HRPD 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]

Thursday, November 27, 1997

• 0844

[English]

The Chairman (Mr. Reg Alcock (Winnipeg South, Lib.)): We will begin what is meeting number 10 of this committee for this new Parliament. I'd like to begin by welcoming all of you and thanking you for making yourselves available.

You've all been participating in a series of exercises on this question and we're looking forward to what today is going to bring to us, because as the committee responsible for this department we're going to be making a report to the House, possibly as early as next Thursday, making a series of recommendations to the government and to the Minister of Finance for the next budget. So we're very interested in what you have to say today.

• 0845

I have a couple of logistical things. We've booked this meeting to run from 8.30 this morning until one o'clock this afternoon. However, we may not need to go as far as one o'clock if we think we've managed to get most of the issues surfaced and the questions answered sufficiently so that we can begin our work of preparing our report.

Around 10 o'clock there will be bells calling the House together. If it's appropriate at that time, we may take a 10- or 15-minute break to allow people to stretch and get a coffee, and then get back at it.

I'm going to begin by asking Mr. Townsend to summarize the work that was done in the workshops last week, and then we're going to take some interventions from some of the group interests here and try to move back and forth and break it up a little bit, so members on this side can ask questions for clarification as we get into this. And once each one of the organizations here has had an opportunity to get their questions or their positions on the table, I would ask others among you to feel quite free in raising questions for participants on that side of the table.

Is that clear enough? Any questions on organization and structure? None.

Mr. Townsend, the floor is yours.

Mr. Thomas Townsend (Director General, Learning and Literacy, Human Resources Development Canada): Thank you, Mr. Chairman.

In the interests of time, I would like to move directly to the emerging themes from the workshop, which would be found on page 4 of the English material that I've presented and on page 3 of the French material.

[Translation]

The report will be released in early December. Here are a few of the themes presented at the conference.

The first priority identified by the participants was debt. They emphasized that student debt levels at graduation are continuing to rise and are the most important problem. Solutions should include up-front grants and measures to reduce debt during the repayment period after students complete their studies.

[English]

The debt reduction during repayment was identified repeatedly as the single most important fact for participants. Debt reduction measures should be linked to income. And in terms of the current interest relief program, although identified as being helpful it was suggested that it needs to be expanded and should provide for graduated interest relief.

There is reluctance on the part of many of the participants to increase the period of repayment, as debt levels for a number of students still remain low enough that they can be repaid in the normal 9.5-year amortization. Fifteen years was the maximum period of repayment identified as acceptable by the participants at the workshop.

The second priority was the package of upfront grants. These were designed to ensure that debt did not become burdensome. The grant for students with dependants was welcomed by participants. Grants during the first and second year were seen as a priority, both to encourage enrolment in post-secondary education and to ensure the retention of students once enroled. Grants should be targeted towards financial need beyond the level of current loan limits and the capacity of student loan programs to provide financial assistance.

• 0850

[Translation]

Eligibility should be linked to needs rather than merit. It would be preferable to use the existing system rather than to create a parallel system.

[English]

The participants also identified a number of tax measures that would be useful in promoting student participation in post-secondary education. They suggested initiatives to enhance RESPs. They also suggested that there be an ability to move funds between RRSPs and RESPs. Finally, they suggested there should be tax deductibility for interest on student loans.

The third priority identified was that of communication. Communication needs to be increased with educational institutions, students, and their families about the student loan system, about budgeting practices, and about other means of financial assistance that are available to them to ensure the completion of their post-secondary education. Students and their families need to be provided with incentives to save in preparation for their post-secondary education, and the program needs to be made easier and more understandable to participants.

The fourth priority was the harmonization of the federal and provincial student aid programs. There was an overriding theme of harmonization. The federal and provincial loan programs, with participation of the two levels of government, were important, but from the students' perspective, there should be one student, one loan. This does not necessarily mean a single loan product across the country, because there are important differences in provinces, and these need to be reflected in the design of the loan programs.

Some of the issues that were raised within the context of harmonization include national standards, the six-month period of grace immediately following studies, interest relief, portability of student loans from province to province, designation of educational institutions, and disbursements of bursaries and grants.

Finally, I would like to underline one concern not contained in the themes already mentioned, which emerged at several points during the workshops: the income-contingent repayment or income-related repayment. The overwhelming consensus of the participants was that income-related schemes do not seem to be a viable option. Major concerns were expressed around the length of repayment for these kinds of schemes, which often is 20 or 25 years. Also, in some of the pure designs of income-related or income-contingent repayment, interest is allowed to be capitalized, so it creates negative amortization and the possibility of the loan actually increasing for some borrowers. And the overall administrative complexity of these plans is an issue.

Mr. Chairman, this concludes my report on the themes. I'd like to underscore that the report from the workshop is not complete; it will be available later next week. These represent the notes I took during the time of the conference.

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

I'm just noticing that in this arrangement, I can't see members, so I'm going to have to get people to indicate a little more directly than they do normally if they wish to ask some questions.

Perhaps we could go to the students and hear a response or a comment or whatever you wish to say to us on this particular issue.

• 0855

Have you worked out among yourselves how you're going to proceed?

A voice: Rubina Ramji will be first.

Ms. Rubina Ramji (Chair, Canadian Graduate Council): Good morning, Mr. Chairman. I'm the chair of the Canadian Graduate Council. Before I begin I would like to introduce my colleagues.

With me is Robert Best, director of government relations and public affairs with the Association of Universities and Colleges of Canada, and Pierre Killeen, the association's constituency and government relations officer; Robert Léger, government relations officer with the Canadian Association of University Teachers; and Judy Stymest, director of student aid and international student adviser at McGill University and Quebec regional representative on the board of directors of the Canadian Association of Student Financial Aid Administrators.

Beginning in the fall of 1996, our five organizations, together with the Canadian Federation of Students and the Canadian Alliance of Student Associations, began meeting regularly to discuss student assistance. We were brought together by a shared concerned over rising levels of student debt and their implications for accessibility and by a shared belief in the importance of continued federal participation in student assistance, particularly through the Canadian student loans programs.

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

Today we will describe for you our updated package of proposals, which is fully supported by the seven organizations of the student assistance round table. I should note that two of our partner organizations, the Canadian Federation of Students and the Canadian Alliance of Student Associations, have accepted the committee's invitation to make individual statements as well.

I would now like to ask Bob Best and Pierre Killeen to read the opening statement on behalf of our groups.

Mr. Robert Best (Director, Government Relations and Public Affairs, Association of Universities and Colleges of Canada): Thank you, Rubina.

Mr. Chairman and members of the committee, student debt has become an issue of major concern in this country. Since 1990 the debt level of the average student who borrows to finance post-secondary education has almost tripled, according to estimates from Human Resources Development Canada. Increased federal loan limits along with rising costs, including tuition, and most importantly, the abolition of provincial grant programs, have all fuelled this rather spectacular leap in the indebtedness of our youth.

The average debt levels among Canadian students who borrow are now comparable with levels among graduates of four-year private institutions in the United States such as Harvard and Yale.

The Conference Board of Canada said last month that “a lack of education is a low-income life sentence.” We agree. Wide access to post-secondary education is necessary to increase the knowledge-building capacity of our citizens, our institutions and our economy in an era of global competition. It would be unconscionable if post-secondary education in this country became accessible only to those from affluent backgrounds. If we do not stop the trend towards a greater student debt, we risk undermining the basic principles of fairness and equity in our education system.

In recent months, the Speech from the Throne, the Prime Minister's reply to the throne speech, and finance minister Martin's economic and fiscal statement have all emphasized the need to deal with the student debt problem. Our associations are delighted at the government's expressed determination to reduce barriers to PSE through further reforms to the Canada Student Loans Program and through increased aid to students with dependents.

All of our groups participated in the national stakeholders' meeting to which Mr. Townsend referred, and we are very pleased at the wide degree of consensus that was achieved on the topic of student assistance reform. We'll continue to work with the government in this area because we believe that a renewed Canada student loans program is the best guarantee of hope and opportunity for Canadians struggling with the demands of the new knowledge economy.

Mr. Chairman, in January we unveiled a package of reform proposals to which Rubina referred earlier. We believe they are necessary to improve the country's system of student assistance. Last week, we released an updated package in the form of a three-page “key elements” document which we have already provided to the committee.

We use the term “package” precisely because it is a package of measures that is needed to deal with the problems of accessibility and student debt. There's no single answer and there's no single quick fix or magic bullet. Our updated package includes a mixture of grant and remission programs, tax measures, and program changes to encourage flexibility in repayment. They are very much along the lines of the measures to which Mr. Townsend referred, and were the subject of much discussion and considerable consensus at last week's stakeholders meeting.

• 0900

If implemented together, the measures would reduce the number of student borrowers with unsupportable debt loads; cut student default and bankruptcy levels; provide increased flexibility options for all borrowers; and link repayment obligations to the individual's ability to pay.

[Translation]

Mr. Pierre Killeen (Government Relations Officer, Association of Community Colleges of Canada): Good morning.

To begin with, we would invite the government to create a program of grants for first and second-year students who, because they come from families with modest incomes or are independent students, need a higher than average level of financial assistance.

That is a critical period for these students, since it is often then that they realize the size of the debt that awaits them at the end of their studies. In some cases, this realization leads them to abandon their studies. Many studies tend to show that such grants encourage people to continue their studies. Of course, the new Millenium Fund may play this role if it is well designed. In any case, however, the need to offer grants based on a needs assessment seems to us to be inescapable.

In a second phase, we would like to see work-study programs introduced. These programs offer students with greater financial needs non-reimbursable assistance in exchange for their commitment to work, usually in a university or professional activity on the campus, without taking the place of support staff. Institutions participating in the programs receive wage subsidies that help to cover educational expenditures. The recipients, of course, acquire valuable work experience, but that is secondary, since work-study programs are not training programs. We recommend that the federal government quickly begin to work with the provinces and post-secondary institutions to launch such a program at the national level. These measures are necessary during post-secondary education.

Finally, we must all tackle the problem of the debt burden of graduates. We would invite the government to introduce a program of deferred grants. A number of provinces already offer debt relief programs to their students after the end of their studies. These programs are generally aimed at reducing students' overall debt and are not linked to the ability to pay.

Our approach is a little different, since it calls for more targeted debt relief using a scale based on debt-to-income ratio. One-time debt remission could be used when it becomes clear that a person who has had persistent difficulty paying back the loan over the first three or four years following completion of their studies will not be able to reimburse the amounts due. Debt remission could also take place more gradually, on a monthly basis, covering part of the interest, the entire interest, or even part of the capital.

We also believe that certain tax measures are needed to make education more affordable. The February budget came much closer to our recommendation on tax treatment of education savings plans and compulsory fees. That is encouraging, but we do not feel that these measures are an adequate solution in the longer term.

First, contributions to registered education savings plans should be tax-deductible.

Second, it should be possible to take money out of registered education savings plans to promote ongoing professional development.

Lastly, we also feel that interest paid on student loans should be tax deductible. It would be a great relief for borrowers who are making the transition from school to work. The United States recently adopted an initiative of that type. Unlike other education-assistance tax measures, that are aimed at all students, this one has the advantage of targeting low-income students who need to borrow large amounts to finance their studies.

• 0905

[English]

Mr. Robert Best: So far, Mr. Chairman, the recommendations we have made are variations on a theme we arrived at last January. As noted earlier, we have just updated those proposals. The major changes involve introducing flexibility in repayment and linking this flexibility to a much improved system of interest relief and targeted debt remission. Our paper therefore recommends three changes to the present loan system to reduce student debt and make loan repayment more flexible.

First, allow all borrowers the option of suspending principal payments during the three to five year period of transition from school to the labour market, thus reducing the required monthly payments and allowing more repayment flexibility. Provided interest payments are met, this does not require any government expenditure.

Second, provide needy borrowers with a reformed and a more graduated version of the present interest relief program during the same three to five year transition period, thus assisting that minority of students who cannot cover even interest payments unaided.

Third, provide those few borrowers who demonstrate significant difficulties in meeting their debt obligations after the transition period with some form of debt reduction. This could be done through a single substantial remission at the end of the interest relief period, or through relief on monthly amortization payments for needy borrowers at any point after the end of the interest relief period, or some combination of the two. In either case, the size of the remission or remissions would be dependent on a calculation that takes into account both the individual's ability to pay and level of debt.

Finally, with respect to the length of the repayment period, we feel that while there should be some flexibility beyond 10 years, we do not believe that student assistance should result in lifelong debt. The repayment period should not be extended too far, and certainly not longer than 15 years.

That concludes the presentation on behalf of five of the seven organizations, and we welcome questions.

The Chairman: Thank you very much.

Carolyn, is your question just one of clarification on this, or do you want to move to the substance?

Ms. Carolyn Bennett (St. Paul's, Lib.): It was clarification, in terms of the result of the workshops.

Maybe to Mr. Townsend, in your emerging themes.... Certainly what we've been hearing at the dorm with the students we talked to.... I think it's dealt with in terms of the overall theme of increasing flexibility, but the rigidity with which a student is forced into bankruptcy at 30 months at the moment is certainly one of the things the students have spoken to me about. They would like to be able to just pay a little bit or have some relief. I think that kind of actual rigid scheme that has no real bearing whichever way...to start to go into the workforce. I just was surprised that it wasn't reflected in the notes from the workshops in terms of the threat of bankruptcy, actually, to somebody who has not even found their first job.

Mr. Thomas Townsend: In taking the notes at the end of the session, I didn't hear a reference specifically to bankruptcy. However, the participants at the workshop indicated a need for increased flexibility, both in the area of interest relief and in the area of providing remission for those individuals who are having trouble paying. I think the themes capture the intent of the participants, but didn't specifically indicate that by doing so these actions would reduce the number of bankruptcies. They most certainly would.

Ms. Carolyn Bennett: The other word I heard recurring a number of times is the whole issue of debt aversion. Obviously is more of a concern for people of lower incomes than it is for those higher up. Is that dealt with in the idea of grants? If there were grants available, then people who are a bit frightened about setting themselves on a course of huge debt would be more likely to go to school. I just think we want to make sure that people feel comfortable going to school.

• 0910

Mr. Thomas Townsend: Workshop participants identified two things that would help with debt aversion. The first is predictability. If students knew what resources were available to them through the entire course of their studies, this would be helpful, because they would be able to predict their total level of indebtedness at the completion of studies.

Second, the concentration on grants at the front end of studies, which would avoid the need to borrow, would have a particular impact on debt aversion.

The Chairman: Perhaps we could move on and hear from one of the major partners in this program, the provinces.

Mr. Patry or Mr. Smith, perhaps one of you would like to jump in at this point.

[Translation]

Mr. Bill Smith (President, Intergovernmental Advisory Committee on Student Assistance): Thank you, Mr. Chairman. I would like to begin by thanking you for giving us the opportunity to come to discuss our concerns in the area of financial assistance to students, and for listening not only to stakeholders' groups, but also to partners of the federal, provincial and territorial governments.

[English]

I think we all know that student aid is a program that's there to overcome financial barriers for the folks who should be in post-secondary education and can't be unless those barriers are overcome. It's not only to get them there but also to keep them there until they succeed.

I want to put the comments of provinces and territories in the context of the three underlying principles for student aid—sufficiency, access and fairness. Those are the principles we've discussed among provinces and territories when approaching this issue. They lead to the detailed recommendations that have been circulated to you and that were reviewed and approved by all of Canada's ministers of education following consideration by premiers in early August.

First, let me say there's been much work to date. It does appear that in the longer term we're arriving at a consensus and a solution. Stimulated by the work of the round table on student aid reform, and perhaps partially culminated by the workshop my colleague, Thomas, so ably summarized, we are arriving at a longer-term arrangement that I think will leave our country with a good student aid program, one that avoids some of the problems it has now. But there are more immediate problems, which I'll put in the contexts I've mentioned.

In terms of suffiency, there are three problems. First, current student aid programs often do not provide enough money for students with dependants. Current student aid programs often do not provide enough money for people acquiring their post-secondary programs at institutions that do not receive public subsidies. Third, the limits on the amount of student aid, the loan limits issue, are fixed, and not indexed to anything that reflects real costs to learners. That has led provinces and territories to be very supportive of what was just in the federal throne speech—that is, that there be grant support in the form of special opportunities grants for students with dependants—and to express a concern that the loan limits in the federal program are not pegged to the costs students actually incur.

We went eight years, to 1994-95, without changing those limits. One large increase and then they were pegged to CPI minus 3%, which is a very weird thing to peg a program to when costs of tuition in 10 years went up 240% and amount to one third of the cost to the student.

The second issue, the access issue, is far more complicated than simply debt. In my other role I'll provide the committee with copies of a study just done by the Maritime Provinces Higher Education Commission, which has been spending a few months looking at the access issue and the role of student aid. That finding confirmed that cost and debt together are a barrier, and more of a barrier to those from low-income backgrounds.

You will see that reflected, in the summary Thomas provided, in the call for more careful attention to the mix between grant and loan in the early years of post-secondary studies so that we do what we can to make sure student aid doesn't add to the barriers but relieves them for people getting to post-secondary education.

• 0915

Third, on the issue of equity and fairness, in the opinion of provinces and territories, dealing with debt is the number one issue, and it is a very, very immediate one. It is not one that can be adequately solved by designing a program that begins three years from now.

