra loan on top of that from before risk share. Then also, many graduate students are getting direct lines of credit. There are some cases where people have five loans to pay back. So you must remember this isn't just these two parallel loans; it's a much bigger issue.

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The Chair: You should remember that I have to balance out the MPs' time, and this is Judy Sgro's time. But Paul, this is okay.

We have Tom Lumsden, very briefly, then Thomas Townsend. We're going to finish with Judy Sgro's question.

Mr. Tom Lumsden: I have just a quick comment on Thomas's remark about the current consolidation process.

It must be recognized that with both the FIs, and in two cases, with two of the participating lenders, those consolidating processes are handled by a service bureau today. There's considerable effort expended on trying to reach clients, notify them of what their responsibilities are today, done by both the FIs and the banks. So there's a fair bit of effort that goes into that. They are very difficult to contact. And yes, Thomas is right, a lot of them end up impassive. It's not lack of trying; it's from trying to generate the response back from the students.

The Chair: Thomas Townsend.

Mr. Thomas Townsend: On the specific subject of confusion resulting from loans from more than one source, this was recognized very early. We've done a couple of things immediately that we hope will assist student borrowers. One is that we've included additional forms in the loan agreements that can be sent to other institutions that may have previous loans with the borrowers. Those would be available to the student borrowers. A major focus of our communications campaign through the next semester will be precisely on this issue.

Additionally, we're working with the financial institutions to ensure that in fact communication is occurring between the government, direct loans, and the existing risk-premium loans.

So we're hoping that all three of those things will minimize the risk of confusion for students, but it's recognized that this is one of the outcomes of the change we're going through—that there may be increased confusion.

The Chair: I think that was a very useful exchange.

It's Paul Crête, followed by Brian Wilfert, Libby Davis, and Raymonde Folco.

[Translation]

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): First of all, a comment on the short-term problems. I'm glad to see that the banks' problems will not call into question their long-term profitability. I don't think that the problems caused to them by students are likely to bring down the banks. Banks do indeed undergo losses on these loans when there's no follow-up on these young people but the development of customer loyalty occurs over a long period of time. I think that we must see the banks' profitability in a larger context. It is important to understand this aspect of the situation.

My question relates more to the long-term program. In this respect, I would like to go along with one of the comments made by Mr. Brown about the tip of the iceberg. It seems to me that the loans system—in Quebec, we talk about loans and bursaries—should be based on an important principle, namely the fact that nowadays in order to benefit society, everyone with the ability to continue their education should be able to exploit this potential.

I'm not talking about favouritism for students. The main problem facing our society with respect to employment is that people do not have adequate education. They do not have the necessary qualifications to take up the available jobs. There is both a shortage of skilled workers and a surplus of people who do not have adequate training.

Some of these people do have the potential but are lacking in funding and encouragement. We still hear people worry that if they continue their education, it might be a waste of money because they think they might not get a job and they don't have the money to pay for their education.

So my question is the following: should we not take advantage of the situation, once we have settled the house keeping matters, to have an in-depth debate in Canada on the principle of accessibility of higher education for all those with the required ability?

Those who fall by the wayside because they are not able to afford higher education result in huge costs for society, don't they? Is it not time to take a serious look at this question, including what happens in countries where tuition fees are non-existent and where education is entirely financed by the government, as well as what happens in countries at the other extreme? What type of model do we wish to have here to meet the requirements of the labour market?

I'd like to hear the views of those concerned by this question.

The Chair: Gerry Brown.

• 1035

Mr. Gerald Brown: We support Mr. Crête's view. We realize that there are some short-term problems that must be settled. However, we must recognize that there will always be short-term problems. I think it is up to your committee to begin substantive changes to the loans and bursaries program and also consider the subject of education in Canada as a whole.

If we went back in time and found ourselves in the place of the previous generation, we might perhaps be holding the same debate on secondary education and we might be wondering if such education should be free. Free secondary education is a reality today. I am part of this previous generation and it seems to me that there is a great deal of progress to be made. Have we now reached the stage today where we are asking ourselves if post- secondary education should also be free? We have understood the need for free secondary education and it is perhaps the time to ask this question. There are many factors to be taken into account, including the existence of employment insurance programs and the transfer of responsibility for manpower to the provinces. Many programs of this type have a direct link with courses provided in colleges and CEGEPs. It is important for all courses to be on line.

The message we are conveying to you is that the Department of Human Resources Development did an excellent job in settling short-term problems. I was happy to hear the chair say that he wanted this process to continue and that you wanted to give further thought to this matter. We share this point of view.

[English]

The Chair: Mike Conlon.

Mr. Michael Conlon: Yes, I think this is an issue our organization's been wrestling with, and our research department has been engaged in ongoing dialogue with the education secretariat in Ireland around the effect the elimination of tuition has had both on the economy and socially in Ireland.

There are several marked things the elimination of fees did in Ireland. Not only has the unemployment rate dropped by nearly half, but tax revenue has increased by about 64% since the elimination of tuition fees. This backs up the research of Robert Allen at the University of British Columbia, who suggested that based on wealth creation through the tax base and other value-added service that education brings to the market, every public dollar invested in post-secondary education has a return of about four dollars.

So I think the argument for the elimination of tuition fees is not just a social argument, an argument about social justice—which we think it also ought to be about, equality of opportunity—but it's also an economic argument. Frankly, everyone we contacted in the Irish government, from the education secretariat to the finance department, said that tax cuts had absolutely nothing to do with the economic growth in Ireland.

The economic growth in Ireland was attributed to two things. The first was a massive infusion of funds from the European Union as a means of inducing Ireland to join the European Union. And the second, closely on the heels of that, that they list as the cause of their economic recovery was the elimination of tuition fees and greater participation in post-secondary education.

[Translation]

The Chair: Paul Crête.

Mr. Paul Crête: I'd like to ask a supplementary question. There is a fairly significant difference in the debt level of Quebec students under the Quebec system of loans and bursaries and that of students in the rest of Canada. Can this discrepancy be explained? Does it exist because the Quebec system has been around for a number of years or are there other elements that explain this difference?

Is it not the aim of the other Canadian provinces to ensure that their students have a lower level of debt, comparable to the Quebec level?

The Chair: Bob Best.

Mr. Robert Best: First of all, the Quebec system of bursaries is a very important factor. Quebec and British Columbia are the only provinces that kept their bursary system during the 1990s. This is a very important factor since, as several colleagues mentioned, many people are thinking about continuing their education but are afraid of going into debt. If from the beginning they have access to bursaries that allow them to reduce their debt level, then of course this will be helpful.

• 1040

Before the 1998 budget, we recommended with several of our colleagues that as part of the CSLP, the federal government adopt a system of bursaries; it created the Millennium Scholarship Fund. There is no doubt that that will reduce the debt level for a significant number but it is only available as of the second year. They are not what can be described as up-front grants.

I think that Quebec and British Columbia were quite right when they decided to keep their grants system. Thank you.

[English]

The Chair: Next are Judy Stymest, Mike Conlon, Gerry Brown, and Thomas Townsend.

Judy Stymest.

[Translation]

Ms. Judy Stymest: I work in a Quebec university. I do in fact see every day the effect of student access to a very generous system of loans and grants along with lower tuition fees. Having worked in this field for a number of years, I've also seen an increase in tuition fees for students from outside the province and I worry when I see the downward trend in provincial grant programs.

I don't think we'll ever see the good old days anymore when tuition fees were minimal, but I really do hope that all of the governments are aware of the debt load of the students and their yearly financial obligations. I think the proper way to attack this problem is to limit the student debt load and offer them scholarships and other ways of decreasing their debts.

The Chair: Thank you, Judy.

[English]

Mike Conlon.

