HUMA Committee Report

STUDENT FINANCING

 

A. The Canada Student Loans Program

 

Higher tuition fees and other education costs combined with slow growth in family incomes have undoubtedly made access to higher education and training more difficult in recent years.  The federal government delivers a number of measures designed to alleviate these pressures and to help facilitate broad access to higher learning.  Thomas Townsend, Director General Learning and Literacy Secretariat, Human Resources Development, stated that:

The Government of Canada has done much to assist learners. Our high participation rates are a function of a broadly accessible system and are in part due to programs like Canada Student Loans Program, the programs of loans and grants that are available in most provinces. We know that about 44% of all students attending university or college receive a loan or a grant.  The Government of Canada has also instituted a number of new measures over the last years which provide over $400 million a year in non-repayable assistance. [9]

Since 1 March 2001, two service providers – EDULINX and BDP Business Data Service - have been administering and managing the Canada Student Loans Program (CSLP) on behalf of the Government of Canada.  Based on the testimony that the Committee received during its roundtable meeting  on the CSLP held on 3 April, the transition to direct delivery was successfully accomplished.  The Committee is also pleased with the government’s decision to extend the default period under direct delivery from 90 to 270 days, to provide more time for service providers to get poorly performing loans back into good standing. 

Despite some recent improvements, the Committee is aware that several issues persist with respect to the CSLP.  Many witnesses expressed the view that reducing the administrative burden associated with a federal-provincial two-loan system would ensure better access for students.  In this respect, the Committee was repeatedly told that greater harmonization between federal and provincial loan programs is necessary to achieve this goal.  We are pleased that the contracts governing our direct delivery service providers allow willing provinces, subject to an agreement with the federal government, to integrate their student loan programs with the CSLP.  However, much remains to be done in this area and the Committee encourages both levels of government to continue to strive for a “one student, one loan” approach. 

Some of those who attended our roundtables believe that the cost of borrowing under direct lending should be lowered to help offset the rising costs of education.  While the Committee will undoubtedly address this issue in future meetings, the Minister of Human Resources Development Canada reminded the Committee that the initiative taken in the 1998 budget to provide a tax credit on student loans effectively results in an interest rate that is similar to the prime lending rate.

The Committee was informed that there is little difference between the participation rates of students with disabilities and those without on entering the post-secondary system. However, there is a noteworthy difference between these groups in terms of graduation rates; according to the 1998-99 National Population Health Survey, 46 per cent of individuals who are not disabled complete their post-secondary schooling compared to a graduation rate of 42 per cent for students with disabilities.  While the factors underlying this difference are not fully known, we suspect that part of the explanation may be due to inadequate measures to meet the additional cost that disability imposes on student learners. This issue must be addressed and in our report, Ensuring Access, the Committee partially addressed this issue in the recommendation that the Canada Study Grant for students with disabilities not be subject to tax.[10]  The Committee was also apprised of the need to improve financial assistance for part-time and Aboriginal students and the Committee expects funding issues related to these groups to be at the fore when our study resumes.

Finally, a financial issue that has surfaced frequently during our hearings is the in-study earnings exemption under the CSLP. Virtually, every witness who spoke to this issue was critical of the current rule that permits students to earn only $600 (including scholarship and bursary income), after which their loan is decreased by 80% of any additional income.  This means that if a student earns $2000 during a school year (or about $100 per week) this student would have $1,120 deducted from his or her student loan.  The Committee addressed this issue in its previous report, Ensuring Access, which recommended that the needs assessment for student loans should not penalize students of high need or outstanding academic excellence.[11]

The Committee recognizes that this threshold is one that provincial/territorial governments have agreed to use in terms of their needs assessment methodology. Nevertheless, in its response to our previous report, Ensuring Access, the government committed to including this in its review of needs assessments (completed almost two years ago) and to work with the provinces to address this issue. We have seen no visible progress since then, and we are aware that some provinces are apparently ready to consider increasing the in-study earnings exemption.  Although we have not taken a position in this report on the actual earnings threshold associated with a revised exemption, we strongly encourage the federal government to work with those provinces (e.g. Alberta and Ontario) that are receptive to an increase in the in-study earnings exemption at this time.  In our view, a higher in-study earnings exemption would help alleviate some of the financial constraints facing post-secondary students who borrow under the CSLP, and we strongly encourage the federal government to move quickly in this matter.

The next steps are:

 

• to obtain more information regarding the role that student financing plays in determining access to post-secondary education and training,
  
• to gather more evidence on this matter, especially as it pertains to the financing needs of part-time learners, students with disabilities, Aboriginal students, immigrants and the loan and grant system in Quebec,
  
• to review the progress that we hope has been made by asking for reports on the unimplemented recommendations in the report, Ensuring Access: Assistance for Post-Secondary Students,  especially those that deal with students that have additional needs, and in particular,
  
• to revise the current in-study earnings exemption that has received so much criticism during our hearings.