I was encouraged, Mr. Chairman, to hear your remarks about recommendations to the finance minister in the very immediate future. The problem is a here-and-now one, and it is a problem of fundamental unfairness to Canadians who are succeeding in their studies.

The Chairman: That was your finance minister I was going to—

Mr. Bill Smith: Well, as a matter of fact, in the case of my jurisdiction, my finance minister and your finance minister met on this, and we announced something in the throne speech two days ago.

The problem is this: By definition in this program, the people from the poorest backgrounds get the biggest debt. When we changed the program some years ago to make it more sufficient by giving more opportunity to acquire debt, we drastically increased the amount of debt that poorer Canadians are acquiring when they come out.

I will give you an example of those numbers from my province, which is quite dramatic, because this problem is not one that is adequately described by averages.

In 1992-93, in the final year of bachelor programs in my province, we had 37 people with over $25,000 student aid debt, and one person with over $30,000. In 1996 I had 980 with over $25,000 in debt, roughly split 50-50 between $25,000 and $30,000.

In speaking with our own cabinet, who ask what does that mean, it means that if you come out with $25,000 worth of debt and the interest rate stays down to 7.5%, you will pay $305 a month for slightly over nine years on your bachelor education. I would suggest to you that looking at the five-year outcomes in the survey released by HRDC on incomes of graduates, that will deter people from entering the housing market, from buying major consumer durables, and does put people in debt for an inordinately long time.

As to solving this in the short term, in the view of provinces and territories, well, I guess provinces and territories are the people who are spending a lot of money on either avoiding debt, by bursaries and grants on the front end—the most significant of which programs happens in the province of Quebec, which has opted out of the Canada student loans program, but there are programs also in British Columbia and in my own province—and in reducing debt by remission programs in existence in British Columbia, Alberta, Saskatchewan, Ontario, and Nova Scotia, at least at this point in time.

We think the only solution to deal with this issue of fundamental unfairness, where poorer Canadians are coming out with a lot of debt, is for the Government of Canada to begin to pay its fair share in contributing to the programs that are there right now in jurisdictions across our land.

Therefore, our three recommendations are: first, proceed with the special opportunity grants for students with dependants and look further at the question of people who are not well served by the existing loan limits; secondly, peg those loan limits to something sensible that bears a relationship to learner cost; and thirdly, in the short term, contribute to the programs that provinces and territories have in place to deal with this issue of debt avoidance, debt reduction, and in the case of Ontario, making the debt something that is more manageable.

That would conclude our comments to this point, Mr. Chairman. Thanks for the opportunity.

The Chairman: Mr. Smith, I'd like you to comment on one issue. You're recommending that loan limits themselves be increased. The increase that took place in the last few years from—Mr. Townsend, help me: $105 to $165?

Mr. Thomas Townsend: Correct.

The Chairman: That is a significant contributor to this rapid increase in debt accumulation. Have you talked about a level to which they should move?

Mr. Bill Smith: No. On our specific recommendation, in the context of the workshop, we need to sort out the grant-loan mix at the front end. There is a lot of grant support at the front end. The package of student aid, the sum of grant plus loan, needs to be enough so people, whether they're students with dependants or whatever, can get enough money to actually go through school.

We would agree with everyone else that the number one priority, the immediate priority, is debt, and we recognize that changing the loan limits does contribute to increasing debt levels. But the recommendation we have is that the federal loan limits be reviewed in terms of a one-time adjustment to make sure students can get enough money, and then that they be pegged to something that reflects the increases in tuition costs and living costs. If that loan were also to become a mix of loan and grant, that would be most helpful with avoiding the debt problem.

• 0920

The Chairman: Did I also understand you to say the costs of tuition have risen 240%?

Mr. Bill Smith: In Canadian Social Trends, published by Statistics Canada, from 1986 to 1996, if memory serves, tuition went up 240% and the cost of living went up about 36% or 37%. Costs to a learner are about one-third tuition and two-thirds living costs for a university undergraduate.

The Chairman: Thank you, Mr. Smith.

Perhaps we could hear from the banks, Mr. Scott; they are also partners in these programs.

Mr. Kelly Scott (Deputy Co-Chair, Financial Arrangements Working Group (FAWG)): Thank you, Mr. Chairman.

I don't have too much to add to what has already been said. In general, the financial institutions that form part of the Financial Arrangements Working Group, the FIs that signed the deal to enter the risk-sharing program in 1995, support the recommendations that you've seen to date. We share this concern with the high debt levels. We have seen the increase in debt levels to students placing significant difficulties on our clients, on the students who are graduating. This is leading to difficulties with repayments, increased defaults, and increased costs to the financial institutions to remain within the program.

I don't think it's any secret to anybody that in some cases what this has led to is to some of the participating lenders reconsidering their commitment to student loan programs. Certainly there's a lot of attention being paid to the debt and default issue, student bankruptcies and so on. We share that concern and think that anything that can be done to reduce those debt levels for our clients is definitely worth while.

Harmonization in our behalf is a very important thing. We're currently speaking on behalf of the Royal Bank, where we participate in nine provincial programs plus the one federal program, and we find it's very complicated to try to explain to a student the nuances and the differences between the two levels of student aid they're currently receiving. In most cases, when they're entering into it they don't recognize that they have in fact two loans, two programs, two different sets of rules. One of the ways we generally try to explain it internally.... We find ourselves trying to explain really probably the most complicated consumer loan product or program we have to clients with the least amount of experience in dealing with financial matters. That combination is quite devastating at times.

We welcome any concept of repayment flexibility. And I would tend to echo what you've already heard to date. Fifteen years would seem to us to be an absolute maximum repayment term. We don't see that extending debt over a lifetime is any sort of solution. Beyond the 15-year window the cost to the borrower is exceptional, but the impact on the monthly payment is negligible.

We support the need for the transition. We see first three to five years as really the critical time to establish the repayment habits of the student. We also recognize that's a time when they're having the most difficulty getting attached to the workforce. So any tools we have as the lenders that we can provide to assist the student we certainly welcome.

The concept of graduated relief program, again in concept we strongly support that. I should caution that it's not something from a program delivery standpoint that could be implemented immediately. There would be development costs and time lags required there even if the decision were made to move ahead with something like this just from an internal processing standpoint in terms of how quickly we could build that program. But, again, we support it in concept.

I think in general again, as I say, from the lenders' standpoint, we support the concepts and the concerns that have been brought forward to date.

The Chairman: Absent questions of clarification, I'm going to start perhaps with Mr. Léon and Mr. Gravel. Perhaps you could come in now and then we'll come back down the table and pick up those groups we haven't heard from.

[Translation]

Mr. Atïm Léon Germain (Vice-President, Fédération étudiante universitaire du Québec): Thank you, Mr. Chairman. To start with, we would like to thank the Standing Committee on Human Resources Development and Persons with Disabilities for its generous invitation.

• 0925

The Fédération étudiante universitaire du Québec and the Fédération étudiante collégiale du Québec are honoured by the interest shown by members of Parliament in their opinion on an issue that affects the majority of our members.

I would like to quickly remind people that the FECQ and the FEUQ together represent over 225,000 students from all regions of Quebec. These federations were established in 1990 and their mandate is to defend the rights and interests of students in dealing with governments and various other stakeholders. They have consistently worked to defend humanist education as a societal choice, high-quality, accessible education.

First of all, and here we may not be in line with the other presentations, we need to emphasize our deep unease at dealing with a question here that comes exclusively under the Quebec government. However, given that education funding, in particular financial assistance for education, is one of our central concerns, we felt it worthwhile to come to make a short presentation before you.

We would have liked to deal in our presentation with a number of aspects of financial assistance, as the previous speakers did, but unfortunately we had only a few hours to prepare. We were notified yesterday or the day before, and we will therefore limit this presentation to what we feel to be the essential points.

We are going to talk about federal funding of post-secondary education, as it relates to financial assistance, and the federal government's intention to establish a bursary fund for the new millennium.

Mr. Dan Gravel (Fédération étudiante universitaire du Québec): Federal funding transfers to Quebec have decreased steadily since the early 1980s. They have dropped from about 28.9% of Quebec budget revenues to around 7.6% this year. In the last Quebec budget, cuts in federal government transfers accounted for 60% of spending cuts for 1997-98. Moreover, since 1993, half of the federal government spending cuts took the form of drastically reduced transfers to the provinces. Obviously, everything indicates that the reduction in the federal deficit is achieved through skilful off-loading of the budget cuts onto the provincial governments.

It is now clear that the Liberal government is doing what its Red Book criticized the Conservative Party for doing over the previous nine years. Last year, the Canada Health and Social Transfer, the CHST, transfers for health, post-secondary education and social assistance were cut by $2.5 billion for 1996-97.

The CHST will be reduced by $4.5 billion for 1997-98, which translates as a net decrease of $7 billion over two years in Canadian investment in priority social programs. The Quebec Finance Minister announced in his latest budget speech that 60% of the budget cuts for Quebec's social programs were due to cuts in the Canada Health and Social Transfer.

Net cuts in the funding of post-secondary education therefore impact directly on the quality and accessibility of college and university training in Quebec. For the year 1997-98, federal cuts in the funding of social programs will result in a shortfall of $1.4 billion to Quebec, which means a net cut of over $280 million to colleges and universities in Quebec for that year.

It is also important to note that the federal government funds approximately 13% of the Quebec university system, which is less than its contribution to the Quebec student population as a whole, that is approximately 15%.

We see that the Quebec student assistance program has been hit by budget cuts. It should be noted first that there have been 20 major regulatory amendments to this program since 1986, that the maximum loan amount was increased every year for 14 years, that the expected contributions from students has increased on several occasions since the beginning of the 1980s and that the number of semesters eligible for financial assistance have been reduced twice since 1991.

• 0930

It should be added that at the same time tuition fees have increased by over 200% since 1990 and that the purchasing power of people 18 to 24 years of age has dropped by over 25% since the early 1980s, according to Statistics Canada.

The direct consequence of this situation is a significant increase in the debt load of students. Over the past five years, the average debt load of university graduates has increased by 30% on average. However, their ability to repay such debts does not seem to be increasing accordingly. It is quite significant to note that in 1995-96, while 55,329 former students started to repay their debts, 27,281 said they were unable to meet their monthly payments.

This seems to us to be one of the direct consequences of budget cuts: a net increase in the student debt load. Although we can calculate that the student debt load in Quebec climbed merrily beyond the level of $2.5 billion last year, the socioeconomic consequences of this situation still cannot be quantified.

The FECQ and the FEUQ consider education to be the cornerstone of a society's long term development. It is even the driving force of our social, cultural, democratic and economic development. Furthermore, according to Statistics Canada, 65% of new jobs created in Canada between 1990 and 1993 require a minimum of 14 to 15 year's education, and the Conseil des sciences et de la technologie du Québec projects that by the year 2000, 65% of new jobs will require university training.

Given the current situation, it is clear to us that the federal government has two options if it wishes to meet its commitments in the area of education. First, it could reinvest in education all the money cut from transfers to post-secondary education, and this could be staggered over a number of years. This option seems to us highly unlikely, so the government could allocate to the Quebec and of course other provincial governments those federal tax points representing the transfer payments paid under post-secondary education. We are not the only people to mention this possibility, since on February 2, 1995 a motion to this effect was unanimously adopted in the Quebec National Assembly. The motion reads as follows:

That the National Assembly of Quebec express its solidarity with all stakeholders in the area of education by denouncing the cuts considered by the federal government in the area of post-secondary education and demand from it the tax points corresponding to current transfer payments paid to Quebec under post-secondary education.

Therefore, the FECQ and the FEUQ consider it essential for the future development of Quebec that this unanimous resolution be respected by the federal government.

This leads us to the third part of our presentation, dealing with the return to budgetary stability by the federal government and financial assistance for education. This is probably the most interesting part for your committee.

The federal government announced this year that it would begin to manage its "surplus" for next year. Obviously, we place the term "surplus" in inverted commas, because once they are used, they are no longer surpluses. The estimates about the volume of such "surpluses" vary, but in every case it would amount to several billion dollars. We consider that the government, in using these "surpluses", cannot ignore the fact that one of the effects of previous budget cuts was to significantly increase the debt load of students across Canada.

This debt load, which particularly affects groups in low and medium income brackets, will soon become a new social scourge, as was pointed out earlier, if nothing is done quickly. We don't really know whether it was in order to reduce this debt load that the federal government announced the establishment of a fund to grant scholarships. At the present time, that is still very vague. According to the announcements made by Mr. Chrétien, an amount of over $700 million will be allocated to the Millenium Scholarship Fund.

• 0935

It is our role, as a student federation, to remain vigilant and critical of government policy during periods of cuts as well as reinvestments. It seems to us already that reinvesting federal "surpluses" might cause as many problems as did budget cuts.

There are a number of questions here. What is the intention of the federal government in creating this fund for the next "millenium", to quote the Prime Minister? Does this announcement or expression of intention mean that the students' financial assistance programs currently in place in Canada are ineffective and even flawed? Are we to understand that the federal government does not consider it necessary to improve the loans and grants program in effect in Quebec and other provinces?

Furthermore, if it is the intention of the federal government to allocate grants on the basis of merit or even excellence, we must express our disagreement with such a policy. The specific purpose of our financial assistance programs is to enhance accessibility to postsecondary education, not to promote excellence. For purposes of comparison, this would be equivalent to saying that EI benefits should be paid only to those people who were most productive when they were working. As we know, that argument just doesn't hold water.

If the government wants to emphasize excellence, we believe that there are various ways of doing so. For example, more money could be invested in providing support services for students, as these are recognized factors in the quality of education and in increasingly the short supply across the country. But to make the bread and butter of the poorest students dependent on their performance in class reflects an ideology that we cannot support.

Given the arguments we have presented, it is clear to us that budget "surpluses" intended to provide financial assistance to students should be transferred to the provincial authorities so that they can improve their own financial assistance programs, since they have been cut. This is an issue of consistency and, in our view, intellectual honesty on the part of the federal government.

Despite its shortcomings, this program is still one of the best in Canada; I am referring here to the Quebec government program. If such a transfer is made to the Quebec government, the money in question will help us to considerably reduce the debt load of Quebec students and significantly improve Quebec's financial assistance program. You can be sure that we will seek the approval of the National Assembly for this. Thank you very much.

[English]

The Chairman: Thank you very much.

Mr. Kitchen.

Mr. Paul Kitchen (Executive Director, National Association of Career Colleges): Thank you very much for the opportunity to address the committee.

I am the executive director of the National Association of Career Colleges, which represents private post-secondary training institutions across the country. There are roughly 400 member institutions that belong to the association, but I would also take this opportunity to speak somewhat on behalf of the students who attend those institutions, as they do not have a collective voice to speak on their behalf.

I want to take a couple of minutes to perhaps make the committee aware of this sector, because I think it's oftentimes not a well-understood or well-known sector of the post-secondary environment. It is a sector of the post-secondary element that has been providing service to students for almost 130 years now, with origins in 1868, and with continuous operation since that period of time. Today we would be serving over 150,000 students across Canada in each and every province. They tend to be smaller kinds of institutions that focus in on specific skills areas of training, and they offer a delivery system that is quite attractive to a certain sector of the population. It's not the kind of delivery system that meets all students' needs, but certainly there is a growing movement towards that kind of delivery system. The population served is somewhat different, and I'll come back to that in a minute.

• 0940

What I did want to say is that our association has participated over the last five years as a member of the National Advisory Group on Student Financial Assistance, and in fact participated in the stakeholder meetings a couple of weeks ago, and would agree with the recommendations that have come forward, both from the public coalition and in the summary remarks Mr. Townsend has made. I won't dwell on those, because they have been well covered.

What I would like to talk about, though, is our belief within our sector that the Canada student loan program is an excellent access tool for people to enter post-secondary education and be able to move on into the labour market afterwards. Certainly some changes need to be made, and they have been discussed, but it has been a tremendous tool and we fully support the concept.

One of the key items for us would be the sense of equity, the sense of choice; students have a right to choose the most appropriate delivery system for them in their post-secondary experience. In our sector, it's trying to gain skills that are required.

As I mentioned before, we tend to serve perhaps a little different portion of the population, as is evidenced in some of the statistics that HRD and some of the provincial jurisdictions have produced to show that a disproportionate number of sole-support parents with dependants access the training system through the private sector. In fact, again, that would be borne out by recent numbers produced at the NAGSFA meeting, indicating that although 15% of the borrowers would be within the private institution sector, nearly 40% of the students with unmet need also would reside within that sector. Certainly most of those would be sole-support parents with dependants, who have high need and have chosen to take the delivery system in the private sector.

We would support the recent announcements of special opportunity grants for students with dependants. It makes sense to try to give them the hand up that's required to be able to enter back into the labour market. We'd support that.

The other sector of students that I would like to comment on is the area of disabled students. Again, the special opportunity grants available to disabled students are extremely important to them, and in fact probably need to be strengthened and made more flexible.

I can speak personally for a moment on that. I became visually impaired in my last year at university, a few decades ago. At that time there were not a lot of supports around. It was a very difficult struggle to try to finish that post-secondary education. It was in my final year. It took a lot of sweat, time, and effort to try to overcome.

The programs we've put in place are very important to those students. Within our sector, something in the neighbourhood of 5% of the students identify themselves as disabled, but I do feel that the initiatives to try to help people who perhaps need a little more time and have a little higher costs to successfully complete and enter the labour market are money well invested.