Mr. Michael Conlon: I concur with most of what Bob Best said: that the answer here is absolutely no mystery whatsoever. No innovative public-private partnership, no innovative public management, and no private sector involvement can match what British Columbia and Quebec do.

The only thing I would add to what Bob said is that both of those provinces share a tuition fee freeze. Now of course the freeze in Quebec does not apply to out-of-province students, which our organization feels is a problem, but besides that point, we feel that both Quebec and British Columbia are the standard-bearers of post-secondary education policy in Canada.

The numbers bear this out. British Columbia went from just about dead last in the country in terms of participation rates among low-income folks to about the middle of the country in less than four years. As well, in Quebec the participation rate among women is about 20% higher than anywhere else in Canada. I think those numbers speak for themselves.

The one thing I didn't concur with in Bob's comments was the millennium scholarship. The millennium scholarship in Ontario and Nova Scotia will have just about no effect whatsoever on a student's debt. The Nova Scotia government's handling of the millennium scholarship is particularly underhanded, as is the Ontario government's. In Ontario, the vast majority of students who receive any benefit from the millennium scholarship will see their debt reduced by about $500 a year. In Nova Scotia, the debt will be reduced by virtually zero.

The Chair: It's Gerry Brown, and then I was going to go to Thomas Townsend, if I may.

[Translation]

Mr. Gerald Brown: Mr. Chairman, I can answer Mr. Crête's question as I used to be the general director of a CEGEP in Quebec City and I'm now working at the Canadian level.

There's no doubt in my mind that access to bursaries in Quebec had a major impact on decreasing the debt load. The absence of tuition fees is also a major factor. Recently, I've seen that there was a gap between Quebec and the other provinces where mobility is concerned. With the CEGEP network—there are 48—the students have access to learning institutions everywhere and anywhere in Quebec and this doesn't necessarily exist in the other provinces. That decreases the impact a lot.

[English]

I would be remiss if I didn't also get in my kick at the can on the millennium foundation. This is an example, I think, of tinkering, which is concerning us. This was introduced as a measure to try to address student debt. Our feeling, from the college perspective, is that it hasn't addressed the debt very well.

• 1045

First of all, I talked earlier about the college clientele. A college clientele is a two-year or maximum three-year clientele. It's students who are older, who have many more personal commitments, and who are probably indebted with a lot of commitments on their own. The millennium foundation, in its wisdom, introduced the millennium fund, but saw fit to cut out the first year altogether, so 50%—if not more—of our students, who probably need this more than anybody else, aren't getting access to it.

We tinkered here. It's a great program. Its intent was excellent: it was there to address the debt of students. But I know for sure that in the college system, at least, it didn't address the debt at all. So let's stop tinkering, please.

The Chair: Thomas Townsend is next. Then we could have two more very short comments on this topic of Paul Crête's. Then we should proceed, if that's okay.

It's Thomas Townsend first.

[Translation]

Mr. Thomas Townsend: I'd like to make two points. First, we shouldn't forget that the integration of the college system with the university system in Quebec counts for a lot in terms of access.

[English]

The second point that I would like to make is that in those provinces where we have very generous systems of grants, there is an overall government budget constraint that has to be respected. At the same time, we need to be careful to look at how the budget is constrained.

Unfortunately, in Quebec the number of qualifying students for this very generous grants program has been declining from year to year. An effect, in both Quebec and British Columbia, is that the benefits associated with out-of-province study are either non-existent or greatly reduced.

The Chair: Very briefly, it's Bob Best, Judy Stymest, and then Paul himself.

Bob Best.

Mr. Robert Best: Thank you, Mr. Chairman. I have just two quick comments on Michael Conlon's remarks, if I may.

First of all, Michael is quite right: the benefits from millennium scholarships, which I alluded to, will vary by province. I didn't mean to suggest that they were the same everywhere. My point was simply that millennium scholarships, to the extent that they're need-based, will reduce the amount of debt that many people take on. But the benefits will vary by province, there's no question about that.

Secondly, on the matter of tuition, I would be remiss if I didn't answer, to some extent, some of the remarks made. We have no position on tuition fees. This is something that's handled provincially and on a campus-by-campus basis, but I think it's fair to say that our members would worry about freezes and certainly about eliminating tuition fees without, at a minimum, firm assurances that operating funding is at least going to make up the difference.

What has happened through the 1990s... There have been several mentions of just how tuition fees have increased, and they have increased very substantially through the 1990s. But the fact is, those tuition fee increases, as large as they have been, have offset on average only one-half of the per-student cut in operating funding, from 1992 on through the 1990s. The per student drop in operating funding has been, on average, twice the increased revenue from tuition fees on a per-student basis.

Thank you.

The Chair: Judy Stymest.

Ms. Judy Stymest: I just wanted to add a point to Gerry's point about the millennium fund in Quebec. This displaced funding has allowed the Quebec government to lower loans for college, university, undergraduate, and graduate students for the upcoming year, by a significant amount. A loan at the graduate level would be $1,000 less. That money will be given out in grants.

The Chair: Paul.

[Translation]

Mr. Paul Crête: In conclusion, I'd like to say that I'm happy to see that in general you're of the opinion that we have to give a lot of thought to this matter and that we should be careful about the impact of individual initiatives like the Millennium Scholarship Fund whose specific goal might be interesting, but that don't necessarily lead to the expected results if they're not located in a more logical whole. I think Mr. Conlon's proposal to have a look at what's done elsewhere is interesting. Without going out and doing that tomorrow morning, it would be interesting to see what Ireland and others are doing.

• 1050

Finally, we can all see that this has to do with the principle of communicating vessels. If one province has fewer interesting scholarship and loan programs available for its students, maybe it's because the funding of the total university system is lower. As there are fewer transfer payments, then we have to be able to look at the whole situation in that perspective.

[English]

The Chair: Before we go to Bryon Wilfert, then Libby Davis, I'd like to comment myself on my Mike Conlon's remarks.

Mike, I echo what you say about B.C. and Quebec, but your point about the extraordinary thing about the external student, the out-of-province student fee in Quebec, is that for Ontario students, at least, the out-of-province fee in Quebec is still a bargain. As I understand it, the fee is some sort of an average of tuition across the country, and tuition is now so high in Ontario that it's still worth while to go to Quebec with the extra out-of-province fee.

Mr. Michael Conlon: Yes, absolutely.

The Chair: It's Bryon Wilfert, followed by Libby Davies.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Mr. Chairman. I thank the representatives for coming here today and sharing their thoughts with us.

Mr. Good, we talk about a seamless transition, but I fail to see so far what the plan is, and what the costs are. In the last five years, when the banks were handling this issue, I understood the taxpayer saved about $500 million. Now we're going to take it back, and I have questionable confidence in terms of whether or not, for one thing, we can manage it. I know we're talking about a service provider, and I would like to know some of the issues with regard to cost.

You talk about requests for proposals. I understand the banks are going to continue for a select period of time during this transition period. Certainly we have to balance the issue of the taxpayer versus the students. Obviously, when the Globe and Mail erroneously reported that we were going to give hundreds of millions of dollars extra to the banks because of their requests for more money, my phones lit up. People are saying “Listen, I have a loan and I don't get special treatment. Why are we giving more to the banks?” And we weren't. Obviously that fee issue was very important.

You talk about a service provider, and obviously someone who has to have a very good relationship, both with the post-secondary institutions and with government, and obviously having some confidence, I would imagine, with students as well. At the same time, I'm sympathetic to the issue of the default period, although I would suggest that students in particular need to get educated as to what their responsibilities and obligations are. I have more students who show up in my office, I have no idea how they're on the street by themselves. They don't know whether it's a grant, whether it's a loan, whether it's provincial, whether it's federal. It's sometimes really quite disconcerting to think that we have students who are out there and don't know this.