 

 

B.  Financial Support for Individuals in Trades Training

 

Although many individuals engaged in trades training regard themselves as employees and not students, witnesses at our roundtables informed the Committee that many of these individuals also require ‘student-like’ assistance to alleviate the financial burden associated with their education/training.  Two key areas of financial support that surfaced during our roundtable meeting on access to trades training involved support for apprentices during their in-school portion of training, and assistance to help alleviate the cost of equipment and tools that are essential to complete training.

In our recent report on Employment Insurance, this Committee recommended the elimination of the two-week waiting period for all EI claimants enrolled in approved training. More recently, some witnesses have indicated that, while the elimination of the two-week waiting period would provide much needed help to those who can establish an EI claim, not everyone engaged in trades training is eligible for EI.  Those who are not also need some kind of income support during periods of in-school training.

The next steps are:

• to examine the extent of the shortfall in income support for apprentices and others during periods of institutional training, and
  
• to identify avenues for enhancing financial support, including measures to help alleviate the cost of tools and other equipment that are critical to the successful completion of training.

 

C. Incentives to Save for Higher Education and Training

Some witnesses who appeared before the Committee suggested that federal educational savings incentives (e.g. Registered Education Savings Plans and Grants) be replaced by needs-based grants.  Although the return on investments in higher education and training accrue primarily to students following graduation, society also benefits from investments in post-secondary studies.  Hence, most Members of the Committee support a cost-shared approach to financing higher learning and in this context endorse educational saving incentives, especially when tailored to low- and middle- income families.  It is, however, difficult to know exactly the point where the need for savings vehicles stops and the requirement for other measures, such as grants, begins.  Unfortunately, incentives to save for life-long learning, including the proposal in the recent Speech from the Throne (i.e. Individual Learning Accounts) have not received a great deal of attention thus far in our work and we intend to revisit this issue when our hearings resume.

The next steps are:

• to investigate the benefits of encouraging individuals to save for life-long learning and examine vehicles for encouraging individuals to invest in the acquisition of skills throughout their years in their workforce, and
  
• to examine where other measures (such as grants) can ensure that those who cannot take advantage of these saving vehicles do not incur any disadvantage in gaining access to higher education.

 

D. Student Debt and Debt Relief

Our testimony clearly signals the existence of a significant shortfall in current information on student debt. According to self-reported data collected from students at the University of Western Ontario  (which may or may not be an accurate reflection of the situation in Ontario or elsewhere in the country), about 30 per cent of students graduate from undergraduate studies with no debt at all. About 55 per cent have debt (i.e. debt from all sources) below $35,000 and 15 per cent have debts in excess of this.[12]  In terms of a broader perspective, we were told that according to a forthcoming paper to be published by the CD Howe Institute, the average amount of debt held by students who borrowed and who graduated in 1995 ranged from $9,000 to $14,000.  Of course, these debt levels fall when averaged over all graduating students, including the non-borrowing student population.[13]

Many witnesses emphasized that the available data on debt does not capture the latter half of the last decade when tuition and other education costs continued to rise.  We concur with this observation, although the federal government initiated a number of measures during this period, particularly in terms of the 1998 budget, to help address this problem.  Nevertheless, we all agree with the need for more current information and analysis to better understand the debt load problems facing students -- to determine what additional help is needed and how this help should be targeted to best address this serious problem.

The next steps are:

• to update our information on student debt,
  
• to assess the effectiveness of the debt relief measures adopted in the 1998 budget, and
  
• to examine the need for further support in this area such as the provision of needs-based grants and the desirability of new lending measures, for example, income contingent loans.

 

E. Bankruptcy

Throughout our hearings, many witnesses expressed strong disagreement with the recent changes to the Bankruptcy and Insolvency Act that prevent an individual who wants to claim bankruptcy from receiving an order of discharge from any debt arising from a Canada student loans for a period of ten years after the date on which the bankrupt ceased to be a full- or part-time student. This measure is largely viewed as extremely unfair and discriminatory.  James L. Turk, Executive Director, Canadian Association of University Teachers used an effective analogy when he stated that:

… we would like to concur with the Canadian Federation of Students in urging your elimination of the discriminatory treatment of student borrowers. If I go to the bank and borrow $50,000, go to the Hull Casino, blow it all and have to declare bankruptcy, I can do that. If I go to the bank, or to the Canada Student Loans Program and borrow $50,000, spend it on a university education and find after that, that I can't get adequate employment, I have to declare bankruptcy, I cannot. This is not smart public policy.[14]

The government takes the position that the mechanisms that are currently in place to help students manage their debt provide sufficient coverage for individuals who experience trouble in repaying and maintaining their loan in good standing.  Given this, the government believes that there is no need to claim bankruptcy.[15]  If this is the case, why was this provision put in the Bankruptcy and Insolvency Act?

The next steps are:

 

• to pursue in more detail the treatment of students by the Bankruptcy and Insolvency Act, and
• to hear the position of officials from HRDC and Industry Canada, the Department that is responsible for the Bankruptcy and Insolvency Act, to discuss the justification for this aspect of the law.

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