The final point I would like to make at this time is that our sector believes in some accountability in terms of the institutional component in the post-secondary education system and student loans. We really do believe that institutions should be held accountable for their enrolment practices. They should be accountable for the retention of students within programs. They should take a look at the work they do in terms of placement rates upon graduation and assisting students with placement activities. Those are the keys to making effective use of a Canada student loan program.

• 0945

Measures should be taken to try to strengthen the accountability back to the institutions for the things they have control over. Again, there are the recruitment practices, retention, placements, the relevancy of training, and contact with industry and the labour market to be looking at programs that are appropriate so that we're investing in students being involved with programs.

That's certainly so in the vocational stream. I would say that it obviously is a different situation for university students, but it's certainly so in the vocational stream. Those are very key components, and they should be taken into account as we develop reforms to the Canada student loan system.

Thank you very much.

The Chairman: Thank you, Mr. Kitchen.

I should also note that the National Educational Association of Disabled Students were invited, but they were unable to attend the round table. However, they're sending a brief on this issue.

I note the presence of Peter Adams here, who is the chair of the caucus committee on higher education. He's known to certainly some of you at this table. He will have to attend the House, as he is partly responsible for running it, but he did have a question for clarification.

Mr. Peter Adams (Peterborough, Lib.): Thank you, Mr. Chairman.

Mr. Scott, our caucus committee on higher education has been following this issue for three or four years. I realize that the focus here is grants and loans, the nature of loans, and that side of student support, but in your remarks you used some phrase like “attachment to the labour force”. The full context of this is the ability to pay, support from families, and in particular, work for students before, during, and after. Were you suggesting that you and your colleagues are actually working actively on helping students to become, as you say, “attached to the workforce”?

Mr. Kelly Scott: No, we're certainly working with students who come to us indicating a lack of ability to pay. I think what I was trying to say was that we recognize that in a lot of cases, there is a lag time from graduation to a permanent attachment to the workforce. Given the current systems and some of the lack of flexibilities that we have in those systems, we're basically left with students who physically can't pay. We really have no alternatives to help them out in that period. That's really what we were talking about.

Mr. Peter Adams: One approach would be to help attach them to the workforce, would it not?

Mr. Kelly Scott: Certainly from the financial institutions' standpoint—certainly it's outside my area of expertise—I know there are involvements from within the banking sector to work toward internship programs and programs of that nature to try to foster that kind of a role.

Mr. Peter Adams: Thank you.

The Chairman: I believe, Mr. Tremblay, you have a short question for clarification.

[Translation]

Mr. Stéphan Tremblay (Lac-Saint-Jean, BQ): My question is to Mr. Léon. I will have other questions later, but my first one concerns the Millenium Scholarship Fund. At the present time is there an equivalent fund in Quebec?

Mr. Atïm Léon Germain: Mr. Chrétien announced that not very long ago. Therefore, it has not yet been looked at by student associations in Quebec and even less so, I would think, by the Quebec Department of Education.

• 0950

According to the Speech from the Throne, it seems clear that it would be used to fund accessibility. These scholarships would be based on merit and need, and intended for middle and low-income groups.

For this reason, it seems clear to us that this is a case of overlap. I say overlap because Quebec has a system of loans and scholarships which has already proven its worth. It's one of the provinces giving the most scholarships in Canada. We really don't see what are the grounds for the federal government wishing to establish a parallel system. We know what the long term consequences of that will be. I won't go back, for example, over the past 30 years of debate on the manpower issue.

Mr. Stéphan Tremblay: Thank you very much.

[English]

The Chairman: Thank you, Mr. Tremblay.

I have two more interveners. I'll start with Mr. Charron.

Mr. Jocelyn Charron (Coordinator, Government Relations Officer, Canadian Federation of Students): Thank you, Mr. Chairman. I would like to do two things: make a few comments about what's been said so far and then move into my presentation.

From our standpoint, the summary offered by Mr. Townsend of the workshop that took place a week and a half ago is pretty accurate. The ranking of the measures, or the ideas, pretty much refelects what we also observe—loan remissions or some measures to take care of the immediate debt problem and then upfront grants for high-needs students and students with dependants.

We were really quite pleased to see that people from so many diverse horizons came to this conclusion and in fact echoed the concerns of both the Canadian Federation of Students and the round table. I would also like to say that throughout this whole process, and previously—over the last three years, I'd say—there has been quite a lot of openness from the Department of Human Resources Development. I think the communication has been quite good. I would like members to know that.

I would like to move into the other part of my presentation, which is going to be quite informal. When we were approached to be a member of the round table by different groups, but mainly by the Association of Universities and Colleges of Canada, we accepted, because it was felt at the time that maybe the federal government was thinking about simply getting out of the student loans business. It was very much a concern to our members that such a thing could happen. So we met and we decided to do something about it. We decided we could look at the program to see how it could be improved and how we can make a case for federal involvement in student aid.

We also found, in working with the other roundtable members, that there was quite a lot of interest in debt reduction measures as opposed to debt management. Now, debt management wasn't excluded from our discussions, but the focus on debt reduction progressively came along. I think we suddenly realized that a big part of the problem was debt accumulation, and that a big part of the solution was debt reduction. That's also the focus we had hoped would happen, and did happen.

We were pleased by the receptivity of the other members, including groups that in the past, as members are well aware, have not seen eye to eye on many topics. We found that encouraging.

• 0955

As Bob has stated, I think we see the measures as a package, but in any package you have favourite and less favourite elements. If I had to identify our favourite measures, they would have to be the debt reduction measures, the deferred grant side of it, and of course the upfront side of it. We also are quite pleased with the idea of exemption from payment on the capital during the transition period, and of the graduated interest relief program. It's fair to say that if the government was to move swiftly on these issues, the initiative would be well received by the federation.

It's also been said around the table that accessibility by itself doesn't end there. I think Mr. Smith mentioned that there's a concern with increased costs. I think others mentioned also the federal transfers. It would be less than honest to say that even with significant improvement to CSLP, the federation would not address those questions. I just wanted the members to know about that.

[Translation]

In this regard, the closest analogy I can make is with the Canadian Foundation for Innovation. As you know a number of proposals were made last year by various groups, including the Federation, and the government responded by creating the Canadian Foundation for Innovation. I think the decision was relatively well received by the various organizations concerned. However, as you know, once again this year we are asking for research granting councils to also be given the resources they need to do their work.

In that case, as in the case we're dealing with at the moment, there's not been any decision to resolve these problems. We have to recognize that for a number of years there have been cutbacks in the level of investment in post-secondary education. Although we expect the government to move quickly in certain areas, efforts will be made to ensure that in the coming years money will be invested in a number of areas, including research, federal transfers and the sector of particular interest to us, namely financial assistance to students.

I think that the government has a unique opportunity to make a difference in the lives of our members. There's been a lot of talk about debt. This is certainly a problem. Our members, despite the problems identified, sometimes look towards Quebec with a certain envy. In many provinces, there are no grants, or at least nothing worthy of the name, and the debt problem is particularly serious.

Particularly in the case of those of our members from low income families, implementation of the measures proposed by the round table and the Federation would make an enormous difference. I hope that the members of your committee will give favourable consideration to those proposals. Thank you for your attention, and I hope to have the opportunity to discuss some of these issues with you during the morning.

[English]

The Chairman: Thank you, Mr. Charron.

Ms. Kowalchuk from CASA.

Ms. Catherine Kowalchuk (Regional Director, Canadian Alliance of Student Associations): Mr. Chairman, members of the committee, and fellow witnesses, good morning. My name is Catherine Kowalchuk. I am the president of the University of Manitoba students' union. I am also the prairie regional director for the Canadian Alliance of Student Associations. More importantly, however, I am a student. The issues I will be discussing today directly affect the issues of accessibility of post-secondary education in this country.

The Canadian Alliance of Student Associations represents over 200,000 students from coast to coast. We are in our third year of raising awareness and improving the quality and accessibility of post-secondary education in this country. We focus our efforts on the decision-makers like yourselves in a practical and pragmatic manner.

• 1000

We also look to work with any one person or group as long as their aims are constructive. Our most important association is with the six post-secondary stakeholder groups also present here today. Together we have formulated a package of key elements, which Mr. Best has already referred to, that we all agree are prerequisites for change. We fully endorse these recommendations.

In line with our methods, CASA invited Mr. Thomas Townsend, director general for learning and literacy, to participate in our national conference discussing much of what we are here to address today. As a result of many discussions and deliberations from that conference, CASA developed “Real Solutions: Proposals for Student Assistance Reform”. I hope you all received a copy of this at some time. I would now like to highlight some of the points in there, from the student perspective.

First, reforming student assistance through an increased federal role in post-secondary education must not be seen by universities or colleges as an opportunity to increase tuition. The crisis that students are facing today is a direct result of the lack of coordination between both levels of government and institutions. If we do not establish that relationship now, any reforms will only be band-aid solutions, and we will be forced to revisit the situation in the near future.

Second, we would like to applaud the announcement by the Prime Minister to establish a Millennium Fund designed to target students from low- to middle-income backgrounds. Like our fellow stakeholders, we would like to emphasize the importance of this money being specifically targeted to needy students. In addition, CASA has proposed some possible structural components to the fund, which are explained in “Real Solutions”. Most of that is referring to the merit-based aspects of the fund.

Third, Human Resources Development's recent commitment to undergo a needs assessment review of the Canada student loan program is a much-needed step in ensuring that post-secondary education remains accessible. In “Real Solutions”, CASA has outlined specific areas of consideration for such assessment review.

In addition to the recommendations for reform of the Canada student loan program that are contained in both the key elements of our round-table and in “Real Solutions”, we would like to stress that the length of time required for a student to repay their loan should not exceed 15 years. People should not have to mortgage their futures in order to pursue an education.

For example, a recent graduate will not only have to repay their student loan but will also need to pay into RRSPs for their retirement and into RESPs to save for their child's education. After these considerations are met, a person's ability to contribute to the Canadian economy as a consumer is severely limited.

Last year Minister Paul Martin announced that ancillary fees would be eligible for tax exemption. Although CASA applauds this initiative, we would like to stress that these ancillary fees include all mandatory fees charged by an institution. Some indications have pointed to the possibility that student-originated fees would be excluded from this clause. This is obviously a concern to us, as student associations have picked up the slack in regard to providing student services in this era of institutional cutbacks.

In closing, I would like to emphasize the human factor. We must be very careful not to rely too greatly on statistics and dollar signs when discussing people. All evidence does point to the need for education in our knowledge-based economy, but more important, we need to realize that we now have food banks on campuses. Let's not allow financial barriers to exclude the academically able from attaining a higher education, for that would erode a principle of accessibility that has been the hallmark of Canadian post-secondary education for the past 25 years.

That concludes my presentation. I thank you for the opportunity to present. I would welcome any questions, and Hoops Harrison, the national director for the Canadian Alliance of Student Associations, would also be pleased to answer questions.

The Chairman: Anybody called Hoops we will definitely have to hear from.

I said we would take a 10- to 15-minute break when the bells started to go. Let's reconvene at 10.20. We'll grab a coffee, take a stretch, and then I'll let the members have at these subjects.

Thank you.

• 1004

• 1022

The Chairman: Let's come back to work.

Now that we have a starting presentation from the various groups here, I'm going to let members have at it with some questions to whoever they choose, although I would ask members when you're raising your questions that as much as you can you pose it to a specific person or group of persons so that we know how to organize this show.

Having done that, I would be interested in hearing, as we get through the responses to those questions, if you have an interest or a comment, as Mr. Charron did, later in the presentation about comments that have been made by other groups. Please feel free to add that information into the mix. It will eventually dissolve into a free-for-all, and hopefully something useful will come from it.

I would now turn to Mr. Johnston and Mr. Anders to start.

Mr. Dale Johnston (Wetaskiwin, Ref.): Thank you, Mr. Chairman.

I believe it was Mr. Best in his presentation who suggested that borrowers should have the option of suspending the principal payments during a three- to five-year period, in transition from school to the labour market. I wonder how that is going to work. I see that a suspension of the principal payments is ultimately going to add to the debt the student owes, because they're not making any payments on it. Either that, or perhaps you're suggesting that this should be subsidized by the government somehow. Perhaps you'd like to explain how that will work.

Mr. Robert Best: Yes, thank you. The idea there is part of a set of measures designed to provide some flexibility in repayment. I would refer back actually to a question from Ms. Bennett where she talked about what MPs may be hearing from constituents about a situation that can arise where people have recently left school, they have substantial debt, and they may be put into a situation where they feel they have very little flexibility in how they handle that debt if they have little or no income.

• 1025

The roundtable groups looked at providing some flexibility on how that might be done. We've talked to some financial institutions who consider it as something that is practical. I certainly invite Kelly Scott to speak to that.

The idea is that an individual could opt to suspend principal payments for a period during this transition period to the labour market. You're quite correct that they would pay more over time, but we want to stress that the idea is to get people through this transition to the labour market period, where most defaults happen, where the bankruptcies happen, and to get people into a position where they can be in the labour market and handle their debt obligations. We know in most instances that in three to five years most people are going to be in a position to handle a reasonable debt load.

Now, you're quite right: there is some trading of time for money. If you choose during that period not to make principal payments, when you do begin paying you're paying on a principal you haven't paid down on, so you're going to pay more than you would otherwise have done. But there are some people who aren't going to be able to make their interest payments, either. That's why we're suggesting that for those people some subsidy may be necessary.

There already is interest relief, but we're suggesting an interest relief mechanism that I think is a bit more responsive. The current interest relief is essentially an on-off switch; you qualify or you don't. If you qualify, you get full interest relief; if you don't qualify, you don't get any.

Our notion is that some people may be able to make partial interest payments, but not total. Why provide them, if they qualify, with the total subsidy? Provide them with some interest relief. That's where the subsidy is.

On the matter of the principal payment, we're saying this decision is one where, yes, the individual is choosing to trade some time for money. It is vitally important—and this comes back to the theme of communication—that they understand the choice they're making, and its implications.

Mr. Dale Johnston: As I see it, you're trying to address flexibility here, and the rate of bankruptcies; you know, either you qualify for this program or you don't. There's a definite cut-off there. You're trying to make a grey line out of a black and white line.

Mr. Robert Best: On the interest rates.

Mr. Dale Johnston: Okay. That makes a little more sense. However, there still is no mechanism in there to prevent the rate of bankruptcy.

I think the rate of bankruptcy is a manifestation of a whole pile of other problems. It is perhaps a combination of students coming out with unmarketable skills, or at least studying for something there's a glut in the market in, and maybe not putting enough effort themselves into meeting the cost of their studies while they're going to school.

I notice in one of these presentations that it says the recommendation is that students work less than 10 hours a week at their jobs in order to put an effort toward their studies. Well, that's probably a good recommendation, but I think we need to have more commitment on behalf of the students as well. It seems quite easy to just declare bankruptcy. Since we've gone to this system where the banks are controlling all the student loans, I think we've seen an increase in the bankruptcy rate. I'm searching for reasons as to why that's increased to the point it has.

Mr. Robert Best: Some others may want to speak in part to that, but there have been increases in bankruptcies, and there have been increases in default. I've heard lenders talk about “can't pays” and “won't pays”. Kelly Scott or someone else may know more about this than I do, but my understanding is that both “can't pays” and “won't pays” have probably gone up.

• 1030

If someone truly won't pay and they have the ability to pay, then I'm not terribly sympathetic. But I am concerned if the “can't pays” are increasing because of the levels of debt and because of the problems in this transition period to the labour market, and because people have little flexibility in their ability to cope with that debt in a period of low or no income.

I balk at easy generalizations about what's going there. I think the lenders and perhaps Human Resources Development Canada may be able to shed some light on that.

Clearly part of what's going on is increasing debt levels. HRDC has documented that—we're seeing substantially increasing debt levels. I think we all should be concerned about whether it's a good public investment to have invested in those people's education substantially, and they've invested time in it, and then put them in a position in a crucial transition to the labour market where for some of them.... And I've had them phone me directly. I've had people phone me, having seen me quoted on this, calling and explaining their desperate situation to me—literally, people phoning up and saying, “I'm the guy you're talking about. I want to get a job. I'm trying to get a job. I just got out of school. I've got a $30,000 or $40,000 debt. What do I do? Where do I turn?”

They can turn to interest relief. There is some aid available. But I think if we can provide some more flexibility to those people, some targeted aid in the form of graduated interest relief, and in more extreme cases some targeted debt remission, we're going to put most people in a position where they can meet the remainder of their debt obligation. That just seems to me a smart thing to do, given that we have invested a lot of public money already on those people's educations.

Mr. Dale Johnston: I have just two final comments. I am talking about the effort put forth by students. I'm talking specifically about the two that I put through university. It seems to me in my fatherly opinion that they could have put a lot more effort into it.

We have to have dedication and obligation on behalf of the student, certainly. I do agree, however, that the levels of obligation on the student's behalf when they get out of school is too high. I think it's ridiculous that they should start off $20,000 or $30,000 in debt. It's as if that's what faces them the first step out of the door, and prospects of a job are not always certain.

I think it's entirely incumbent on the student to train for something they know is marketable. If we were to fund post-secondary education to the last dollar, we would have some students I'm sure who'd take half a dozen degrees, not worrying too much about how marketable they were.

The Chairman: Who wants to touch that?

Thank you, Mr. Johnston. We'll send a copy of the transcript to your kids.

Mr. Tremblay.