On the other hand, there are the interest rates. The comment made over here about how disproportionate the interest rate for student loans was versus others I think was a good point. But I do think we have to stress the issue of responsibilities. What I'd like to know as a taxpayer is how much is this new system going to cost? I'd like to see something in black and white. I'd like to know who's going to do the approvals. At the end of the day, when we talk about tuition fees, which of course fall in the jurisdiction of the provinces, I've been a strong advocate for the elimination of the CHST because I think that providing post-secondary funding in that manner has no accountability, no transparency.

Coming from Ontario, if you're unhappy with the tuition fees, go see Mike Harris, who has significantly raised them. At the same time, by us providing dollars for which we don't know whether they're allocating 20%, 40%, there is no accountability, and I think that's a problem.

I would certainly suggest that we continue to push on the issue of harmonization, but again it takes two to dance, and there are many who are not prepared, it seems, to come to the dance floor—never mind dancing. So I would suggest that this is a major problem. I assume that all these organizations are also aiming their comments at the provinces and territories and indicating that these are concerns that together we all have to try to deal with. But this split jurisdictional issue, as it is in health care, as it is in the environment, is a problem.

• 1055

If we can maybe address the first question, which is what's the cost and what's the plan, and what role does Parliament have in terms of... We get these things that are on the table all of a sudden, and suddenly we get the calls on things that we have absolutely, in my view, little if any say in. I am very concerned, and I would echo the comments of some others around the table, about the government hopping back into something that when we ran it before I don't think was very successful.

The Chair: David Good.

Mr. David Good: Let me attempt to respond to a number of the questions, Mr. Chair, and then I'll ask Thomas Townsend to elaborate briefly.

With respect to the overall costs, the previous regime, before we had the risk premium at 5%, was a 100% loan guarantee program, as you are aware. We did not find that this was a successful arrangement, basically because of the way it operated. There was not due diligence, because all the costs were then put back onto the Government of Canada and there was very little incentive in it for either the banks or, as we call it, the service providers to really provide the kind of information and kind of due diligence required.

We then entered into a process of risk premiums where after consolidation 5% of the consolidated loans were paid to the financial institutions as a means of incentive. Quite clearly, the banks had indicated that this was not a favourable regime for them.

Our calculation of costs indicates that to move to the direct financing arrangement we have talked about will be less expensive than going back to the loan guarantee arrangement that we previously had. The costs will clearly be more than the 5% risk premium that we were in before, but they will be less than the amount it would have cost us to go back to a 100% loan guarantee.

With regard to the approach we're taking in terms of the question, we have reached an agreement in principle, as I indicated in my opening comments, basically for the disbursements. So the disbursements can take place through the financial institutions. They will then hold the loans. And when the service provider is put in place—and we have a great deal of interest in the service providers, as you know—they will then be in a position basically to manage the loan and to ensure the proper arrangements and communications are done according to the specifications by the government with regard to those communications.

The Chair: Thomas Townsend.

Mr. Thomas Townsend: Yes. I think it's important for us to underscore that the decisions we had to take on March 9 were as a result of us being unable to find a sufficient number of financial institutions willing to participate in the program to, in our view, offer a national service to students. So the transitional period for us is a series of urgent measures that we needed to take in order to ensure continuity of service to students.

The only way we believe we would have been able to continue our arrangements with the financial institutions would have been to return to the guarantee that Mr. Good has mentioned, or some form of arrangement that would have, for all intents and purposes, been a guarantee. And the government had rejected that as a method of most effectively delivering this program in 1995. So the direct financing approach is, in our view, the only viable alternative the government had to ensure that there was a continuity of service.

That said, it's clear that during the transition period we will have some increases in costs. These costs will occur in areas where, as has been mentioned several times this morning, there is an increased danger for confusion among student borrowers. We're going to have to invest in ensuring that the communications to student borrowers are sufficiently good that this confusion is minimized.

The transitional arrangements with the banks to ensure that we can put the service provider in place clearly are a cost that we had not anticipated. On the other hand, had we gone forward with the bank arrangements, there would have been increased costs associated with the servicing of those arrangements. We believe, at this point, that the transitional costs will probably be less than the costs we would have incurred had we gone forward.

All of these are in the process, at this point, of being detailed. The department will go forward to the Treasury Board with the detailed presentation of the cost estimates for the new program. But our belief currently, based on the modelling we're able to do, is that over the long haul the program should not be significantly more expensive than it would have been had we had arrangements with the banks. Our principal rationale for that is that the service providers that will be providing the loan administration services for the government provide those kinds of services to financial institutions currently.

• 1100

The Chair: Bryon, I have a bunch of short comments on your question, if that's okay.

I have Brad Wuetherick, Bob Best, David Robinson, and then Mike Conlon on this topic. Brad.

Mr. Brad Wuetherick: I have three very quick points.

First of all, there is definitely a problem with the understanding of loans. Students, myself included... When I was 18 years old I did not understand what I was getting into when I signed my first loan agreement. Communication is an issue that we must keep stressing. It has to be a priority.

Second, and Mike Conlon has already brought up this point, I think students generally feel a lot more confident dealing with the government than they did with banks. Banks are out for their own interests. They're not out for the interests of students. I really think that within this new system there is going to be more transparency and more accountability to students in the program. I think that's important to stress as well.

As a question to Mr. Good, I really would like to know who decides who becomes a service provider. And I would really like to stress that the government as well as the stakeholders at this table really should be kept aware of the whole process of who's becoming the service providers. I'll let you comment on that, I guess.

The Chair: Should we come back? I'll come back there very briefly.

Bob Best, then David Robinson, and then Mike Conlon.

Mr. Bob Best: Thank you, Mr. Chairman.

Brad actually mentioned the transparency and the accountability to students, and I wanted to pick up on a point Mr. Wilfert made with regard to the role of Parliament in this. I think what I would clearly see as a potential benefit of the move to direct lending is enhanced accountability and transparency. I've been on the national advisory group on student financial assistance since 1991, so I've seen each of these iterations. The last five years have been enormously frustrating for me as a member of that committee, because we haven't been able to get reliable up-to-date data on student loan defaults. We've heard much about the program being threatened by student loan default data.

The department itself has had and been able to provide data on the guaranteed loans, and trend lines and defaults on guaranteed loans, but frankly some of that data hasn't been as up to date as we would have liked.

The data on the risk-shared loans has been unavailable. The financial institutions have treated that as proprietary data. Very often the officials at the department themselves have told us they couldn't themselves get up-to-date data.

It seems to me that an important role for this committee, certainly in terms of the accountability role, is to insist that this kind of data be made available on these new loans, and the department will have access. They will be able to insist that the service providers make that data available very regularly on trends in student loan defaults.

I don't think it's widely known, but my understanding is that the guaranteed loan data at least shows that student loan defaults started to drop in 1996. The latest data I've seen from the department is 1997, I believe. All of those measures that were in the 1998 budget, some of which are just really starting to kick in, should logically drive defaults down further.

Again, in terms of monitoring that, we need access to current, very up-to-date data on student loan defaults.

Thank you, Chairman.

The Chair: David Robinson, CAUT.

Mr. David Robinson: Thank you, Mr. Chair.

I wanted to pick up briefly on Mr. Wilfert's comment about the Canada health and social transfer, and the problem with accountability in that. I want to remind the committee that the same problem existed with the previous fiscal transfer of the established program financing.

I come from British Columbia, and the Social Credit government of the day there used to boast about how it paved the roads of British Columbia with post-secondary education funds. So this has been a longstanding problem.

I think it really cuts to the heart of a lot of the issues we've been talking about, about the way the federal government has been put into a corner of its own making in many ways, and has been forced to tinker around the edges rather than deal with the fundamental issue of how we deal with the core operating funding of post-secondary education institutions.

• 1105

In the last budget, for instance, the government committed an extra $2.5 billion over four years through the CHST. How much of that will go to education? I'm not going to hold my breath. We have already heard from the Premier of Ontario that not one cent will go to post-secondary education.

So for a longer-term agenda, we really need to reconsider the way the federal government transfers funds for important programs that have national significance, like post-secondary education. Maybe we can look at a way to transfer those funds, like we do through the Canada Health Act, to post-secondary education and have a dedicated fund with some national commitments that provinces can agree to. It's a tall order, I know, but it's really the only way we're going to deal with this issue.

The Chair: David, I'm sorry, I introduced you as Good, and I know you're not Good.

Mike Conlon.

Mr. Michael Conlon: I just want to comment on Mr. Wilfert's intervention. Unless he has some information I don't have, we really don't know, in many ways, what costs, expenses, and accounting procedures go into the banks' claims around the Canada student loans program. Frankly, the program has been clouded in a shroud of secrecy from 1995 until the present day.

We don't have any idea, when the banks say they're losing money, if that means the same thing as when you and I are losing money, or that there's an opportunity cost that's being passed over by dispersing student loans that might find a better rate of return on the Asian markets, in a money market or currency exchange, or wherever.

The banks claim they're losing hundreds of millions of dollars. Despite some of the provisions in the risk-sharing agreements, we have never had access to that data, nor have we had access to any of the default data. So from our standpoint, if there is a cost to administering the program to the citizens of Canada, surely it is much more justifiable than making retroactive payments—as reported in the Globe and Mail story—to the banks around the risk-sharing agreements.

From our standpoint, the cost of the program, if it's provided to the citizens of Canada for a worthwhile social program, is always a better investment than transferring money to the banks.

The Chair: It's still Bryon Wilfert's turn. I'm very conscious of that.

David Good, briefly.

Mr. David Good: I'll ask Mr Townsend to briefly respond.

The Chair: Thomas Townsend.

Mr. Thomas Townsend: I would just like to comment on this issue of transparency. For us, as public servants, and for the parliamentarians, knowing the facts—the cost facts and the facts around the program performance—is essential for the creation of good public policy and the good administration of that public policy.

There are very real opportunities that present themselves through the direct-loan process—not because of that being the method, but because all of the costs are internal now to the government's books—to be able to do a much better job on reporting to Parliament the costs associated with the programs, and to have much better analytical capacity, with the data we will have available, to inform public policy. From our perspective, in terms of modern public service management, one of the key aspects, as we go forward with the new program of direct financing, will be to create the environment in which fact is the principal driver of program decisions.

The Chair: Bryon Wilfert.

Mr. Bryon Wilfert: Thank you, Mr. Chairman.

Mr. Good, I'm always concerned about reactive responses in developing public policy. It seems to me we need to have very clear objectives as to what we want the student loans program to achieve. If we can agree on what those objectives are—and I don't know that we have—we then need to establish the proper structure, costs, etc.

I hear comments that we have this modelling system, and we think it shouldn't incur some increase, but we're not... Obviously there's no definitive answer, but we know, as often happens, when we say it's going to cost us x it often won't cost us y. That is a concern I think we all share.

I don't speak for the banks, but they would have seemed to have been the logical agent. Obviously transparency and accountability have to be there, and if they can't provide it—although some banks apparently wanted to stay in and some did not—the bottom line is we have to develop a system that works for the student and the taxpayer.

• 1110

I'm not really getting any comfort from hearing we're projecting that. I want to know, Mr. Townsend and Mr. Good, that this information... And it should be before this committee in a timely fashion. We're probably in the death throes of this session, until the fall. We're going to go back to our ridings, and we're going to read about this on the front page of the Globe and Mail, which is not the way to do public policy.

I'm very bitter about the nonsense that went down in January and the response of the department, which was very poor. In fact, it was a disaster. It was ten hours before there was a response to something we knew was wrong. But nobody, of course, came out with the information. Then we had the announcement on March 9 that said the banks were out. That wasn't your fault, but again, since March, where have we been?

You say we're going to a request for proposals. The agreement ends the end of July. The banks are going to do some kind of transition that is going to cost us money, and we're not sure how much. There seem to be a lot of variables here that we don't have solid answers to. As a member of Parliament—I can't speak for my colleagues—I need solid answers. In the summertime, we know how difficult it is, in the best of times, to get the answers we need to these important questions.

I suggest that before we rise we should have before us some kind of outline, at least, as to what you are proposing and the factors involved. What criteria will be used to evaluate these service providers? I'd like to know what they will be. I'd like to know how the stakeholders—the government, the students, and the service providers—are going to be in this process.

At the end of the day, I want to know that I don't have to worry about the fact that the costs have gone up here for things I have no control over. On the other hand, what is our strategy in pursuing the harmonization issue, which is clearly a major problem?

I have no control over Mr. Harris in Ontario and the increases they have had. Students come to us and say “Well, what are you doing for us? Ontario's increased them; we're now looking to you.” I think the millennium rip-off was a real disaster, in terms of how Harris tried to pocket the money, which he had no business doing. Our response, at least initially, was weak.

The Chair: This is Bryon Wilfert's time. I'm trying to balance the MPs, so if we can have a quick response to that, then we'll move on.

Mr. David Good: I'll try to give a very succinct response.

The clear objective is accessibility. We need to balance this with the needs of students and the needs of the taxpayers. Quite clearly, as I indicated earlier, this scheme is less than a loan guarantee arrangement we were into before. We believe that very strongly. As Thomas indicated, there will be some transitional costs associated with it.

I take your point, Mr. Wilfert, that the specifications of the service contract are absolutely critical to the success of this arrangement. We've got to be able to express the transparency, the openness, the accountability, and the requirements for service to students in that contract. That's the vehicle in which we're going to be undertaking it.

We believe that as public servants we will be accountable to our minister for that. She, in turn, will be accountable to the parliamentary committee for the results.

The Chair: As I mentioned earlier, the committee would be grateful for all possible information, as it appears. I know you post it, but it's very useful for members in all parties to receive this stuff, so we have at least some sense of what's going on.

Thomas Townsend.

Mr. Thomas Townsend: I'd like to add that a very important part of the question was on how we are involving the stakeholders at this table. When we put forth the request for information to look to the industry for interest, we gathered all of the respondents for that request for information together and gave the stakeholders the opportunity to interact directly with the companies that had shown interest.

As we are developing the statement of requirements for the tender—the request for proposal—we are working again with the stakeholders to ensure that issues around the service and accountability in that contract are correct. We will be meeting with representatives of this group tomorrow to go over our drafts of that statement of requirements. We're making a great deal of effort to ensure that the broadest possible group of people be involved in the development of the service provider agreement.

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The Chair: Libby Davies, and then Larry McCormick.

Ms. Libby Davies (Vancouver East, NDP): Thank you, Chair.

First of all, I'd like to thank the members of the committee for supporting this motion coming forward today. I think we can see from the level of concern that it's very important to have this discussion—better late than never, actually.

Before I ask a question and make some comments, I'd like to clarify something with the chair. I'm glad to hear that you will be forwarding a letter from today's discussion to the minister, but I want to clarify whether or not there will also be an opportunity for the committee to entertain a motion that could be considered today.

The Chair: I regret to say, we simply don't have the numbers to do that. You can give us notice of motion, if you wish, and we can deal with it at some later date, if that's okay, but I'm very keen on doing the letter.

Ms. Libby Davies: I think it is very important that we discuss this issue, because hearing from a number of witnesses today, I think one of the key issues before us is whether or not the Canada student loans program is seen as a social program or whether it is simply some sort of a consumer credit or commercial loan program. I think the experience over the last few years since the control by the banks is that we've gone more and more down the road of Canada student loans being looked at as a commercial loan program.