[Translation]

Mr. Stéphan Tremblay: My question is to Mr. Charron and Mr. Léon. I would like them both to answer.

Mr. Charron, as you have a good knowledge of all the current systems of loans and grants in every province, do you believe it would be more efficient to distribute the money involved to the provinces and let them manage it themselves? I would ask the same question of Mr. Léon, but more specifically as regards Quebec.

Mr. Jocelyn Charron: Is this a trick question?

Mr. Stéphan Tremblay: No, not at all. I would like to have your opinion.

Mr. Jocelyn Charron: One of the ways of answering that question is to look at what's happened in recent years as regards financial assistance to students. In the early 1990s for example, there were in most provinces quite substantial grants for entry-level students. In the vast majority of cases, outside Quebec, they have been eliminated or substantially reduced.

• 1035

Personally, and I think this is the view of other members of the round table as well, I believe it makes sense to ask the federal government to occupy the vacuum in a way.

The members of the round table expected the new funding under the Canada Student Loans Program would be distributed according to existing procedures. That means that Quebec, which has chosen to establish its own program, would receive an equivalent extra amount for its program, which is already one of the best, if not the best, in Canada.

Our decision is based on our analysis of political and investment trends in the area of student financial assistance, as well as the actual situation involved in opting-out with compensation, which exists for Quebec and the North West Territories, I believe.

Mr. Stéphan Tremblay: Thank you very much.

The Chairman: Mr. Léon.

Mr. Atïm Léon Germain: Particularly in the case of Quebec, this is clearly a program with an opting-out provision. Thus, the issue becomes more complicated, because if the federal government were to decide to reinvest some money in its own program, there would be a transfer to Quebec in particular. So there is no problem in this regard.

However, we can nevertheless express an opinion on the program as a whole. It is clear, and here we agree with the CMEC, that at the moment it is more attractive to invest in the provincial programs, some of which offer debt forgiveness and others grants. In this case, the question for Quebec is as follows: how would we go about transferring that to Quebec, since there is no opting-out provision? I think we have to look at this very pragmatically and say that the best approach in the country as a whole is to transfer funds to the provincial programs at the moment. That is the situation.

Mr. Stéphan Tremblay: To turn to a different matter, Mr. Charron, do you think there is a cause-and-effect connection between the cuts to the three granting councils and students' debt loads? The reference is probably to students in master's programs. but I would like to hear what you think about that.

Mr. Jocelyn Charron: I am sure there is a connection. Unfortunately, I do not have the figures with me, because that is a slightly different issue, but there is no doubt that the research granting councils are now providing fewer grants than they were a few years ago and it is clear as well that these grants cover fewer needs than they did 15 or 20 years ago. So, in this sense, there is a connection.

The other consideration is that students who are approaching their master's degree or doctorate, and who already have a fairly large debt load, often have to decide whether it is worth continuing their education if they have little or no chance of getting any funding of this type. I believe this does have an impact.

Obviously, at the graduate level, there are many other options. Students can be research assistants, they can teach, and so on. So there are other things available at that level. However, I think the cuts to these councils has meant that students definitely think twice before going deeper in debt, because it is most likely that they will not get any financial assistance from the National Research Council.

My colleague Rubina may have something to add on this.

Mr. Stéphan Tremblay: Thank you.

[English]

Ms. Rubina Ramji: I also wanted to state that the granting councils only support 16% of graduate students. It's not a significant amount of students who get grants at the graduate level. Specifically in the social sciences sector, they don't give grants to master's degree students. They only give grants to Ph.D. students.

There is less and less funding at the graduate level. A lot of these students already have debt, so they tend not to even think of going to graduate school, because there are so few grants available for them.

• 1040

[Translation]

Mr. Stéphan Tremblay: My question is to Ms. Ramji. Does the money go most often to professor-researchers or just students?

[English]

Ms. Rubina Ramji: The 16% is directly to the students. Students can get indirect funds through their professors, if the professors offer research assistantships to the students, but that doesn't always happen, depending on how much of the money goes to the professor. It's up to the professor to give the student money, and they have to work for that; it's not a grant.

[Translation]

Mr. Stéphan Tremblay: Do you think this is a good approach, or would you prefer more of the money to go to students? Perhaps Mr. Léger could add something as well.

[English]

Ms. Rubina Ramji: I would think that more grants directly to students would be beneficial, because it would allow students to see into the future, to know what kind of funding they would be able to get, rather than hoping they would be able to work with a professor, who might or might not already have a grant.

[Translation]

Mr. Stéphan Tremblay: What Mr. Léger thinks.

Mr. Robert Léger (Government Relations Officer, Canadian Association of University Teachers): I think that both are important. On the one hand, teachers need funding to help students who can do research work with them. I think that is absolutely necessary. In addition, however, I have no objection to grants for financially needy students.

Mr. Stéphan Tremblay: Thank you.

[English]

The Chairman: Thank you very much, Mr. Tremblay and Mr. Léger.

Libby.

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

My question is to Mr. Charron from the Canadian Federation of Students.

First of all, thank you very much for coming today, and to the other witnesses as well. I'm very glad we're having this discussion.

In the last few months, the Canadian Federation of Students released a number of very key documents: Blueprint for Access, Compromising Access, and then one just more recently about the Millennium Fund, which a number of people have touched on today. Those documents really were very important, because they served to highlight and focus attention on the very stark reality that students are facing across Canada. I don't think there's any doubt that the evidence clearly shows a very strong cause-and-effect relationship between the massive cuts we've experienced in federal funding to post-secondary education and the skyrocketing tuition fees—we hear today they've gone up 230% since 1986—as well as the increasing student debt load.

One of the really important pieces of information that came out of that work was the fact that debt reduction is the issue we have to deal with. There's been a lot of discussion about restructuring debts for students, but to get at the issue of debt reduction is most critical. It's very interesting now and important to see that a consensus is clearly emerging from a number of the groups involved, in terms of what direction we need to move in.

I'd like to focus my question on the issue of this Millennium Fund. As far as I'm aware, no consultation was done prior to the announcement of this Millennium Fund. We don't know much about it. It appears it is primarily a scholarship type of fund, maybe to begin prior to the year 2000—again, that's not clear, nor is how it will be directed.

In the joint presentation today, the suggestion is made that this fund should now be looked at as a source of funding to actually move from a scholarship merit system over to a grant system based on financial need, which is really where the critical issues lie.

I'd like to ask you to comment on what kind of process you would recommend the committee take up to actually deal with that, in terms of looking at the substance of what this Millennium Fund is all about and how it can be more directed towards a grant system based on financial need. I'd invite other people to comment on that as well.

Mr. Jocelyn Charron: In terms of process, I would suggest that consultation processes and mechanisms are already in place that are proving to be fairly effective in reaching out to the post-secondary education community and asking them how they see certain issues. The Millennium Fund certainly could be one of the topics we would address in those settings. I'm talking, of course, about the National Advisory Group on Student Financial Assistance, and there are others involving also the provinces.

• 1045

I think there would be mechanisms that would probably work, because they involve people who are familiar with the issue, and also because Human Resources Development would be involved. I think Human Resources needs to be involved in order to figure how to reconcile and how you mesh something like the Millennium Fund and the Canada student loan program. They're both mechanisms to help students, and somehow they'd have to work together if the Millennium Fund is created. At first glance, I would see those mechanisms as possible solutions to bring about a discussion, and also to present ideas to members of the committee.

The Chairman: Thank you, Mr. Charron.

Mr. Killeen.

Mr. Pierre Killeen: The design of the fund is going to be crucial in terms of its success. This is a very sophisticated financial product, as you've heard our friends from the banks say. If we're going to introduce a new source of funds into the system, clearly we will have to articulate this new source of funds with the current system that we already have. And then there's the even more perplexing question of Quebec.

A lot of talk has been tossed around here about the Millennium Fund. I've been doing some quick envelope calculations. If we're talking about a billion dollar endowment that would be generating a 3% to 5% return on a yearly basis, that would be about $30 million to $50 million that would be available for scholarships. We have 400,000 students now participating in the Canada student loans program. I guess the point is that the Canada Millennium Scholarship Endowment Fund is not going to address the need that we're trying to present before you here today. My second point would be that it's very important that the design of this be well effected, because we want to see dollars going to students, not dollars going to program administrators.

The Chairman: Mr. Harrison, you also wanted to comment.

Mr. Hoops Harrison (National Director, Canadian Alliance of Student Associations): Thank you, Mr. Chairman.

We referred earlier to the fact that we have some outlines in the “Real Solutions” document for the Millennium Fund. In our calculations, we actually predicted a little higher return on the investment for the endowment, at 7%. We think the government has better financial sense, so we're hoping they have some good investors.

In regard to linking it with the Canada student loans program, we didn't actually propose that because we didn't want to exclude people who were not involved in the Canada student loans program, like the people in Quebec and the Northwest Territories. We have very much concentrated on what you have mentioned. We focused our concentration on need. And I would also like to say that Atim's comment about linking with employment insurance is a very interesting linkage, and I think it holds true.

As far as merit or any sorts of academic qualifications are concerned, we chose the concept of extraordinary contribution. It should be considered when determining who gets these scholarships or grants—not necessarily academic work, but perhaps other works such as charity work, work in the community, or leadership skills, or things that quite often aren't always recognized in pursuing post-secondary education. There are already many scholarships out there for the academically qualified.

In regard to something Pierre said about the adequate levels of funding that are currently available, the national grant program in the United States amounts to about $25 billion. Proportional to the Canadian population, we would need an upfront grant program of about $700 million to adequately provide the same sort of support for students. This Millennium Fund, if it's $70 million a year for a $1 billion fund, or $140 million for a $2 billion endowment, is a start, but it doesn't adequately address the full need that's out there.

The Chairman: Thank you, Mr. Harrison.

I believe Mr. Smith also wanted to make a comment.

Mr. Bill Smith: Yes, thank you.

I want to emphasize that a fund that will produce some scholarships for students who start a couple of years from now doesn't do much for those who are graduating now with unmanageable debt loads—and I'd emphasize the materiality issue here. At the Council of Ministers of Education, our own estimates are that if the Government of Canada were simply to match for the 60% of loans that it produces, at the current level of expenditures on debt reduction by the provinces we're talking about a new federal expenditure in the neighbourhood of $400 million a year. That's why we say this is a significant financial issue and that it needs to be addressed in that context as well.

• 1050

There is a short-term need and there's a need to deal with that debt. I think this fund is a good thing, which provinces like to see, and I think it will help avoid debt for future students. There's some time to sort out its design, but it's neither sufficiently material nor sufficiently timely to deal with today's number one issue.

The Chairman: Thank you, Ms. Davies. I'll let you come back with another question.

Mr. Killeen, could you just clarify something? I didn't understand your comment about administrators.

Mr. Pierre Killeen: It comes out of my discussions with student financial administrators who work at community colleges and technical institutes. Specifically I was saying that the decision as to who gets a particular scholarship can be a very complex decision. We already have a needs assessment process under the Canada student loans program, and I'm not sure what part of the budget of the program goes towards administration per se. That's the issue I was getting at. The more complicated the fund is, the more it's going to cost to administer, so less money will be available for students.

The Chairman: Thank you.

Libby, do you have any follow-up questions?

Ms. Libby Davies: Yes. I think the responses are very interesting and serve to point out that we do have a very complex system in the Canada student loans program and the relationship with the provinces. That's why it's very important to look at this millennium fund in terms of trying to figure out how the millennium fund becomes part of or works with the system we already have, and that's really not clear to us.

I'm sort of picking up here on the suggestion from this joint brief that it may well serve as an important source of funds for a grants program, but I entirely agree that the issue of a grants program is not going to be addressed from this source of funds alone. We're talking about something much bigger. So in that connection, in terms of a grants program, I just wonder whether some of the witnesses have examples of programs that have been effective in other jurisdictions or other countries and could serve us here in terms of trying to move towards a system of a national grants program. Does anyone have examples that we could look at and draw from to use in Canada?

Ms. Judy Stymest (Quebec Representative, Canadian Association of Student Financial Aid Administrators): I'd like to comment from the perspective of the Canadian Association of Student Financial Aid Administrators. I think we are quite united across the country in wanting this money to be given on a needs basis. We certainly feel that's where the money should go. That's where it's important. We hope that maybe part of it could be used to create a program to encourage accessibility for first-year and second-year students, those students who may be debt-averse and who are put off by the headlines about $25,000 and more of debt.

To answer your question specifically, the U.S. has Pell grants for high-needs students. That's probably the biggest example of a federal program injecting grant money into programs for high-needs students.

The Chairman: Mr. Townsend.

Mr. Thomas Townsend: There's a General Accounting Office report on retention grants that might be of interest to this committee. I don't have the number of that report off the top of my head, but it looked at the use of grants in the first and second years of studies in terms of grants ensuring that individuals completed their studies, and in fact there was some evaluative evidence that was so.

The Chairman: Thank you, Mr. Townsend. Perhaps you could get that reference to the clerk, and we'll have it circulated to members here.

Mr. Charron.

Mr. Jocelyn Charron: If I'm not mistaken, I think that during the stakeholders' meeting there was a reference to the attrition rate or retention rate in British Columbia, which has upfront grants for the first two years, I think. It was shown that there were fewer students leaving school there during those years than there were in other provinces. A clear link was made to the grant. Am I alone in having heard of this?

• 1055

I think the provincial government in British Columbia has done studies to look at the impact of its own programs on retention and attrition rates. That would be a place to look.

The Chairman: Thank you, Mr. Charron. The interpretation system doesn't show nods, but Mr. Townsend was nodding along with you as you were making your observations.

If I might, Mr. Smith, you made a comment about the remission program—I think that's what you were talking about—that the provincial governments would like to have matched. Are you saying, then, that just the federal share would be $400 million so that in fact if we were in an ideal situation, the problem would be about $800 million a year?

Mr. Bill Smith: The federal student loan meets 60% of need up to whatever limits happen to be established. So it's a 60-40 kind of sharing.

The number I was using is a fairly loose estimate, because measures in each province to avoid or reduce debt vary rather considerably. B.C., for example, is a combination of first- and second-year grants. Then they spend another $60 million a year on remission.

Ontario's remission program in 1996-97 I think cost them around $150 million, but in the same year, in terms of the amount of loans they made, if they keep that remission program, they will have to book a liability of $450 million.

The point I want to make here is that there is significant provincial expenditure that varies from province to province in both its design and its level for either avoiding debt by giving grants and bursaries or by bringing it down by some form of rebate. If we look at the three western provinces, it looks like about 30¢ per dollar of loan. If we look at the liabilities being accrued in Ontario, it's probably about 50¢ per dollar of loan. Quebec is an opted-out jurisdiction. Our estimate is somewhere in between the two.

If we run those numbers as ballpark numbers we're in the $400 million range if the Government of Canada were providing a debt reduction benefit of 30¢ or so per dollar of loan for its volume of loans each year across the country, and providing a payment to the two opted-out jurisdictions of Quebec and the Northwest Territories so that they might have comparable arrangements through their bursary and remission programs, which, I would say, is something the Council of Ministers of Education has supported. Certainly in 1964, when the Canada student loans program was started, no one was contemplating this kind of level, this kind of need, for debt assistance. This is truly something of a new thing where there is case of unfairness or a payment to opted-out jurisdictions.

The Chair: Carolyn, do you want to jump in here?

Ms. Carolyn Bennett: I have two questions. The first is to Mr. Kitchen.

I certainly appreciated your presentation. I know that sector has been a little bit under attack. I feel that the fact that you're there doing what you can.... But there's no question that the private part of this, especially if we start talking about grants, is going to be increasingly under scrutiny. Your words about accountability I think were well received.

I want to know what the private colleges will be doing in order to deal with the issue of recruiting students who don't have a prayer of finishing and would take the retention rate...which maybe is viewed by some to be unacceptable. Is there something we can do in terms of accrediting the good guys such that they get their loans and that we don't have to hear these stories any more about the bad guys?

Mr. Paul Kitchen: There are a couple of points I would like to pick up on here. You talked about being under attack. I think the basis of a lot of the attack is in the area of default levels. Some of the statistics produced take a look at the three educational sectors and determine default rates based on incidents. What the data does not look at, in our estimation certainly, is the demographics of the students in those sectors in order to see if a particular area of the population is being served. Are there consistent default rates among the three sectors in those demographic breakdowns? I've never seen any numbers, and I'm not aware that any kind of a study like that has been done.

• 1100

When I spoke earlier, I talked about the private sector serving a higher proportion—a disproportionate number—of sole-support parents with dependants. Certainly studies in the U.S. have indicated that it is a very high risk population. The experience in the U.S., where they introduced threshold rates on institutions, has brought default rates down, but there were other systemic changes that came into play.

As I talked to our counterparts in the U.S., I found out that what happened with the introduction of threshold rates was that many of the institutions made a very conscious decision to move out of inner-city locations, move out into the suburbs, where there was a more affluent clientele. Their default rates came down by serving a different kind of population. I think that's a factor that has not been well understood or well investigated, certainly in Canada. There is a higher-risk population. In fact, there is a legislative condition in the U.S. for historically black colleges and universities, which currently are running at about a 70% default rate on average, and they are exempt from thresholds simply by the recognition that there is a higher-risk population. So that would be the first point I would make. When you talk about the attack, I don't think enough work has been done in looking at who is being served by each of the sectors.