I don't know about other members of the committee, but I know from the contact I've had with students, not only in my own riding in east Vancouver but across the country, there is a real crisis. The very public face of it is that Canadian universities and colleges are facing enormous costs and their infrastructure is breaking down, but the public face of it is also students who are facing, in many instances, a crisis in terms of not being able to get through school because of these massive debt loads. I don't think there's any question from anyone here today that, as we've heard, the root cause of that is the chronic underfunding of the post-secondary educational system.

I think there's also a huge concern about the increase in privatization, and that we're now beginning to see the beginnings of sort of a two-tier system that has developed in health care. We're now seeing that come into our educational system as well, and I think that should be of grave concern.

In terms of the Canada student loans program, I think when the banks pulled out a lot of us saw that as kind of a window of opportunity to fix some of the horrendous problems that have taken place. Most of the students I know had a huge amount of suspicion, and even fear, about dealing with banks. The whole prospect of going through that system and then being harassed by collection agencies when you go into default, and so on, has been a really bad experience for students. Now moving to what we're told is this direct financing regime through the service providers, hopefully this is an opportunity where we're going to see improvement. But I have to echo the comments of my colleagues that we don't yet see anything on the table that's giving an assurance that the quality of the service is actually going to improve, from the point of view of students, so that it is equitable, and there is open disclosure, fair treatment, and good access.

Secondly, in terms of the overall provisions of the program, I think it's very important that we begin to look at adjustments that can be made in terms of what the interest rate is going to be. Are we going to further look at debt reduction programs? What will the default program be? Right now, it's very severe, and students are immediately moved into a default situation after 90 days.

Those are some of the questions I have. I realize we can't take it all up today, but I'd like to begin with Mr. Conlon and Mr. Robinson and ask your perspective of the service providers and what you think we should be spelling out in terms of ensuring a high quality of service to students that is going to be vastly different from what students experienced going through the banks.

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Secondly, I think both of you mentioned the importance, in terms of fixing some of the problems we have, of looking at further changes and a debt reduction program.

Actually, Mr. Conlon, your recommendations were so rapid that I didn't get them all, but on the debt reduction issue that you brought up specifically, I'd like you to spell that out a little bit more.

The Chair: Michael Conlon, and then David Robinson.

Mr. Michael Conlon: On the debt reduction program, I'm merely referring to the program that was introduced in the 1998 budget. I can only put in family viewing terms the frustration we have around the dispatch with which the federal government has acted to implement the more regressive measures in the 1998 budget, and here we sit two years later without having this program in place.

So I think the debt reduction measure, which is a means of helping students who have exhausted other possibilities, will have some effect, as will interest relief. Our organization has never denied that. But I think the discussion today has been somewhat productive, in that the larger-picture issues around the Canada student loans program, tuition fees, and the other pressures that are bearing down on the program are very fundamental issues that can't be discussed in abstraction from the program itself.

In terms of the service providers, I think from a purely principled standpoint our organization holds that a public program should be administered by those who are publicly accountable and accountable to elected public officials. Having said that, given that this is not the environment in which we're moving, our basic requirement of the new environment would be twofold.

The first requirement would be that there be enforceable—and that was another area of great concern for us—service standards in whatever these contracts end up being. There were service provisions with the banks. In many cases those service provisions were not followed up on. There was an incident in which the federal government did follow up very quickly with the Bank of Nova Scotia around the provision of service, but from our standpoint we felt that the level of service provided by the banks was not sufficient. So there need to be enforceable and very clear performance standards.

Secondly, and much more important from our standpoint, the service providers, unlike the banks, have absolutely no influence, either direct or indirect, in setting the public policy of the program. This is a social program designed to offer hope to Canadians who have the merit and initiative to attempt post-secondary education. It should not be subject to the dictates of a for-profit industry.

So as far as the service provider goes, the government has made the decision to compensate them for a particular service offered to administer the program, and if that's the decision, as it seems to have already been made, those are the two primary concerns we would have.

The Chair: David Robinson, and then Judy Stymest.

Mr. David Robinson: I would echo some of Michael's comments and concerns on the debt reduction measures. I think we're looking for a program, and we're hoping that one is coming. We've seen some initial thinking coming out of the department that we think is not going to provide enough coverage, but hopefully through ongoing discussions and consultations we will see that those students who really are facing some difficulties—and unfortunately there are quite a few of them—will be offered some meaningful debt relief.

On the service providers, again, I would echo Michael's concern that we would like to see, ideally, a public service model in place here, something that's publicly controlled and publicly accountable. Given that this is not the case, I think these service providers should be held to the same kinds of standards to which we would hold public institutions in terms of accountability and transparency and providing high quality of service to students.

The Chair: Judy Stymest.

Ms. Judy Stymest: It seems to me that direct lending does provide a great opportunity to innovate and redesign some of the processing of student assistance in Canada.

One example to which I would like to refer was Mr. Wilfert's comment earlier about the borrowers who don't know how many loans and what to do, and the whole complication around the numerous multiple loans students are dealing with.

It would be, to me, I hope, something that would be designed into the new program that perhaps students could confirm once, to one central body, that they are full-time students and thus eligible for interest-free status. That information could then be given out to those who need it so that they would not fall into technical default, and they would be able to concentrate on studying rather than on the maintenance of their various loan programs.

• 1125

I also hope that, as Michael has said, the policy will be separate from the delivery system and that we will be able to focus on designing or looking at the debt reduction measures as well as the needs assessment study that needs addressing.

The Chair: Libby Davies.

Ms. Libby Davies: Further to that, in terms of how the service providers are set up or how they're chosen, we don't even know at this point, or at least I haven't read it in the material, whether it will be a for-profit or a non-profit. We also don't know what the overhead administration will be in terms of the cost to the government. I don't know whether Mr. Good or Mr. Townsend can comment on that.

The other question that hasn't been touched upon yet is, what will be the connection and will there be any changes in the way collection agencies operate? That also has been a very big frustration of students. When they do go into default, very quickly they get turned over to collection agencies. Again, you're just then a victim of the marketplace.

I've talked to students who have been literally harassed at seven o'clock in the morning by collection agencies. I've talked to moms on welfare who haven't been able to go to work, because as soon as they go to work they're going to get absolutely dinged on their student loan by the collection agency—the harassment agency—and they'll be living below the poverty line.

So one of the very critical questions is will there be any changes in these service standards that hopefully will be there to set out standards for how these collection agencies operate? I would ask the government representatives to comment on that, and any other witnesses who would like to make a comment.

The Chair: Thomas Townsend.

Mr. Thomas Townsend: Several questions were asked on the service provider. Of the fifteen organizations that responded to the RFI, the request for information, all of them were for-profit organizations. So our expectation is, when the contract is tendered for a service provider or service providers, it will be in all likelihood for-profit organizations that will bid for and win the service provider business. There would be nothing in the request for proposal that would limit or impede a not-for-profit organization from bidding and successfully winning the contract, but there's no impediment either way in the process.

With respect to service, it is our commitment that in fact we use this opportunity to improve service to student borrowers. In doing so, with respect to the service provider, we are working closely with groups here on defining the statement of work. As well, we are working through a number of other information sessions, including briefings of parliamentarians and their staff, and receiving comments from groups that frequently deal with students who are having trouble and difficulties with the program. We've held four such sessions so far, and we've received a tremendous amount of useful counsel and advice from them. We will be, as I said, working with the people at this table tomorrow in one of our sessions to develop the statement of work that will determine the service levels for the provider.

On the question that was asked with respect to collection agencies, the principal focus of our service formulation for the direct loans program will be to avoid loans going into default and into collections. But the government does in fact, for all of its debts that are due, employ collection agencies. Those collection agencies again have standards they are to employ, which include the fair treatment of individuals. So the kind of situation you describe, where people are being harassed, is not only inappropriate; it is not within the context of the agreements the Government of Canada has.