On your other comment about accountability, a number of the colleges within our membership certainly take very seriously the recruitment processes, the attention it takes with students—particularly in the smaller settings that we have for the one-on-one attention to try to make sure the retention rates are up, that there is a mastery of the skills that are being taught. Many of the colleges have industrial advisory panels that are constantly assisting them with looking at the relevance of their programs.

As for job placement assistance, obviously we can't guarantee employment in this kind of climate, but certainly what we can do is to try to assist people. We would not be opposed to having some kinds of standards in terms of retention rates and placement rates put in place. If we are funding programs, we think that would be an admirable goal.

You mentioned accreditation. Our association has an arm's-length, independent body currently known as the National Accreditation Commission. For almost ten years now in Canada, it has been doing accreditation on a voluntary basis. It is a costly process to institutions, but it is on a voluntary basis. It has set a number of standards that have been agreed to by the sector itself, by industry in terms of performance of an institution. There is quite a thorough inspection and scrutiny of those institutions. In talking with any of them that have been through the process, I believe they feel they are better for having gone through the process.

This doesn't mean schools that haven't been through the process are not performing well, and I would not want people to draw that conclusion. Certainly we have had discussions with Thomas Townsend's department, however, and there are ongoing discussions right now in terms of looking at whether or not it makes sense to tie designation for student loans to an accreditation process.

I would add for you, too, that among the membership on the commission that does the accreditation, we currently have four of the provincial regulators who are responsible for licensing and regulating the sector that I represent. They sit on that commission and add that kind of credibility, knowledge and expertise.

I think I've covered all your questions.

Ms. Carolyn Bennett: I just had one question, but maybe it's easiest for Mr. Townsend.

• 1105

Needs assessment is something I am concerned about, in that I've sat on committees before, and I don't know how you do it. I'd just like some help. In terms of parental income, is it taken into consideration that if the parents have four university-age children they may not even bother to apply because they know they they won't make it, so they have to send kids to university one at a time?

Mr. Thomas Townsend: The simple formula around needs assessment is “resources minus cost equals need”, and with respect to parents with a large number of children, that's taken into account.

The process is not perfect. At this point it's under review, and there are a couple of areas that we have had identified to us as being particularly problematic. One is the amount of income students are allowed to make that is exempted from the needs assessment area. The other is that our needs assessment instruments are not particularly well geared to individuals who are resuming studies after having been in the labour market for awhile or away from educational institutions.

The Chairman: Thank you. Mr. Smith and Ms. Kowalchuk wanted to come in on this.

Mr. Bill Smith: I want to come in on that question because I'm not sure the parental contribution is as large or as frequent as people popularly believe. We looked at this in our province.

And yes, the number of dependants in a family is taken into account, not just the number of university students. We find that on a base of about 15,000 people who apply for student aid each year, about 7,000 initially have some parental contribution. In the end, only about 2,200 are actually required to have a parental contribution. We find that there is virtually never a parental contribution for family with an income of below $40,000 per year, which, at least in my part of Canada, is a good income, and from $40,000 to $60,000 a year it ramps up very quickly in terms of the required parental contribution.

The Chairman: Mr. Smith, can you comment on the RESP in that context?

Mr. Bill Smith: Yes, I can. I'll relate this to the discussions that we've had with ministers in my home province of New Brunswick. We're not sure that adjusting the RESP makes a lot of sense given who this program is there to help. This is a program for those from the lowest income backgrounds, and they don't have enough money to feed the family, let alone put it aside in an RESP.

We do think there is some room for consistent and helpful promotion of “saving for learning” for all people, along with some tax benefits that are potentially skewed to give a bigger tax advantage to those from lower income backgrounds. But doing more with the current simple tax deferral instrument of RESPs doesn't do much for the people this program is there to help.

The Chairman: Thank you, Mr. Smith.

Ms. Kowalchuk.

Ms. Catherine Kowalchuk: I just want to make one further comment in regard to parental contributions. We should be very mindful of the fact that although there are students who have parents who make a lot of money, that is used against the student. That needs to be taken into consideration.

For example, as a student I did not qualify for student aid simply because my parents made too much money. However, I paid for my own education without the help of their financial support from my second year on. So I think this needs to be taken into consideration. Also, it's not enough just to generalize. There are specific cases out there that manage to fall through the loops and we need to make sure those individuals are taken care of.

The Chairman: Mr. Smith.

Mr. Bill Smith: We're getting the impression from the studies we see that the two groups where there's an impact on access are the particularly poor, for whom both costs and debt are different from those for middle-class Canadians, and the family with the income of $40,000 to $60,000 that spends all its money and doesn't have anything left over to help out with. That's an issue of where this program is really focused and where this program needs to focus.

• 1110

Our choice in our region—and this is not something we've discussed in these terms as the Council of Ministers of Education Canada—is to have a serious look at what the impact on access is for lower-income Canadians.

I recall one of the vice-presidents of one of our universities recounting a story of how he was trying to talk a family into sending their bright young person to university, but the family had trouble understanding both the cost and why you would have to borrow more than the value of the family home to get a bachelor's degree.

The Chairman: Mr. Nault.

Mr. Robert D. Nault (Kenora—Rainy River, Lib.): Thank you, Mr. Chairman.

I'd like to get some specific information as it relates to Ontario and its position. There's been a lot of discussion here about particular recommendations and an agreement by all the different organizations. We're still under the impression here that Ontario is interested in some income-contingent repayment plan.

I don't know whether all of you received the breakdown of the number of all students and where they come from, but Ontario is a very large player in all of this. I'm trying to get a sense of what its position is. Has it evolved? Has it changed? Is it part of this consensus that's starting to emerge now, or have you just factored Ontario out of here? In the emerging themes, the first priority in dealing with debt is that debt reduction measures should be linked to income. Is that because of Ontario's interest, or is that emerging as well and we'll see something more in the December report we'll receive? Could someone start by telling me where we're at with that? Mr. Best?

Mr. Robert Best: Thank you. I look forward to hearing from Bill Smith on where the provinces are at. I'll toss that to Bill to some extent.

I don't know where the Ontario government is on this issue. I understand it wants to have an income-contingent repayment scheme in place in September 1998. I don't know what it means by that. I understand the Government of Ontario says it is looking at a number of different models and hasn't decided what it means specifically in terms of a program designed for income-contingent repayment.

From the point of view of the roundtable groups—and the others may want to speak to this—when we began to meet we made a very conscious decision that we would not get caught up in some of the labels that had frequently divided. Labels like income-contingent repayment had become, quite frankly, hot buttons. They had taken on great symbolic value. We decided we would approach it differently and ask what's needed here.

We quickly agreed there was a student debt problem and began to look at practical measures to deal with that. I think it is fair to say we've agreed that some flexibility in repayment is important. We have agreed it is important to take into account people's ability to pay in deciding on various types of interventions—for example, interest relief or targeted debt remission. So you should certainly take into account ability to pay, which includes income but also includes the size of the debt. So something like debt service ratios or debt-to-income ratios are important.

We've come up with a package of proposals that includes some flexibility in repayment and partially takes into account debt service ratios as triggers for certain types of interventions to help people. In a very loose generic sense they're income-related but not purely income-related. They're not traditional or pure ICR.

Much attention in public debate and much controversy has focused on what many of us now call pure ICR, which is a system where people repay as a portion of their incomes over long periods of time—20 to 25 years—before there's any subsidy. So there's no subsidy during the repayment period and associated with it is this notion of negative amortization, unpaid interest being rolled into the principal and compounding. Again, frequently associated with pure ICR is a debt that grows over a long period of time with the possibility of some forgiveness at the end.

• 1115

That model of pure ICR is not supported by the members of the round table. We have had this discussion and I think all of us have gone on record publicly as not supporting that pure notion of ICR.

The Chairman: Bob, can I just ask you to expand on that? I think I understand that part of it, but you have in the emerging themes that Mr. Townsend put out in the first area of debt an issue that debt reduction measures should be linked to income. Was that talking on the grant side or was that the repayment side? I'm uncertain.

Mr. Robert Best: I can offer my answer and then Thomas can clarify what he meant.

First of all, I would say that on the repayment side, as I understand it, what people talked about and on which there was a considerable amount of consensus was that pure ICR as I described it is not.... I heard no one in the day and a half of the consultation speak in favour of that kind of pure ICR. Not everyone spoke on the subject, but I heard no one speak in favour of it.

As I understand it, what people did agree on was the kind of thing the roundtable groups have agreed on, that in looking at the repayment and various types of interventions in the repayment stage that may be necessary—interest relief, targeted debt remission—it is important to take into account ability to pay, and that includes income. Clearly people's income is one factor, but also the size of the debt is a factor. That's why you need to look at debt to income.

The Chairman: Good. Mr. Léon and then Mr. Smith on this.

Mr. Robert Nault: Before I get to these other gentlemen, I'd like to maybe put it in the proper context.

First of all, when you look at this issue you've also got in your emerging themes at the very end this whole issue of harmonization, meaning it's becoming a very complex system. And when you take the number of students across the nation—and almost half of them come from the province of Ontario—who are involved in this whole loan program process and/or grants, and of course they're going in a completely different direction, you can't just say we're not interested in ICR therefore that's not where we're going.

You have to come with us a step further and say if the province of Ontario insists that's the direction they're going in, how does the federal government react to this if you're all totally opposed to it as a process? I understand from your perspective you may not think of the jurisdictional issue, but we do from this side of the House, on this side of the table, and I'm trying to get a read of that.

Do we tell Ontario to forget it, we're going to try to do it on our own and have one federal program and run it out of the federal shop, and that's what you mean by harmonization? That's what I'm trying to link here so you understand where I'm coming from. We're trying to get a better sense of that, because you can't factor Ontario out of this whole discussion, which it seems to me is what we've done so far this morning. I'm quite concerned about that because of the numbers I see here on these tables.

The Chairman: Mr. Léon, do you want to come in on this point, or is there another point you wish to make?

We'll let Mr. Léon come in, and then Mr. Smith and then back to you, Mr. Best, and anybody else who wishes to respond.

[Translation]

Mr. Atïm Léon Germain: I have a comment on this point, which is related to the situation in Ontario. We know that at the moment Ontario is studying ICR, income contingent repayment. We would have liked to have been able to talk about that here, but we simply put it in our appendix so that committee people could read about our position. We have been working on this for about two years, and we asked the Quebec Department of Education to look at the matter. Ms. Marois, the Minister, announced a month ago that she was establishing a committee to study ICR.

As Bill Smith was saying earlier, I just wanted to say that the question is urgent. How can our government allocate resources so as to deal with the excessive debt loads of a whole generation of students? If we think of a short-term program for people entering university, we will have missed the boat, because there is a whole generation of people whose debts are too high.

• 1120

We need a program that is retroactive in some way, and applies to all individuals with student debts. In our view, ICR could deal with existing problems. For example, we expect the ICR would provide for a minimum income level after which, a percentage of income would be considered for repayment purposes.

[English]

The Chairman: Mr. Smith.

Mr. Bill Smith: There are a number of questions you're raising here, and I'm going to try to address them all.

Ontario is only half of the Canadian student loan market because Quebec has opted out. The position of the Council of Ministers of Education has been a fair federal contribution to measures aimed at both avoiding and reducing debt in order to make it manageable. It is there precisely because of Ontario's concern about ICR.

I think it's also important to understand a little more about Ontario's situation. Ontario's rebate program is perhaps the most generous in the country, and I gave you the numbers a minute ago. In their 1996-97 loans, I think they have a liability, if they keep it, of somewhere around $450 million. That is not sustainable even for Ontario. So Ontario has been seeking assistance both with their measures to reduce debt and with whatever changes they may be able to accomplish to help make it repayable.

I think the comment Bob Best made is a useful one. Pure ICR does not reduce debt. As such, it fails to address the inequity that occurs when lower-income Canadians get out of their degrees with $40,000 worth of debt and people from middle-class backgrounds come out with none. So it also requires a significant front-end government investment, a very large government investment for a self-funding ICR, and a fairly significant proportion of everyone's income thereafter if you're going to avoid the situation in which you have capitalization of interest and people whose debt actually turns around and starts to accumulate 25 or 30 years out—and particularly women. That is why, when Alberta or New Brunswick studied ICR in the early 1990s, we said pure ICR is not a player. What I think you see happening now is the emergence of a consensus that it does make sense to have repayment related in some way to income if there is a way to do it. Yes, it does make sense to provide rebates in relation to people's ability to earn. And no, it doesn't make sense to have repayment periods of longer than 15 years.

I don't know Ontario's design. That province's commitment is to have an ICR program in by next year, but I would not be surprised to see it as one that met those parameters rather well. If you meet those parameters at a reasonable proportion of income, what you end up with is a fairly substantial forgiving of debt at the 15-year point for those people who have still not made it. In effect, the argument about whether it's a remission targeted by income or ICR tends to disappear, because what you're arguing about is whether you pay it at three years, five years, or fifteen years. So I think this is coming together in a fairly good way. I don't think the cut between Ontario and others is anywhere near as big as people think. Ontario has a large financial problem with its program now, and I think everyone's trying to accommodate that.

The only other thing I'd mention is, again, that we're talking about the long term. We do need to deal with people who are graduating four months from now.

The Chairman: Mr. Harrison, and then Mr. Townsend.

Mr. Hoops Harrison: Once again, Bill took all my good comments. They were exactly the points I was going to touch on.

As a student, I was involved in the consultations on this entire idea of income contingency years ago. In fact, up until just recently, our association supported the idea of income contingency. The reason for that was that four years ago there was an entirely different situation as it relates to student indebtedness and student assistance. What we found happening there was that students were repaying according to a standard that was very rigid. Depending on the income levels, some people were falling through the cracks, so to speak. So as for this idea of being sensitive to income, a more flexible method of repayment was going to aid those students with better repaying their debts.

• 1125

What happened over the next four or five years, as we all know, was that there was a drastic increase in tuition and the cost of education. For me, it was a 100% increase in the cost of tuition.

What we have now is a debt level that surpasses the ability to repay. So the new proposals you see in front of you are in fact a continuation of that idea that was carried forward quite a few years ago. I believe, as Mr. Smith said, that this is not that far off from what the actual consensus is. The students in Ontario we have discussed this with are very much in favour of debt reduction in line with debt repayment. In order to solve the current crisis, we must address the current debt, and then enter into a method of repayment that's not only sensitive to income but also the ability to repay with the debt-to-income ratio that Mr. Best referred to.

Mr. Robert Nault: Before we let Mr. Harrison wander off here, I wanted to ask him what I assumed might be a simple question. I have been trying to catch up on all this reading. I haven't been able to come up with what you mean by an acceptable level of debt.

I can understand the whole debate here of pure versus non-pure, because it then becomes a more difficult issue. Of course if you're talking about people who can't afford to pay, you're also talking about some form of definition of needy borrowers and where they fit into that. Has anybody come up, in today's world of 1997 and beyond, with what an acceptable level of debt is, factoring in that we are trying to deal with it right now?

The numbers I have been looking at show such a small percentage. These are 1995 numbers, but I was trying to get a handle on it. I hate talking about numbers because numbers aren't what we can spend all our time on. It shows that the people who owe more than $25,000 are 2% of the whole problem. I don't want to get into that because it's not necessarily conducive to a good debate. I'm trying to get a handle on this.

As you know, when governments make decisions on where cutoffs are, like EI and other kinds of programs, somebody who's right on the edge gets awfully mad when you say that because you're over $40,000, then you're upper middle class. You start playing this numbers game. It's really difficult for people to do that. So I'm very interested in this whole issue of what you define as a needy borrower and a level of debt that's too high.

Say I'm an individual parent with a $60,000 income and my child comes out of university with a debt, if I help him or her, of somewhere around $10,000. Obviously that's pretty low, considering my income. We would consider that to be okay.

Now say I'm a low-income Canadian who is basically just making ends meet, I have a number of children, and I'm not putting any money into it. If they come out with a $40,000 debt, that's quite substantial, of course.

I haven't been able to get my head around just what that all means to you folks and how you would create a program that's efficient, effective, and fair to people when you end up right on that line.

Of course that's why I'm one of those who disagree with some of the statements made about the Millennium Scholarship Fund. I think it's important to have a program as part of the puzzle.

Now there are certain sectors, and that becomes a complexity. The millennium scholarship is intended not to deal necessarily just with need but also with those who excel. Then you can sort of fit that into the puzzle as well.

That's not going to deal with today's issue. I don't think it was intended to. I don't think that's what the Prime Minister had in mind when he made the announcement. I think it was intended to be part of that overall puzzle that we're trying to fit in the slots.

Before I let you run off, Mr. Harrison, can you sort of give me your sense from western Canada as to what you see is an acceptable level of debt? We don't want to get into the debate about parents now and what their role is, because I think Catherine sort of touched on that already. Most of us, of course, would argue that parents do have some responsibility in this whole affair, but in fact that may broaden the debate too far away from where we want to go. So could you give me a sense of that so I have a better understanding?

Mr. Hoops Harrison: Okay. I have three points.

Mr. Robert Nault: This meeting is going to one o'clock. You should be good until one o'clock just if you answer those.

• 1130

Mr. Hoops Harrison: The three areas are in terms of the acceptable level of debt, the comments about the millennium scholarship, and about the parental contribution.

As for just your most recent comment, I believe what Catherine was referring to in terms of the parental contribution is that we all agree that students have a contribution to their own education. It's the case that when certain guidelines in the Canada student loans program prohibit students with parents who have higher incomes from accessing student assistance, and the parents don't have the ability to contribute, these students have to fund their education somehow. So they take out credit lines at institutions or take assistance from somewhere else outside of the Canada student loans system that is far less forgiving.

So in order to meet those needs, we have to re-evaluate the parental income. We're not saying that parents have no need to contribute.

In terms of the Millennium Scholarship Endowment Fund, the reason we targeted on need is because if there are any efforts from the federal government regarding accessibility for students.... The concern right now is for the low- to middle-income people, not the academically qualified. There are avenues for those people to access education.

When you consider people from high-income backgrounds and high academic backgrounds, they'll have access to post-secondary education. They have the income and academic qualifications to receive scholarships at institutions and from private industries that devote this for them. If you have people of low-income backgrounds but very high academic standards, they too will be able to access those grants and scholarships from various sources. But if you have low-income people who are academically qualified, they don't have the same opportunities. The only avenues they have are through the Canada student loans program. In some instances, that isn't sufficient. So if we're talking about an investment from the federal government, the need is for the needy students, who are from the low- to middle-income backgrounds. That's why we centred in on it.

In terms of the acceptable level of debt, I think Mr. Smith will want to comment on this as well. The different provinces evaluate what is and isn't acceptable in terms of their admission programs. Ontario does it on a monthly basis, if I'm not mistaken. Other provinces do it on just a flat rate. If you're over this amount of debt, then they'll omit the rest of it.

That says to us that there's no magic number across the country in terms of level of debt. It has to take into consideration many factors—it isn't only regional characteristics—such as incomes and expenses, but also the individual's level of income and expenses, and their ability to earn. For instance, with two people who have $30,000 in income in a year, there'll be a difference in the ability to repay if one of those people has two children and is a single parent.

So all these factors must be taken into consideration. So in some of our proposals to you, we say that these evaluations must take into consideration all these factors. It can't simply be one number.

Mr. Robert Nault: Mr. Chairman, I can't let Mr. Harrison off the hook that easily.

That's a very glib political answer, but you're not allowed to give a political answer; that's our job over here.

I'm going to just read for you what Statistics Canada says about the fact that there is no statistically significant debt crisis among students. This means that we haven't got a handle on that, depending on who you're arguing with, as a percentage. Yes, there are some who are statistically in that category of having a huge amount of debt. But when you look at it across the nation, you get into this whole discussion. It's scary to get into numbers. It causes us all sorts of problems. I'm just trying to get a handle on it.

I have two kids, and I have a long way to go. One is seven months and the other is four years old. I'm preparing for their university and college. God only knows what the statistical amount of allowable debt will be when they go to university and college, as that's a long way away. But if we don't know what it is today, we're going to have a heck of a time 15 or 20 years from now to know just what it will be then.

Somebody must have those numbers. You must be able to say to yourself that to get a good quality education that will get you a good job, coming out of university with a good degree is worth a debt of $30,000, $25,000, or $15,000.

How do you estimate that as an individual, and how do you expect the government to assume that? Or do you just not think that's the route you want to go? That's what I'm trying to get a sense of.

• 1135

There are many people who argue, maybe more from the right than the left or the centre, that this is a fabricated situation here, that the numbers are not there statistically. I'm trying to get some ammunition for you. You're supposed to give me the ammunition on why this is a crisis.

Mr. Hoops Harrison: From Mr. Bevilaqua's office, from the youth task force, came an average figure of $25,000 of debt per student by the year 1998. About the statistics Statistics Canada gives you, on most of that I can only comment by saying a writer said “lies, damned lies, and statistics”.

I myself and a gentleman named Fred Hemingway, who is the associate deputy minister for the Province of Alberta, in a national stakeholders meeting came up with a core principle for what a student should be repaying. It's a core tenet in Canadian society to receive an education, and now the benchmarks have moved up in terms of what an acceptable level of education is. To quote some statistics for you, by the year 2000, 45% of all new jobs will require more than 16 years of education. That's a university degree and something else. In addition to that, 20% of all new jobs will require some level of post-secondary education. So 65% of all new jobs require some level of post-secondary education. The benchmark now is no longer just a high school education; it has now moved into the post-secondary.

How do we account for that in terms of societal demands? What we came up with is that students or individuals should be contributing to their education to the extent that they can and their ability to pay and the rest should be made up with government funding. That's the reason why government supplements the costs of post-secondary education to the amounts of 60% to 75%, depending on which area of the country you're in.

I still have to maintain there is no magic number across the board for its worth, $30,000, like an investment in a car. We have to take into consideration the progressive nature of society. If all people are going to have equal access to education, than financial indications shouldn't be a barrier. Not all people should be lumped into one single category. Where people fall below the threshold, there should be assistance.

It may well be that it should be a dedication on an average individual basis of $25,000. All those people who can't afford that $25,000 investment shouldn't be prohibited from accessing this education. It has to be on a gradual basis.

The Chairman: I have about six people now who want to jump in on this particular topic. I'm wondering if one of them in doing so could also comment on...if anybody has a number to give some sense of the order of magnitude of non-government grants and scholarships. Mr. Townsend.

Mr. Thomas Townsend: I just wanted to speak briefly on the question of harmonization and the nature of the relationship between the federal government and Ontario on student loans. It is, as you pointed out, absolutely critical to the long-term solution for student loan programs in Canada to have Ontario remain an active participant in the Canada student loans program. We're in communication and have remained in communication with the Province of Ontario throughout the discussions—in fact, most recently last evening.

Without my presuming what Ontario is working on specifically, I think the province shows an interest in measures that are sensitive to income because they address the fundamental design questions Ontario is looking at for an ICR. Whether or not the measures that are being proposed will go far enough to allow them to say yes, this will allow us to build the program we need, I can't say, but we have ongoing discussions weekly with the Province of Ontario.

The Chairman: Mr. Nault.

Mr. Robert Nault: I was looking to some of the student associations to speak to this. As you can well imagine, the federal government has 101 government members from Ontario who don't necessarily agree with the Province of Ontario on where they want to go with the student loans. Of course, all of us at this table are Ontario MPs—at this end. Over there, it's another story.

• 1140

What we're trying to find out from you is that when we transfer a significant amount of federal funds to a province with which we may not totally agree ideologically in terms of how they deal with their students, what's your position on that particular issue? I've put it in context for you so that you understand where we're coming from. You can imagine the debate that goes on in Ontario's caucus federally, when we basically represent every part of the province, and in terms of the amount of money we're talking about.

I was trying to get a sense from you of where we're at with this whole debate, because it's going to come up politically for us somewhere soon. You've somewhat skirted it. Maybe it's because you don't want to deal with it head on, but we will have to deal with it head on within our own government caucus to see whether in fact we want to transfer a huge pile of money that doesn't go necessarily where we think it should go. That's what you're trying to deal with here: if we're going to put money into the system, where best to put it, and if we're going to put more money into the system to deal with certain indebtedness now, what's the best method of dealing with it?

I'm trying to build this in context so that you understand where I'm coming from on this.

The Chairman: I'm going to go to Mr. Smith.

Mr. Bill Smith: I want to deal with the issue of how much debt is too much debt. I want to deal also with whether there is an issue or not.

If Statistics Canada is saying they're wrong.... The issue is measured not by year-old or two-year-old historical data on averages but by the proportion of people now in school who are accumulating debt levels that are serious enough that they're unlikely to have enough income to deal with them. Again, when you get this report you'll see what that is for Nova Scotia and New Brunswick, for example.

It's a serious number in my province. It amounts to 10% of an age cohort in the final year of a bachelor's degree with more than $25,000 debt.

Let me get to your other question on how much debt is too much, to which the answer is, if the debt is more than you can service by your income. A fundamental misunderstanding about dealing with the debt issue is the idea that you might be able to deal with this by averages. You can't. Debt is an individual issue. Whether or not you can pay that debt depends on your income.

Let me get to a hard one-province example on this, my own, because we've gone through this, tough side, for the finance department, saying, fine, what do you mean by that? Our answer was that people should be able to pay in both student aid and in the skills loans and grants loans component we're bringing in on the EI side. We believe the amount of debt that is reasonable is the amount a person can service with 8% of their income up to $18,000, and 20% of income above that. I could give you a table that shows a sliding scale on this that's roughly for people in this program. It runs from 8% of income up to about 16% of income if they're up in the $50,000-a-year range.

We did those numbers starting with what Immigration Canada tells immigrants they will have available to spend on housing, food and the rest of it, at different income levels, going into family budgets and looking at what it costs to actually live and pay off debt in your young years and later on.

[Translation]

The Chairman: Mr. Léger.

Mr. Robert Léger: First of all, I would like to say that I very much like the answer just given by Mr. Smith.

Mr. Nault spoke about a threshold,

[English]

a threshold at which you would receive something, and at another one, nothing.

In terms of remission, I think it would be better if the remission were gradual, if the ratio of debt to income was such that you would receive a partial remission, not a full remission, of your debt.

So I don't think one threshold is good in that sense. I agree with you: I would prefer a gradual remission of the debt, depending on the debt-to-income ratio.

The Chairman: Mr. Killeen.

Mr. Pierre Killeen: Thank you very much, Mr. Chairman.

• 1145

Mr. Nault, following up on your comments, a lot of the discussion today centred around the university student with $25,000 in debt. I'm from the Association of Canadian Community Colleges, and we have a significant portion of our students facing debt problems. This is a much bigger issue than you're student who is going to be set up for life.

Please don't think we're saying that every student with $25,000 in debt is in such a circumstance that they need a debt reduction. I think the student loan program in the past has been a very blunt instrument. What we're trying to do is say that debt is an individual circumstance, and what we need are some fine tuned instruments to deal with individual circumstances, to deal with individual cases.

I'd like to talk to you to maybe give you an idea of what is happening in the province of Ontario today with one group of students. I'm talking about sole-support students who would be coming to a community college, and I have some statistics, too. In 1995-96 the average debt of a sole-support student was $6,000. In 1996-97 that debt has gone to $14,000 a year. That's an increase of $8,000 in one year. What you have is a circumstance in which you might have someone who is being pushed off the welfare roll and is told to go get an education. At the same time, that individual is told that because he or she is now a student, he or she is going to have to look to the student financial assistance system to support his or her living costs. Before, these might have been taken care of by the social assistance system.

We've tried to focus on student financial assistance, but this is part of a much bigger issue. A lot more factors into the kinds of people getting into problems with debt. This is not just your university student with a $25,000 debt. The situation is just as grave when you look at married students in the province of Ontario. Their debts have gone up by $5,000 in one year. We have a situation whereby someone who might not have even finished high school finds himself with almost $30,000 in debt after two years in a community college. We have a very different student population coming into our institutions now.

The Chairman: Ms. Stymest.

Ms. Judy Stymest: I think all the comments have been made.

The Chairman: Okay. Mr. Charron.

Mr. Jocelyn Charron: I'd like to specifically address the question of Ontario. As you phrased it, it's a political question, and I guess you want us to give you some feed back as to what would happen if you were to go ahead with trying to accommodate Ontario—supposing that it is Ontario, because we don't know. Which way Ontario will eventually go is an unknown, but I can say with some certainty that our members would probably not be very happy, and they would probably contest the decision to accommodate Ontario.

What has been very frustrating in this whole discussion for our Ontario members is that there has been no constituency for what the government is asking there. It's as though the government is acting in a vacuum. There is no constituency, and they have representations to the fact that they would like to see something else. Others have made the same kinds of representations, and we'll eventually see whether or not they've had an effect. It doesn't seem that we've had much of an impact, though.

If the decision was to still go ahead to accommodate Ontario, then I'm afraid that our members would be very displeased with that. I can tell you that, if that's the kind of answer you're looking for.

The Chairman: Mr. Best.

Mr. Robert Best: I was going to pick up on Mr. Nault's question as well, simply to say that I don't think we have been avoiding the issue at all. And I'll repeat what I said earlier. I think we wanted to come at this by proposing practical solutions to the problem that we saw, and ones that we think would work. We've continued to promote them, and we've had surprising resonance—maybe not so surprising, because I think it's a good package of measures. We haven't heard yet from the Government of Ontario.

I am encouraged by what Thomas Townsend said. What I think I heard was that discussions are continuing. Well, discussions presuppose, I hope, flexibility on the part of all parties.

• 1150

This has been a difficult issue. I've been here a long time and have seen an awful lot of movement over the last five years. To me, this event is quite remarkable. The consultation that HRDC sponsored was a remarkable event. I had no idea going into that what it would be like when we came out. It is one of those rare events where there is an awful lot of interest in an issue and an awful lot of participants are moving together.

First, we're all in the same field. We have the provincial premiers, including the Premier of Ontario, agreeing that there's a student debt issue. We have the Prime Minister of Canada, the finance minister, and of course the throne speech from the Government of Canada agreeing. We have the financial institutions and the national post-secondary education associations agreeing. All agree we have a student debt issue, and all agree, I think, that a package of measures is needed to deal with it. And they're talking very seriously about the elements of that package.

I haven't heard the Ontario government's response to the package yet. I've been around a long time and ought not to be Pollyannaish about this, but I'm starting to become somewhat optimistic. I think maybe we can get some real progress on this, so I prefer not to get drawn into the what ifs. I have said that I think pure ICR won't fly. I don't think it's the right policy, and it has very few public supporters that I can see. I haven't heard the Ontario government say they're bound to that pure ICR model.

I think we've put out a very practical set of proposals for everyone to consider.

The Chairman: I have two more who wish to have a piece of you, Mr. Nault.

Ms. Kowalchuk?

Ms. Catherine Kowalchuk: I'll pass.

The Chairman: Okay. Ms. Ramji?

Ms. Rubina Ramiji: I don't think our proposals are out of line with what Ontario wants. If Ontario wishes to reduce defaults and bankruptcies, our measures actually allow that by putting into place a measure of flexibility so that the student can pay back the loan without actually harming the student by increasing the debt. The concept they came up with was to try to put in that flexibility. The concept of a pure ICR increases the debt. We have tried to come up with a measure that does reduce bankruptcies and defaults but has that flexibility so that the student doesn't get harmed. I think our measures are in line with what Ontario originally wanted. We're just doing it in a way that actually benefits the student as well.

The Chairman: Mr. Nault, I have booked Mr. Anders for a minute. Then we'll come back to you.

Mr. Robert Nault: Yes, sure. I'm in no big rush, Mr. Chairman. I just wanted to tie it into everything as we go.

The Chairman: Mr. Anders, do you want to go ahead?

Mr. Rob Anders (Calgary West, Ref.): Very much so.

First I just want to address the size of the budgets we're dealing with here. My understanding of it, looking at the numbers I've seen, is that about $6 billion is involved in the Canada student loans program, and with the provincial equivalents and what not it gets bigger.

With some of the proposals I've heard here today about loan remissions or forgiving whatever portion of the principal is left after 15 years on an income-contingent loan basis, etc., my guess is we're probably looking at something in the order of $10 billion. When you look at a total budget of $109 billion for an operational budget, that's a big chunk, a very sizeable portion. I have concerns about that.

In terms of the income-contingent loan repayment program, the Reform Party and I are definitely supporters of a pure income-contingent loan repayment program. The reason for our support is that these people have committed to a loan, to taking this money, and I think they have a responsibility and an obligation to pay it back. If Ontario is promoting that, I wholeheartedly support it. And if it has impacts on 50% of the student loans in this country, so be it. I think it'll have a positive impact on the student loans across the country.

I understand there's some debate in terms of whether or not there should be some remissions for a period of 10 to 15 years from when the loans begin, a debate about whether we should just kind of forget about the principal thereafter. Once again I maintain it would jump the Canada student loans program from being a $6 billion cost to something substantially higher.

• 1155

I'm just going to touch on a whole bunch of issues and then allow a free-for-all in terms of responses.

One of the things I'd like to talk about as well is the auditing process. In a number of documents here I've noted where there are problems with the auditing process, the transfer of data between the various governments, etc. There are a lot of situations where students are allowed to fill out their own paperwork. They're the ones who say which bank accounts you can look at. They're the ones who say what their incomes are. Frankly, I don't think that's good enough.

I want that tied to the social insurance numbers, because I know people right now who are getting away scot-free, or are intentionally trying to claim default interest relief and some other things so they can get out of their student loans and get remissions. I'll bet you those people would love to have an income-contingent student loans program where they could default and get rid of a huge chunk of the principal after ten to fifteen years. I think we're setting ourselves up for a huge problem if we allow for this opt-out.

So once again, I'd like to have some comments with regard to how we can tighten up the auditing. I don't think students should be able to skew the type of information that can be looked at. Student loans should be linked to social insurance numbers and, within reason, to a fairly exhaustive process so they're not able to get away scot-free from their loan obligations.

I don't support tax deductibility. That's just another form of subsidizing the loans. I understand there is some concern about students in financial need. I will go on record as saying Mr. Smith's comments were some of the most reasonable ones I've heard here today. If there's a choice between having a rebate in the first three to five years versus allowing something to go to fifteen years and then allowing for a remission, I would prefer the option of going for the fifteen years. Then the students would be in the position where if they had the income to repay the loans, they would, as opposed to just hiving off a huge chunk in three to five years, kissing it goodbye and putting it on the backs of the taxpayers.

I also noticed there was some talk in the documents here about changing the nature of what is considered full-time study requirements. It would go to 60% of a full course load, or from five courses in a given semester, based on the Alberta example, to four courses. There was also talk of changing part-time study requirements to be eligible for student loans. I support that.