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The Canada student loans program will, as part of its service formula, maintain public servants who will be available to borrowers who are having difficulty either with the service provider or with a collection company, and who can advocate and intervene on their behalf. So there will be a level of appeal available to borrowers.

The Chair: Brad Wuetherick very briefly, and then, Libby, we should move on, if it's possible.

Mr. Brad Wuetherick: I just wanted to really briefly stress that the appeal process you mentioned is essential.

And I still really haven't heard a commitment on the final decision-making for the service providers. Who gets these contracts? I really would like to know who is going to be making that final decision. Is it HRDC that's deciding completely? Is it members of this committee in conjunction with stakeholders?

Mr. Thomas Townsend: The contract for service providers must follow the rules of government contracting. The individuals who decide on the selection and the award of that contract will be public servants from Human Resources Development Canada and Public Works and Government Services Canada. The involvement of stakeholders is critical at this point, because once we go into the tendering process, we're bound by those rules.

Ms. Libby Davies: It's very important that this committee try to stay on top of what's going on, because we have lost contact. We did the initial report three years ago, and there were minority reports as well, but since then, we might have had one other round-table discussion. Given these significant changes that are taking place, I really hope the committee will look at this as a future work. I do intend to bring forward a notice of motion based on what we've heard today.

The only other point I want to make is that probably the most fundamental thing we have to look at is some kind of national standard or principle that is based on accessibility. Everybody has mentioned that accessibility to post-secondary education and making sure the funding is there to provide that accessibility are really what underlies all of this. Unless we grapple with that, this crisis is going to continue.

The Chair: Larry McCormick and then Raymonde Folco.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair.

I thank the witnesses, each and all, for being here.

I want to go back just for a moment to HRDC on this tendering process, which will be cast permanently. At this point in time, are all the guidelines out there for what we're asking for, what you're tendering for, and what will be a service agency? Do we have all that information?

Mr. Thomas Townsend: We're currently in the process of developing a statement of requirement, which will determine the service standards, the performance conditions, and other considerations in the contract. That's why we're in a highly consultative mode. We expect to be in a position to develop the statement of work, which is what actually determines the tendering process, within the next two to three weeks. So we're not finalized at this point, but we're moving quickly towards that end.

The Chair: Are the stakeholders involved in the design of the proposal?

Mr. Thomas Townsend: Yes, that's what we're doing at this point, and it would be a question of asking the stakeholders the degree to which they feel they—

The Chair: Thank you.

Larry McCormick.

Mr. Larry McCormick: Of course that's interesting, and I'm sure the stakeholders in regard to the service agency will be for-profit, but what ability will these companies have to collect on faulty student loans, and how will the federal government monitor that? We didn't do it very well before.

Mr. Thomas Townsend: Clearly the organization or organizations that will be selected have to have the capacity to administer loans, and they have to have it in a demonstrable fashion. We've established a number of preconditions in terms of their ability to do that.

The other feature that is a very central part of the requirement we've been developing is the information the service provider passes to the federal government on the status of each and every loan they're administering on behalf of the federal government.

• 1135

The Chair: How long would the contract be? I mean, we're lacking some basic information here. Are we looking for five years, or two years, or...

Mr. Thomas Townsend: It's a multi-year agreement. The expectation at this time, although it's not a decision that has been taken now, would be to allow it to be long enough for the service provider to recover their capital investments but short enough to allow for innovations or changes in the industry.

So sometime between three and five years would probably be the time period.

The Chair: Thank you.

Larry McCormick.

Mr. Larry McCormick: Thank you, Mr. Chair.

In an article on June 6, a Halifax newspaper reported that Nova Scotia does not have a financial institution to administer the student loans. I'm sure you'll look after that, but are there any other areas... and how many gaps are there during this transition period?

Mr. Thomas Townsend: With respect to the provincial student loans program, the Province of Ontario has existing agreements that will go a further year. The Province of Saskatchewan has agreements that will go a further year. The Province of British Columbia has just completed a tendering process that, to the best of my knowledge, will result in that province going with a direct financing scheme similar to that of the federal government's.

All of the other provinces at this point are looking to conclude short- or long-term arrangements with financial institutions, but none of them have accomplished that to date.

Mr. Larry McCormick: Thank you, Mr. Chair.

My colleague from Vancouver mentioned the fact that some people think we have two-tiered health care in Canada. Of course, yesterday we had the Minister of Health to talk about that, because the two tiers many of us see are between urban and rural, and the same thing does exist in education.

My small role with our government as rural caucus chair is to look out for small-town and rural Canada. Perhaps that's why some of those students in the past have been been harassed more for their student loans, which they certainly owe, because the jobs are not always there in the same way in rural Canada.

Yesterday the government announced a good amount of money for tele-medicine and tele-health. I know there's a larger-picture discussion here, but certainly tele-education would be somewhat of a player as we look to the future of student loans and the burden and the challenges of rural Canada.

The Chair: To again go back to the last question with regard to the contract, will it include provisions for assessment and reassessment as well as accountability?

Mr. Thomas Townsend: At several stages in the execution of the agreement, yes, and payments will be based on performance through various phases of the agreement. In addition, there will be provisions for looking at service levels through independent surveys, and, based on those surveys, benchmark improvements by the service provider.

The Chair: Thank you. I'd be grateful if the committee could be involved in some of those loops. I've explained to you why we didn't deal with this in February, and that may happen again, but I think at the committee we have staff, and we can track things that are going on in HRDC even if in fact it's impossible for us to conduct public meetings on them.

Raymonde Folco.

[Translation]

Ms. Raymonde Folco (Laval West, Lib.): I'd like to follow up on my colleague McCormick's question.

You told him there is now a tentative agreement between the government and the Royal Bank, the CIBC, the Bank of Nova Scotia, the National Bank and others concerning this transition period between August 1, 2000 and February 28, 2001. It's an attempt at an agreement, from what I gather, and I'd like to know at what point this tentative agreement becomes solid. Are we sure that during this period between August 1, 2000 and February 28, 2001, the students in all provinces—if I'm not mistaken, it's not just in Nova Scotia that the problem has arisen but in all the provinces—will be able to count on this agreement to have access to scholarships?

Mr. Thomas Townsend: This attempt is a draft contract with financial institutions. Before it is signed, we have to say it is tentative. We expect to be signing a contract with the financial institutions during the next few days.

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I would like to emphasize, and perhaps Mr. Lumsden might want to elaborate, that the Canadian financial institutions are extremely co-operative in attempting to ensure that the students will have their loans available for the next quarter. They are all very encouraging and are co-operating very well with the federal government to ensure that the agreement between the federal government and the financial institutions won't pose any problem for the students.

Ms. Raymonde Folco: Just to satisfy my own curiosity, I'd like to know if the students in other provinces were having the same problems as the Nova Scotia ones.

Mr. Thomas Townsend: From what I understand, Nova Scotia is still trying to come to a short-term agreement with the financial institutions. It hasn't had an answer yet.

Ms. Raymonde Folco: Are there any other provinces in this situation?

Mr. Thomas Townsend: All the provinces except for BC, Saskatchewan and Ontario.

Ms. Raymonde Folco: Fine.

Do I still have some time left, Mr. Chairman?

The Chair: Yes.

Ms. Raymonde Folco: I have a question on a totally different matter but still connected to student loans. At the time when the financial institutions managed the student loans, they got a risk premium of 5% because of the high default rate in that area. How will this new system look at the question of risk in the direct benefits system? Mr. Townsend, you're probably the one who can answer that.

Mr. Thomas Townsend: I'm not quite sure I got the question. Could you repeat it?

Ms. Raymonde Folco: I'm comparing the old system to the new direct benefits system. Under the old system, the banks were indemnified for the high default rate. Are they going to be indemnified under the new system? I suppose the question of risk was discussed. How will you be taking that into account?

Mr. Thomas Townsend: Under the new program, as the loans are made by the government, the government takes all the risks. So the question of indemnifying the financial institutions for the risk doesn't arise. It's up to the government to foresee the needs in its books to recognize that all the loans won't be paid back. So there will be a loss for the government.

Ms. Raymonde Folco: And the government takes the whole hit.

Mr. Thomas Townsend: Exactly.

Ms. Raymonde Folco: Thank you.

[English]

The Chair: Thank you very much.

Perhaps I can wind this up. I have one very technical matter, which I mentioned at the very beginning.

Today our main concern is around the arrangements for the next semester and then the longer-term plans for Canada student loans, but I have also made notice of Bill C-487, a private member's bill. I'm not going to ask you now for comments on it, but this enactment expands the definition of “qualifying student” in the Canada Student Financial Assistance Act to include a convention refugee.

To quote from the bill:

Under this enactment, a Convention refugee is a person who has been determined to be a Convention refugee by the Immigration and Refugee Board under the Immigration Act. This enactment

—that is to say, “this bill”—

would permit such refugees to obtain financial assistance under the Canada Student Financial Assistance Act and thereby acquire post-secondary education and training.

I would just mention this to you. It's something that's come up in the last two or three weeks. Changes are going on. I hope you'll simply put it in your mind. If you have any comments, I myself would be glad to hear them.

I have two things to do as chair. Well, it's three, really, because the third is to thank everyone for being here.

To Thomas Townsend and David Good, how, in your part of HRDC, is policy developed? At the moment you're in the throes of developing the administration for the interim arrangements—there's a great urgency to that, and I understand that—while you're developing the longer-term plans for Canada student loans. But how, where you sit in HRDC, is policy developed?

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Mr. David Good: Mr. Chairman, that's a very good question. Quite clearly, policy development in this area requires a lot of input from the stakeholders, from the provinces, from members of Parliament, from the committee.

I think from the point of view of public servants our role in the policy-making process is greatly enhanced by the extent to which we have solid reports from committees, the likes of which we had previously, a strong input from the stakeholders and a lot of cooperation from the provinces. We're dealing with a very difficult issue here, but a very fundamental and extremely important one to the future of Canada. So the policy-making process has to be very open and very transparent and it has to bring together the best analysis and the best advice one can bring.

We're constantly in the process of reviewing the program, and as you've seen, we've had to focus very much on the short term. And we will welcome a further engaged process of open policy dialogue and discussion and the analysis and reports that have come in in order to move to the next steps of policy changes, which will be the important work for the program.

The Chair: Perhaps I could ask you this again. David, you're the ADM for the human resources investment branch. Thomas is the director general of the learning and literacy directorate. Where is it in there? Is there somebody or another organization above the branch or the directorate where this policy comes from? I understand it comes from Parliament, but there must be somebody... You're obviously seized with this matter, the urgency of getting the loans out and doing it reasonably. Is there someone who thinks more generally about these matters?

Mr. David Good: Quite clearly, we are thinking generally about them, and quite clearly in the policy-making process this will require a lot of interdepartmental work, work with the stakeholders, with the parliamentary committee. The normal process of policy-making requires a memorandum to cabinet or else seeks the requirements through the budget preparation process. In that regard we work very closely with the Department of Finance and with other departments, and obviously advise the ministers to bring forward various proposals for cabinet consideration in that context.

The Chair: Thomas Townsend.

Mr. Thomas Townsend: Perhaps I could add that there's no program that I've worked with in my nearly 30-year career in the public service that is more dependent upon close working relationships with the provinces.

In a couple of areas accessibility has been mentioned several times this morning. There is currently a project being undertaken by the Council of Ministers of Education, which represents the ministers of education for the provinces and Canada's territories, and Human Resources Development Canada that's looking at issues specifically around accessibility.

That kind of work would be the beginnings of information that could start to inform a policy discussion and debate that would be with our stakeholders. Three formal groups advise us: the National Advisory Group on Student Financial Assistance, and a number of the members of that group are represented here this morning; the Intergovernmental Consultative Committee on Student Financial Assistance, which is myself and my provincial colleagues; and the Financial Arrangements Working Group, which has guided us in terms of operational policy with respect to Canada's financial institutions participating in the program.

The Chair: I think I can speak for my colleagues. We really appreciate the consultation that is going on and that has gone on.

What does the ADM of strategic policy do in HRDC?

Mr. David Good: The ADM of strategic policy will provide the broader framework within which these initiatives can move forward. For instance, in the Speech from the Throne the announcement was made with respect to the skills and learning agenda, and we report on that whole agenda. The ADM strategic policy analysis will undertake the broad diagnostics, the analysis, and be able to put forward the case and the preparation of documents that would go forward, such as various cabinet documents and other things of that nature.

For our part, Thomas and I will handle the sectoral interests and we'll be there to advocate that in this context the Canada students loan program and the whole area of education is a very important project. Therefore, our job will be to work closely with the ADM of strategic policy to make sure the issues we are responsible for, particularly in the area of Canada student loans and post-secondary education, are brought to the fore and advocated strongly within the department.

The Chair: So the ADM for strategic policy is a broad policy area, and your point is that your area of interest, in this case Canada student loans, comes under that.

Mr. David Good: Yes.

The Chair: Okay, thank you.

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Could I ask one more thing, and this is more general? I explained at the beginning why it is we didn't do this in February. It seems to me that a lot has been going on, and my impression is that many if not all of you have been consulted one way or the other. Do you feel reasonably comfortable about the interim arrangements? I say that now. I don't want to broaden it out again, but are we reasonably comfortable that students will be able to receive their loans in a reasonable fashion this next semester?

Tom Lumsden.

Mr. Tom Lumsden: In answer to Thomas's question, we have received the draft agreement. I would caution that there are a number of discussion points that need to be undertaken before that is done. I would be cautious with that agreement. We are consciously working with them, trying to find a solution. As FIs, we want to be there, but we have to make sure we can do it. We've just received the document and the specifications that are laid out in it. We will need to sit down with HRDC and go through those.

The Chair: Tom, have you any sense in your own mind when those problems will be resolved or will be known not to have been resolved?

Mr. Tom Lumsden: We've yet to set up the meetings, so that's the process we're in right now to establish the meetings to go through it. It's my understanding that we're going to be meeting individually, and perhaps that's a question for Thomas today. It might behoove us to meet as a group to deal with all the issues at the same time.

The Chair: Okay. I'll come back to Thomas.

Raymonde Folco.

[Translation]

Ms. Raymonde Folco: I don't quite understand the Conlon's position as compared to Mr. Townsend's on a question that I put concerning the agreement between the financial institutions. If I understood correctly, Mr. Townsend explained that the agreement was to be signed within the next few days. I'm talking about the agreement that's under discussion at this time. If I understand correctly, Mr. Conlon is telling us that isn't the case because there are still a lot of differences between the parties.

Could we get some clarification on this matter?

[English]

The Chair: Perhaps we could come back to the two of you at the end of this exchange, Raymonde.

Tom Lumsden, do you have anything to add to Raymonde's point?

Mr. Tom Lumsden: Actually, it was my point that the discussions had not taken place. So we're in that stage right now.

The Chair: We'll come back to that. I will ask each person now on this same point. Our concern now is the immediate.

Mike Conlon.

Mr. Michael Conlon: We don't have any more knowledge than has been disbursed to the committee today about the agreements for September, but we have been encouraged and to a certain degree appreciative of the degree to which we've been kept in the loop about where the program is going. In terms of the size of this program and the timelines that HRDC has to turn it around, I think they're fairly daunting. We remain guardedly optimistic that there isn't going to be an interruption for students.