There was also talk of institutional accountability, so, if I may quote, “student aid mills” where the default rates and the problems associated with loan repayment were particularly problematic would be cited for those problems and would also have some sort of financial accountability and some responsibility for that.

I've mentioned several things. I'll leave it at that, in a sense, and open it up to responses, questions or whatever.

The Chairman: I suspect there'll be a response.

Mr. Léon.

Mr. Atïm Léon Germain: I'll go later.

The Chairman: Mr. Harrison.

Mr. Hoops Harrison: Rob, I assume the people you know who are getting away without repaying their loans aren't from the Reform Party or anything, obviously.

Mr. Rob Anders: As a matter of fact most of them aren't. I know them from all walks of life. Many of them were involved in the student government at the University of Calgary.

Mr. Hoops Harrison: You mentioned a bunch of different things, but I'm only going to comment on a couple of them.

In addressing the debt in terms of the auditing process for students, in the “Real Solutions” document, when we were reconsidering loan repayment we very much considered the question of abuse. If the government is going to invest these dollars, we very much want to limit abuse as much as possible, because abuse of the system means more cost for the government, more cost for the banks, and in the end more cost for the students themselves.

• 1200

So on your point of linking it with the SIN numbers, it's not necessarily totally off from what we're suggesting, but there are questions in terms of the Privacy Act and the Bankruptcy and Insolvency Act, and things that have to be reconsidered when one is dealing with those suggestions. We advocate some outside guidance, where the federal government can actually do the checking on whether students are accurately projecting what their income levels are and their ability to repay.

Mr. Rob Anders: Out of curiosity, what changes to the Privacy Act would need to be made in order for the governments to make thorough checks and audits on student loans and what not?

Mr. Hoops Harrison: Currently, to my knowledge—other people can correct me if I'm wrong—you can't sign away the authority for people to access documents, to look at your financial records, in that sense. It's that aspect of it.

About abuse and addressing the debt issue, ICR won't eliminate defaults or bankruptcies. If we allow the levels of defaults and bankruptcies to continue, the banks propose that they want a drastic increase in the risk premiums the federal government pays them in order for them to participate in the student loan programs, and that in the end involves a greater federal contribution just to satisfy those defaults and bankruptcies. Our point of view is that we should target the defaults and bankruptcies first before we consider any loan repayment program. In order to target those defaults and bankruptcies, we have to target debt.

If you consider some of the proposals that were tossed around at the national stakeholders meeting.... The current level is a 5% risk premium the banks are being paid. They are asking for somewhere along the lines of 20% to 25% to indicate accurately what the levels of defaults and bankruptcies are. That drastic increase in federal money is anywhere from $100 million to $120 million in increased assistance just to have the banks continue to participate. That money should go to the students to reduce their debts so these problems don't occur in the first place. That is exactly the mechanism the round table has proposed. Where there are shortfalls in income, you subsidize those people so they don't default and so we don't have the problems that are currently there.

The Chairman: Ms. Stymest.

Ms. Judy Stymest: I want to react a bit to your comments about student dishonesty, as I guess you could call it. I think this is one of the situations where it always gets blown up. A small percentage of students are dishonest and it becomes the overriding perception that all students are dishonest. Certainly as an operator of one of the student aid mills I don't see overwhelming dishonesty among students in general.

I think we have to put it in a certain context, that we're living with student loan programs where ceilings limit the income level of students and there is a great level of unmet need. In many cases students are forced to go out and get jobs and earn more. It looks as if it's dishonest, but they actually are stuck between a rock and a hard place; they actually do need that extra $500 to make ends meet.

We have to measure it a bit. This is not something I would consider abuse, but rather an inadequacy of the system. Students are not overwhelmingly dishonest.

The Chairman: Mr. Killeen.

• 1205

Mr. Pierre Killeen: Mr. Chairman, on this notion of abuse, the package of measures we are advancing is going to take us out of the realm of the general and into the realm of the specific and hopefully will provide governments and institutions with the tools needed in order to address situations on an individual level.

I don't think any one of our organizations is going to say we want to give someone a free ride. What we're trying to say is we need the flexibility and the precision to deal with circumstances on an individual basis so that we get away from this.

I would echo Judy's comments on this notion of generalizing based on your circle of friends being the best way to approach student financial assistance.

Thank you.

Mr. Rob Anders: To try to pass disparaging comments in terms of my circle of friends I think is cheap.

When I was at university there were hundreds if not thousands of students I knew. And for you to say dismissingly that it's based on my circle of friends or that in your opinion overwhelming dishonesty in students doesn't exist.... What I'm saying is I've seen the incentive structure set up so that students do try to instigate interest payment problems or defaults in order to get remissions, and it's not based on my circle of friends or anything like that. I've seen that happen and I know it's going on, so you can't sit here and say it doesn't go on. I was only in university a few years ago myself, so you can't stick your head in the sand and say this doesn't happen.

The Chairman: Thank you, Mr. Anders.

Mr. Charron, and then Mr. Best and Ms. Kowalchuk.

Mr. Jocelyn Charron: I have a couple of questions. First, I don't understand the numbers you used at the beginning in terms of the costs you evaluated, and if possible I'd like you to explain them to me again.

With regard to pure ICR, I think that obviously we have a very serious difference of opinion. I think any system of student assistance that would ask students from low-income and moderate-income families to pay twice or even three times more for their education than students from wealthier families would be a very unfair system, and that's what would happen because of the longer repayment period and the interest on the loans. I think it would be a morally bankrupt student aid system, and we can't endorse that.

But I'd like very much to discuss how you envision the costs and how you analysed that, because I did not catch it. I think the figure you threw out was $4 billion. I would like to know how you came to that conclusion.

Mr. Rob Anders: Actually the figure I used was $6 billion. For example, looking here at the actual numbers for 1995-96, we're looking at $1.497 billion, call it $1.5 billion. For 1996-97 we're looking at over $1.7 billion. These are just in particular given years. And then as well there was a figure in one of the documents here that quoted it as being $6 billion. I think that's probably even an optimistic or a conservative number.

We're talking a lot of money here.

Mr. Jocelyn Charron: Yes, but the government doesn't pay that. The banks lend the money and the government guarantees it, offers a 5% rebate or risk premium. That's not what the government spends.

Mr. Rob Anders: When 20% of student loans have difficulty in terms of either interest payments or defaults or a complication of a whole myriad of factors, it's big money.

Mr. Jocelyn Charron: It's big money, but not in the ballpark you're mentioning. The other thing, of course, is that eventually it's just under 10% of students who end up really not repaying, because once they are contacted either they pay to a collection agency or.... So in terms of the numbers, I would suggest they're not as big as you said at the beginning.

The Chairman: Thank you, Mr. Charron.

Mr. Townsend, can you comment on that specific issue of what percentage of students actually don't pay their debt, what the actual default rate is after the collection has been attempted?

Mr. Thomas Townsend: The default rates have historically been in the high twenties. Just for the sake of argument we could use 30%. But this does not mean that the government does not recover the money once a loan goes into default; it means that a borrower has not paid for a certain period of time. I believe the actual loss rate historically on student loans is in the 7% to 10% range.

The Chairman: Thank you, Mr. Townsend.

Now I'll come to the list. Mr. Best.

• 1210

Mr. Robert Best: Thank you, Mr. Chairman. Mr. Anders said he would welcome questions, and I do have a question.

In commenting on Bill Smith's comments, I think you said that you don't like the idea of remission at three to five years but prefer to see it at fifteen years. Do I understand by this that you see the maximum repayment period as fifteen years, after which there would be forgiveness?

Mr. Rob Anders: No. Let me be extremely clear about that. I don't think there should be any remission. If somebody takes out a loan, if they take on that responsibility, I think they should pay it back 100% in full. However, if the consideration by others is determining whether or not they want to do rebates in the first three to five years, taking into account what they consider to be transitional difficulties to finding full-time work, as opposed to considering remissions at the point of fifteen years, which obviously a lot of people around here are touting as their preferred number, I would opt for the fifteen years. It at least allows for fifteen years' potential time of repayment, with a tie-in to hopefully income-contingent student loan repayment as opposed to hiving off a huge chunk of the debt at three to five years in transition and getting rid of it right then.

If the student over fifteen years has the income to repay what they took out as a loan they should do so rather than just remitting it in three to five.

Mr. Robert Best: Thank you for that clarification.

I think what the round table groups have said is not necessarily huge remission at three to five years but targeted remission based on debt-to-income ratios. They may or may not be huge, but I think it is certainly our anticipation that in most cases it would not be huge. The idea is to get people into a position where they can in fact meet their loan repayment obligations within the 15-year period.

As well, your preference is that people in fact don't get remission, and that they simply pay off the debt. But I'm curious to know what you see happening in the instance where people simply cannot pay the debt. Do they default or...?

Mr. Rob Anders: I'm going to suggest that if somebody over a period of...well, I'm not even going to put a stipulation on the amount of time. If somebody takes out, for example, $30,000 in student loans, and if they take a vow of perpetual poverty or have little or no ability to find work due to unmarketable skills, or something to that effect, I don't think they should be forgiven that loan in three to five years, or 15, or maybe even 25.

Say you wanted to have it income-contingent, which is something we support. Then make the payments very little, or next to nothing, maybe, or do it for 25 years, maybe. But to say we're just going to kiss that goodbye, for example, and that person can walk away from their loan obligations, is I think morally wrong.

Mr. Robert Best: Of course, if they make the very small payments as a percentage of income, to which you refer, I think it's widely accepted that, in the case of those individuals who have problems making payments, their debt in fact will grow, in many cases double, or more than double, over the 25 years. So 25 years out, you still have the problem.

Now, I hear you say you're not prepared even then necessarily to provide forgiveness. In those cases, then, my understanding is that those people are going to carry a growing debt till they die.

Mr. Rob Anders: The thing is, if they remain poor throughout their lives, on income contingency, then they probably won't be able to pay it back. The mechanisms are set up so that it will not be onerous in terms of the income they draw in. But certainly I don't believe in relieving people of their obligation to pay the debts they've taken on.

Mr. Robert Best: So the debt owed to the public will continue to grow until those people die, so we'll have an ever-expanding amount of debt—

Mr. Rob Anders: Under the system you're proposing, Mr. Best, that debt will be taken on by the taxpayers automatically in three to five years, or fifteen years.

Mr. Robert Best: I need to clarify that. That is not in fact what we're advocating.

The Chairman: Briefly, please.

Mr. Robert Best: We're not advocating that it be taken on by the taxpayers totally. We are talking about targeted partial remission based on ability to pay.

Mr. Rob Anders: Who else is paying that bill?

Mr. Robert Best: So I would prefer that it was not characterized as total forgiveness. Thank you.

Mr. Rob Anders: Who else is paying that bill, Mr. Best? It's the taxpayers.

The Chairman: Thank you, Mr. Anders. Ms. Kowalchuk.

• 1215

Ms. Catherine Kowalchuk: Yes, I have many comments, so I'm going to try to narrow them down and be brief.

I do agree with you that students have the responsibility to pay off their debt, definitely. By all means, I don't believe bankruptcy should be an option. But for some, bankruptcy or defaulting on a loan is just simply a reality.

I believe it's very unfair—and perhaps you can provide me with some kind of solution or response to this. How can these people contribute to society when they are using their pension—if they're lucky enough to have one—at the age of 65 to pay off the student debt or student loan they incurred 35 years prior to that? I have a problem with that. There are more issues at stake here than just income. We do not live in a vacuum, and these things need to be taken into consideration for those people who are graduating with children, who are single parents, and those afflicted with other social problems.

I must also say that those students who can pay their debt will pay their debt. The program that the round table is offering for your consideration will hopefully eliminate all defaults. Currently, if you cannot make your monthly payment, the government will subsidize the full amount of whatever set amount is determined that you need to pay. But in our system, we are suggesting that if the student can afford to pay $50 out of a $100 payment, the government will step in to subsidize the other $50 for that month. Not only will the government potentially be saving money, but perhaps could also even reach more students under this program.

So I definitely disagree. I do not see ICR is a viable option for students.

The Chairman: Thank you, Ms. Kowalchuk.

Mr. Townsend, please give a targeted response, and then I'm going to move on to Mr. Nault.

Mr. Thomas Townsend: I think the notion of individuals having responsibility for their debts is an important one. Where there is abuse, it's also important that the government move to abate that abuse.

There are a number of measures currently in place. We believe they are not sufficient, and that there will be additional accountability measures that will need to be built into the program—measures that are currently in place that will be of interest. With the tax set-off policy that we have, we recover some $20 million a year from individuals through set-off of income tax. You may have read recently in the newspaper that we did a pay list match with federal employees who had student loans. These are the kinds of measures that we feel are necessary to ensure that the taxpayer does in fact get good stewardship of an important program like this.

The Chairman: Thank you, Mr. Townsend.

I'm going to go back to Mr. Nault, but I want to just pick up on something that was raised earlier.

Everybody agrees that there's a problem. There seems to be some difficulty in the information that comes forward when you start to get down to the nuts and bolts of it. I have a table of information, and Mr. Nault was referencing an issue with Statistics Canada's comments on this. We recognize that their data can lag behind reality somewhat, and, certainly from other information, this problem has accelerated dramatically in the last three years. Averages from three or four years out may not be terribly relevant to what's going on.

I have the data from 1996-97 here for the Canada student loans program, and with the provinces added on top of that, we could argue that there's another 40% added to that data. But even if we assume that 40% addition, it suggests that only 11% of all the students who had loans had an indebtedness if we incremented it by 40% of 21,000. That's only 11%! Of all the students who have that, it's only roughly 50% of total students. So you have roughly 11% of 50% who have a debt in the area we're concerned about.

• 1220

I understand there's some softness to this. And with it accelerating, the 1996-97 numbers may not capture where we're going to be in 2000, which is the other part of that concern.

Here's the reason I raise all this. Is it an adjustment to the basic program? The figure you see has an average debt of $25,000 for all students who borrow. It's hard to understand that figure in the context of these actual numbers. It may well be, but it's hard to take it seriously, frankly, when you look at the other numbers.

Again, the reason I raised this is that if what we're looking at is a targeted attack on some 15% to 20% of students who have a problem because of this, then that's one issue. That rolls up into one number that the federal government may have to consider. If it's an adjustment to the entire program that may serve the function of widening the net and bringing more people into debt remission programs and such, that creates a different number and a different set of problems.

I'm going to turn it back to Mr. Nault, but I'd be interested in hearing some feedback on this question of size or magnitude.

Mr. Robert Nault: Now that everyone's blood pressure is a little bit higher than it was before, I think it's important to keep in mind that there's obviously a difference of opinion, depending on which party you're talking to.

I wanted to touch on this whole issue of your priorities. I keep going back to the emerging themes because I think that's important. The first priority is the debt. In the debt, there is this current interest relief program that needs to be expanded. It should provide for graduated relief. I don't have any difficulty with that, because I think it's essential for people to understand that there's not much sense in trying to have compound interest growing and growing when someone can't pay it. I've seen that happen to too many constituents over my nine years as an MP. It really doesn't help the situation at all.

But if we are to have some sort of graduated interest relief program, or a version of it, you're going to have to tell us what the definition of a needy borrower is or give us some way of dealing with that. That's going to be the government's tough issue: where do we sit on that particular area? So I'd like to get some feedback from you as to how we do that.

There's no doubt in my mind that the whole issue of debt is one thing, but then over time, as the compound interest takes place, it becomes much more of a huge, larger issue. If I had my druthers, you wouldn't get charged interest at all, but I guess I don't want to get too far down that road considering the financial situation of some of the governments.

Could you give me some feedback on that? I'd like to start with that so we could sort of narrow it down. That's one of your specific areas that you've targeted that you think is important. We, as a government, are going to have to decide who that needy borrower is.

Who wants to start?

The Chairman: Mr. Harrison.

Mr. Hoops Harrison: In the Canada student loan program, there's an assessment process when you apply. They evaluate your resources against your expenses.

One of the recommendations from our association is that there should be a comparable assessment process following graduation or the completion of studies. Then the size of the loan over the period of repayment is divided up into monthly payments. That's called the calculated monthly payment.

There should be also an assessment process, like the Canada student loan program, after graduation that takes into consideration income and expenses, much like the current one on the front end. From that, you will get an affordable monthly payment that this person can afford to repay. That's the number above which there should be government remission or targeted assistance. As Mr. Alcock said, that assistance would target not the majority of students but those students who demonstrate that significant inability—approximately 11%, 15%, or even as much as 25%.

• 1225

Through that process we would get a system that was fully accurate, very precise and very efficient. It would require a little more effort on the part of the administrators, but if we really want to target the problem and address it, that's what we need to do.

The Chairman: Mr. Charron.

Mr. Jocelyn Charron: I have a couple of reactions to your question. The first is yes, there's a necessity to tackle those issues and see what those ratios could look like and what a reasonable debt ratio would be. You need that to actually implement something like that, and you want us to help you do that.

On the other hand, it has to be said that the real experts on this are the people who not only have the technical number-crunching capabilities but who also get the most cases in terms of whether or not it actually works. There is currently an interest relief program for students that was extended to 30 months in the last budget. I really think the department has much more knowledge than any of the groups around the table about this. What the Canadian Federation of Students gets is anecdotes; people call us and tell us about their problems. So what I can give you is a collection of anecdotes, but that doesn't make for a very good case. So I don't know how much I can help you with this.

When the issue of needs assessment was discussed at the stakeholders meeting, there was quite a bit of agreement that whatever the exact criteria were to be, they needed to let the students have a breathing space after graduation. This was expressed by several people and the lenders supported that very strongly as well. You simply don't want student loans to force students to postpone all decisions until they're done with them.

Mr. Robert Nault: Before you go too far, the 30-month remission on paying interest was across the board. Now this is a graduated system you're talking about. It's much more complicated and much more administratively difficult to do. You need people who can do an assessment of an individual's income and bottom lines.

If you go back to the initiatives and suggestions of my colleague from Reform, you have to start looking at people's financial situations from a number of perspectives and then the Privacy Act comes into play.

The way we did it in the budget with Mr. Martin is you have up to 30 months to apply for that and there's no administrative work to be done. You just say you can't afford to do it and need the extension to 30 months. But what's being suggested here is a graduated system based on somebody's ability to pay after graduation, and there has to be an assessment done of that. Just as there's the summary of need assessment procedures at the front end, there will be a similar situation at the back end. Somebody has to tell us where that starts and where that ends in order for us to come up with a solution.

We have another problem. We have to be able to tell the electorate, the Department of Finance and the Auditor General, who's always chasing us around, how much this is going to cost. That's part of our role as your representatives. So we're trying to get some understanding of how simple we can make this. The simpler it is the better, and the more effective the better. Of course we don't want to have to hire—well, maybe we do, knowing the unemployment rate—a lot of people to administer the back end, because we are doing that now on the front end.

This is different from what we did in the budget. The 30-month extension is easy to do. You just apply for that, as far as I know. Mr. Townsend can correct me if I'm wrong, but this is a graduated system, so there has to be a start-off point somewhere.

So, Jocelyn, that's why I'm asking the specific question. It's much more complicated than just saying we'll let the experts decide. If we don't have the cut-off point at the right spot we'll leave somebody out, and there's the whole issue of how it's all sorted out—parents and their responsibilities, etc. Do you get what I mean?

• 1230

Mr. Jocelyn Charron: Yes. I want to be clear. I'm not saying it's going to be simple. That's not what I'm implying. But I think also we need to recognize one thing: Under the current system, it would be administered by lenders, not by the government.

The government would be responsible for actually coming with a table, just like I think interest relief is being administered right now by the lenders and not governments. What of course would be difficult is coming up with criteria for all the situations in terms of conjunction of income level versus family situation, how many children, and things like that.

Yes, there is serious research that needs to go into this. But what I'm saying is, in terms of input, what groups like ours can give you are broad guidelines. One of the guidelines that was clearly announced at the stakeholders meeting was the necessity to leave borrowers breathing space upon graduation and to allow them to make decisions about families and other things that should not have to wait until 15 years after graduation.

The Chairman: Okay, we're going to have to tighten this up, as we're coming into our last half hour. Mr. Smith.

Mr. Bill Smith: I have a couple of brief comments. First is the problem on the data. I would agree with you, we need some good data. The data we need is the data that's projective. What is the level of loan being authorized now? What is the distribution of people by amount of cumulative debt? That is quite a different issue from what the averages tell you. Will it tell you how many people actually are likely to have a problem because they won't get jobs that are rich enough to help them service that debt, at least in the initial year?

The second comment would be that the devil is in the details. If you're in Ontario and in a worse situation, you can borrow up to $500 a week. You then get remission down to $3,500 a term. In a three-year degree in Ontario, one would expect the average for folks to be well under $20,000. But Ontario's problem is they can't sustain that level of remission, and that also needs to be taken into account looking into the details.

As the third comment I was going to make, if I understand well the roundtable proposal, the first bit of help in the transition period is that the financial institutions would accept interest payments only. I suspect that would actually save government money if that's done instead of providing interest relief.

On the second and graduated interest relief, you're right, I think the simplest you can get is an income-based formula, even for that, because it is a very expensive process to do net worths on people and start figuring out what assets you want to take into account, and the rest. But that, too, to us would be better than the present interest relief program, because it's no longer a flat threshold below which you have to make no payments. Certainly there is some evidence on the responsibility to repay a loan that even if you can only pay $5 a month, you should be paying that and staying with it.

Finally, the other piece of the round table's proposal, as I understand it, is very much targeted. It's just for those who have that gap between income and debt, for as long as they might have that.

So it is, Mr. Chair, the 15% or 20% that you were talking about. I rather suspect that's a relatively inexpensive option for government, compared to others.

The Chairman: Mr. Gravel.

[Translation]

Mr. Dany Gravel: Mr. Nault, you were asking for a definition of someone who needs a loan or a grant. It's easy to define. All individuals who want to go to university need high-quality education to prepare for the future and to earn a decent living.

Thus, everyone needs a high-quality education, and those who cannot get it on their own could apply to the program. We could see if the checks could be made at the beginning or end to determine applicants' income, expenses, family contributions, and so on. That is easy to check with the income tax returns. I think, using this system, everyone can check whether the program is working. In Quebec, that can be done. If a student requests it, checks can be made through the Department of Revenue. That is what I wanted to say.

• 1235

[English]

The Chairman: Thank you. Mr. Scott.

Mr. Kelly Scott: Just to address the issue of the graduated interest relief and the administration of it, as Jocelyn and Bill Smith had indicated.

Currently the lenders are responsible for that task, and generally it's done on a revolving basis every three months. The student must apply to renew that, and it is very table-driven, based on income. We would certainly be willing to work with Mr. Townsend's department and so on to determine the formula and an easy administration to make that work.

It would come down to a couple of different issues, though, and some them we touched on earlier. It's difficult to come into, and we've got both a federal and provincial loan and we've got to know what the cut-offs are. We've got to know whether we're dealing with a harmonized program. We've got to know what thresholds everybody is finding acceptable.

Certainly from our standpoint, when we saw the roundtable discussion, we saw ourselves as continuing to be the administrators of that program and not sort of foisting that off back to the government for another application process.

What we did see, though, is that it needed to be a joint effort to work together to come up with something that's workable. The current black and white leaves a lot of students in the lurch, and we're just not comfortable with it. We think the graduated mechanism can in fact save the government money but also expand that flexibility up to and including if necessary it would just allow the student to make interest payments if that's what they need to bridge them for a period of time.

The Chairman: Thank you, Mr. Scott. Mr. Townsend.

Mr. Thomas Townsend: I think Mr. Scott has covered my point, that administratively this is doable and in fact it can be made quite simple.

The Chairman: Mr. Best.

Mr. Robert Best: One of the points I wanted to make has been made previously. I would just make one point, on a graduated scheme. First of all, with the existing budget for interest relief, apart from the question of whether it will need to be expanded, the existing budget can be used more efficiently to reach more people in a graduated scheme. Again, with an on-off switch, some people receive total interest relief when they only may need partial interest relief to be able to get themselves through that transition period, get into the labour market, and get established and pay off their debt. What this does is make it a more sensitive instrument to reach more people according to their need.

It was my understanding from talking to lenders on this—and we have talked to them before, we didn't just come up with this out of the air—that, yes, there were some potential problems, but it was also doable.

Thank you.

The Chairman: Okay. Thank you.

Let me ask you, those who care to comment on the issue that comes out of the round table on harmonization—I think the discussion that Mr. Townsend raised when you were reporting on that, and Mr. Scott touched on it—that it's the complexity of the loan decision and administration. Harmonization can mean many things. So I suppose the broadest question is what do you mean?

The second question is could harmonization mean the federal government taking over the loan program and there just being one loan program all federally administered and the provinces withdrawing and doing other things with their money, much as we've done on the child tax credit area?

I'll excuse Mr. Léon and Mr. Gravel from that question. Mr. Smith.

Mr. Bill Smith: Well, I don't know anyone in the provinces who doesn't agree that it would be a better program to have one program with one design. I don't think you would ever get consensus among the provinces as to whether that is best achieved by provinces devolving to the federal order of government, the federal devolving to the provincial order of government, or the two governments working it out and having a co-managed and harmonized program. Different provinces are in different places on that issue.

I have to say that the sticker for most provinces has been fair sharing of the costs of providing student aid. As the cost of the student aid has moved from front-end grants to dealing with debt—and it's the provinces who are in the business of dealing with debt—the issue becomes one of who is paying what part of the cost.

• 1240

I think a number of provinces would harmonize tomorrow, not without some wrinkles, as discussed, minor policy preferences, and the key to that harmonization is an agreement that each order of government will pay its fair share of the cost of student aid programs.

The Chairman: Mr. Scott.

Mr. Kelly Scott: Speaking from the lenders' standpoint—and I did allude to the complexity this morning—we find the whole issue of having more than one loan per client to be one of the biggest problems in having students understand their responsibilities and assume their payments in a fair manner.

I don't necessarily have a preference as to which way it goes. I think the bottom line from our standpoint is one loan per student, as opposed to the two or three that we sometimes find now. I think generally, obviously from an administration standpoint, if we have one national program it obviously decreases our costs significantly, but at the top of our wish list would be just to be able to come down to the fact of one student, one loan.

The Chairman: Mr. Léon.

Mr. Atïm Léon Germain: We do have a point of view on that.

[Translation]

I will nevertheless repeat what I said earlier. I would like to emphasize that for us, the transfer to the provinces is something important, but from a very pragmatic viewpoint. We are not the provincial Minister of Education. I can understand that she may be interested in the transfer from a financial point of view, but we view it very pragmatically. We feel we have much more control over the program when it comes under provincial jurisdiction. We feel much closer to the administrators, and we can pass on our comments and recommendations much more easily. When the program is closer to us, we think we are in a better position to make certain changes. That is all I wanted to say.

[English]

The Chairman: Mr. Nault.

Mr. Robert Nault: This is based on my own experience when I went to university. Of course it was a little while ago. I'm a little older than Mr. Anders.

You've suggested under the second priority that grants for first- and second-year students are a priority. It seemed to me when I went that my first and second years were the easier of the years as it went to third and fourth. Can you give me some understanding of how you arrived at that being the priority? From personal experience of my own university days, I found it the other way around: the longer I went, the poorer I got. I was down to a couple of beers a week. That's all I could afford as time went on. I'm curious as to how you came up with that, not that it's totally important. I'm just surprised; that's all.

Mr. Pierre Killeen: Grants to third- and fourth-year students wouldn't really be something that community college and technical institute students could avail themselves of.

Ontario is the exception because it has some three-year community college programs, and there are some in Quebec as well. But outside of that, we're looking at one and two years in terms of students attending our institutions.

In regard to grants for third-year students, you're excluding a significant percentage of the population that's participating in the student assistance program.

The Chairman: Unless we were to redesign that program for different levels of education.

Mr. Charron, do you want to comment on that?

Mr. Jocelyn Charron: To give you an idea of the rationale—and I think it was mentioned by Mr. Townsend previously—there was a study by the General Accounting Office in the United States. The object of the study was to look at the effect that substituting grants versus loans had on retention for students in different years. One of the issues with grants is that we feel that they help students who otherwise would have more incentive to leave school during the first and second year, whereas substituting a grant adds incentive to that. The study basically showed that this substitution of a grant instead of a loan was more effective during those first two years than they were in the third and fourth year.

The reason for that is of course that once you've invested of yourself, your time, your energy for two years and you arrive at the third and the fourth year, then you have more to leave behind, in a sense, if you decide to quit.

In terms of effectiveness, and I would say in terms of proven effectiveness, first- and second-year students with high needs were shown to be more receptive, and it was modified by those.

• 1245

Mr. Bill Smith: I'd add to that the concern about access, the cost and debtor barrier to getting there. We're concerned about people from lower income groups getting into post-secondary studies, and grants in the first year have something to do with that.

I know there's quite a list of things here and they're expensive. If I had to suggest a strategic direction, it would be to deal with the current debt issue for the largest investment now, the phase-out of that into a program that included some front-end grants but dealt with the access issue also.

Mr. Robert Nault: I want to get a bit more feedback on this issue of grants for students with dependants. That's of course a very large issue, and also very complicated. Could I get a sense of what you're suggesting?

Are you looking for some sort of per-child breakdown—I haven't seen the material, so I'm trying to get a sense of it—or are you just basically saying that because you're a single parent you should be allowed to access a grant of some kind based on need and you fill it out like you do with the other assessment? Is it based on per-child and how much it would cost to maintain a child, obviously including child care? A big portion of the problem you're probably running into for single parents is the child care cost when the student is at university or college. Could you give me some background on that?

Mr. Townsend.

Mr. Thomas Townsend: About 25,000 students currently have dependants, and the most serious problem for this group is that, under the need instruments we have and the loan limits, it frequently leaves these individuals with assessed need that cannot be met through any of the financial aid instruments that are currently available. It's referred to in the student financial aid community as unmet need. What this does is place a significant additional pressure on an individual who's trying to take care of a dependant—it's not always a child, it may be an elderly parent in some cases—and complete their studies.

The grant is seen as going to that person and addressing that unmet need portion of their assessment. It allows the individual to have an easier time of their studies.

Mr. Robert Nault: The reason I bring it up is that I come from a region that has.... I represent 51 first nations. As you know, INAC has a program dealing with native students who have dependants. It's all based on a percentage of so much per dependant and you get that grant based on that formula.

I was wondering if that was the approach you were taking and it is not based on whether it's a parent in need or it's basically for single parents who have children, in essence, and have to take them with them when they go. In my particular area you don't stay home to go to school; you have to leave and go somewhere else, quite a long way away.

I was just wondering whether that was the program and the criterion you were looking at. That's my reaction to that.

Mr. Thomas Townsend: INAC covers similar considerations, but done somewhat differently, because of the way the Canada student loans program is set up.

Mr. Bill Smith: I have to signal on Ontario's behalf that if this program is targeted to unmet need, Ontario will have some trouble with it. This is because Canada Student Loans is supposed to meet 60% of assessed need, the province meets another 40%; that's $275 of support per week.

Ontario's problem is that they provide up to $500 based on their needs assessment and then provide remission. So, as the student aid director in Ontario has mentioned to me, our problem is that we don't really have unmet need but we still have these people with a lot of needs that are not fairly being met by the two orders of government.

I think that from the point of view of all the provinces it would be fairer to think in terms of this group on a needs assessment where people have need of over $275 a week.

• 1250

The Chairman: Is there anything any one of you want to make as a parting comment? You can have 15 to 20 seconds to do so, but just a summary, if there's anything you feel hasn't been emphasized to the degree to which it should have been. Mr. Killeen.

Mr. Pierre Killeen: Thank you for having us out today.

The Chairman: I'll come back to that. Mr. Townsend.

Mr. Thomas Townsend: Two points of clarification on statistics, because at a certain level they are important.

First, why are we focusing on $25,000? The average expected income of someone coming out of a post-secondary program, an undergraduate program in a university, is about $30,000. As the debt touches $25,000 and goes beyond that it's very hard to manage payments on that level of debt within that income range. That's the first clarification.

Secondly, what is the distribution of students who have these larger debt levels on graduation? As the Statistics Canada article in the Education Quarterly Review indicates, we're not seeing an awful lot of that when we compare the data back a couple of years ago. The trend we see is that in 1990 about 5% of the graduates were in this category. This year there's 14% or 15%. Next year it's going to be 18% and the year after 20%. So it's that rising trend of a distribution which places an increasing number of individuals in higher debt.

The Chairman: Let me just respond to one aspect of that, and there are two areas. What worries me, what is always difficult when you're dealing with significant public issues like this, is that certain phrases or certain images get picked up on. Students don't pay their debts. Students default. Students are irresponsible. We hear that. That 30% default rate always comes up, that students, who by definition ultimately are the best educated and the most likely to earn income, seem to have this disproportionately high default rate, when we find out, after examining it, that the default is an administrative artifact as much as it's an action on the part of students. On the front pages of certain newspapers—not the one represented by the journalist sitting behind me here, but others, I'm sure—we hear this hot image of these irresponsible students.

Similarly, a $25,000 average debt across all students who are requiring income assistance is the current image that gets painted there. I don't want to dismiss the debt problem—I think there is a debt problem—but if you say to me we have to look at our admission program, which covers all 300,000 students who are accessing loans, we have huge problem. If you say to me there's this portion of students who are acquiring debt and who have a debt that is getting into an unsustainable range, I can say, yes, I can see a way within current fiscal realities you can do something about that.

We end up—and Mr. Townsend, it's in your comments just now—with this problem. What is being said, what is being written about, what is being talked about by people who aren't spending as much time looking at this, is that—and it's stated directly on paper from your department—next year average student debt will be $25,000; but none of your underlying documents support that. They all say it's 11%, maybe it's 14%, next year. It just adds confusion to the debate. That's really what I'm concerned about.

Having said that, I do want to thank all of you. I appreciate the work that has been done by the department. I appreciate the work that has been done by everybody sitting here. A number of issues that have been rolling around on this issue are a lot clearer to me as a result of this, and I thank you for that. We are very rapidly going to attempt to synthesize this into something Mr. Anders, Mr. Tremblay, Mr. Nault, Larry, and I myself can put before the House, certainly before the session recesses at Christmas time, and we hope as early as the end of next week. We will see that you all get a copy of that so that you can see your hard work today reflected—in at least someone else's opinion. You can also measure how pursuasive you are.

• 1255

Thank you very much. I do appreciate your taking the time to be here today.

On that note, we're out of here.