The Chair: Mark Kissel.

Mr. Mark Kissel: I'd like to go along the same lines as Michael. From what HRDC has told my constituents, the interim solution seems to be the best one in the way that everything is going down. We too are optimistic, and we are generally impressed with the way the program in the interim at least seems to be laid out. We're very interested to see how this will generate into the new millennium with the new service provider, but in the interim it seems to be going okay.

The Chair: Frank Smith.

Mr. Frank Smith: I think we would agree with what the previous two speakers have said.

The Chair: Frank, thank you very much.

I'll go down the line. Judy Stymest.

Ms. Judy Stymest: CASFAA is appreciative of the consultation. However, we have six weeks until August 1, and it's very important that the information be solidified and sent directly to the educational institutions as quickly as possible, because we are the point of contact for the beneficiaries of this program. It's vital we have all the information on how this process is going to be carried out.

The Chair: Thank you, Judy.

Brad Wuetherick.

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Mr. Brad Wuetherick: I would agree very much with what has been said so far. But I think it's important to emphasize that communication, not only to the institutions about the interim deal, but also to the students who are getting the loans, is essential. We have to do that as soon as possible. Students right now are not really sure what's going on.

Although it is very encouraging that at the front end of the loan what the student is going to experience is probably going to be the same. I am definitely optimistic—to an extent.

The Chair: Paul Kitchin.

Mr. Paul Kitchin: Yes. Thank you.

I guess the first comment would be that as a member of the national advisory group on student financial aid, I'm quite pleased at the information flow we have received from Thomas Townsend and the department on the plans. Being involved at our last meeting in early April, we were all invited as stakeholders to participate in I think it was four or five different committees that were going to be working on these issues, including a group around the service providers. A number of us again attended the meetings in May where the potential service providers were interviewed, and we were very glad to have that opportunity.

I think we do have a great opportunity to make some changes and improvements. The timeline certainly does make us nervous, but I think we can work through it.

Regarding the arrangement with the financial institutions to become the disbursement agents, again, the timeline is somewhat disturbing, although at our meetings we have been assured that if there is the chance that deadline can't be met, the government itself has plans to actually become the disburser in the absence of an agreement. Again, there's not much time to put that in place if the government is actually going to be cutting cheques.

I think overall we're pleased with the direction, but as with everybody else, just cautiously optimistic.

The Chair: Thank you, Paul.

Bob Best.

Mr. Robert Best: Thank you, Mr. Chairman.

In some ways, I would prefer to answer your question after I've heard Thomas Townsend's answer to Madam Folco. Had I not heard that last exchange, I would have said I was cautiously optimistic. Now I'm a bit concerned, frankly. Until I heard Tom Lumsden's remark, I thought there was an agreement with the financial institutions, essentially.

Clearly it's important that agreement be in place very quickly. I worry about the transition period. I think it's vitally important that we get this program off the ground with minimal disruption. Inevitably there will be some confusion, but I think it's very important it be minimized in its first year, because if this gets off the ground in a way that members of this committee and other parliamentarians are hearing complaints, where there are newspapers and other media stories about this being a disaster, I think that would not bode well.

So it's very important we get through this transition period with minimal disruption. It's very important to the department. I know they're doing the best they can under the timeframe, and I echo my colleagues: the department is doing the best it can to be consultative in a very short timeframe.

But I do worry about it. I worry particularly now, because I think that deal with the financial institutions for this transitional period is absolutely essential. It has to be tied up with a ribbon here, in short.

The Chair: Thank you, Bob.

David Robinson.

Mr. David Robinson: I'd be much more optimistic too if there were an interim agreement in place. I also was under the impression that this was already a done deal. It's a bit of a revelation. The timeline, as people have said, is very tight. I think the government should seriously consider how to anticipate and deal with possible problems in this transition period. We are going to have some inevitable problems, so what kinds of systems can we put in place to deal with them?

The Chair: Thank you.

Gerald Brown.

Mr. Gerald Brown: I mentioned at the beginning that I was cautiously optimistic. I guess the “c” has gone from a little “c” to a big “C” now. I am cautiously optimistic. I would have felt a lot more comfortable... although maybe I've misunderstood the responses here. It's possible.

We're cautiously optimistic because we've been involved with the government all the way through in this exercise. They've been very consultative. I think it's important also to mention the quality of the people involved in this project from HRDC. David and Thomas give us a lot of confidence in the process. But real students are making real decisions today.

The Chair: Thank you very much.

David or Thomas.

Mr. Thomas Townsend: I guess it would be, from my perspective, a clarification for Tom, because my understanding is that in fact we do have a tentative arrangement with the financial institutions. We need to confirm those in a contract agreement. A draft is in the hands of the banks. I'm welcoming and open to communication to bring those agreements to conclusion. But I've been given no indication by any of my communications with the financial institutions that there is a show-stopper in anything we're dealing with. So perhaps Tom could clarify.

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The Chair: Tom Lumsden.

Mr. Tom Lumsden: You're correct, Thomas, insomuch as the tentative deal was there. But we received that draft agreement, I believe, last Wednesday. We've had a chance to review it. There are some initial questions we need to work through. They're more operational in nature, in how we're going to communicate the information, rather than in the upfront interaction with the student. But there are some things there that we may or may not be able to do—at least from the Royal Bank's perspective. I have not had a chance to talk to my colleagues about what their issues are other than in very brief passing comments, and they have some concerns as well.

So one of the things we are going to do is urge you to sit down with us as a group to work through this agreement so we can put it in place. We are mindful of the time to delivery as well, and if there are technical requirements in there, we do have some issues.

The Chair: Okay.

Would you like to respond?

Mr. Thomas Townsend: Again, I'm hearing that well-meaning parties can sit down and bring this to conclusion to respond to Madam Folco's question.

[Translation]

When I mentioned the next few days, I meant that it was absolutely necessary to wrap up these discussions and sign the contracts in the next few days.

The Chair: Thank you very much.

Ms. Raymonde Folco: This meeting will have at least one very positive result.

[English]

The Chair: John Williams, but extremely briefly, John. Is it a comment or question?

Mr. John Williams: It's a comment, Mr. Chairman, and unlike the others, I am not cautiously optimistic. I'm quite pessimistic.

If HRDC have a problem communicating with five financial institutions, and we know where they are, how do they expect to improve communications with hundreds of thousands of students across this country, when they don't even know where they live?

The Chair: Actually, the last exchange makes me even more glad we had this session when we did, because I hope you know that we had to force it in. It was a fairly elaborate session that has allowed us to air a lot of issues, to put the focus on the immediate, as we know in the end we have to. I'm very glad.

Before I thank you, though, I have one small piece of routine business, which I'm glad to say we can't execute today. I just want to formally recognize, colleagues, that on our agenda, under other business, we've received a notice of motion:

In view of the unacceptable action of the chair of the Standing Committee on Human Resources Development and the Status of Persons with Disabilities, Peter Adams, the member from Peterborough, this committee consider the action by the chair was a serious breach in the observance of the proprieties of this committee and the management of its business.

I regret to say I'm now recognizing we have this motion. We don't have the numbers to deal with it. I will call this motion at the soonest possible opportunity, which I would imagine will be in the fall.

On behalf of the committee, I want to thank all the witnesses for being here. I hope this meeting has been useful in triggering some action.

David and Thomas, as you can see, the committee is very interested. We would not have done this at this time if we had not been so... We wish you well in the interim arrangements. We hope that a successful long-term arrangement is established, and we hope you will continue to consult with these stakeholders.

I want to thank you all very much, and I want to thank the people in the audience who were here as well. We are most grateful to them for attending this meeting.

The meeting is adjourned at the call of the chair.