:
Good morning, everyone. It's good to see all of you. I call this meeting to order.
Welcome to meeting number 10 of the Standing Committee on Public Accounts. Pursuant to Standing Order 108(3)(g), the committee is meeting in public today to study “Report 2—Student Financial Assistance”, of the 2020 spring reports of the Auditor General of Canada.
Today's meeting is taking place in a hybrid format, pursuant to the House order of September 23.
To ensure an orderly meeting, I will outline a few rules as follows:
For those who are participating virtually, members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice at the bottom of your screen of the floor, English or French. Before speaking, click on the microphone icon to activate your own mike. When you have finished speaking, please put your mike on mute to minimize any interference. Unless there are exceptional circumstances, the use of headsets with a boom microphone is mandatory for everyone participating remotely. Should any technical challenges arise, please advise the chair. Please note that we might need to suspend for a few minutes as we need to ensure that all members are able to participate fully.
For those participating in person, masks are required unless you are seated and when physical distancing is not possible. Should you wish to get my attention, signal the clerk with a hand gesture. Should you wish to raise a point of order, please activate your microphone and indicate to me clearly that you wish to raise a point of order. With regard to a speaking list, the committee clerk and I will do our best to maintain a consolidated order of speaking for all members, whether you are participating virtually or in person.
I will now turn to our witnesses. Welcome.
Joining us today from the Office of the Auditor General of Canada, we have the Auditor General, Karen Hogan; Mathieu Lequain, director; and Philippe Le Goff, principal.
From the Canada Revenue Agency, we have Bob Hamilton, commissioner of revenue and chief executive officer; and Marc Lemieux, assistant commissioner, collections and verification branch.
From the Department of Employment and Social Development, we have Graham Flack, deputy minister, employment and social development; Atiq Rahman, acting assistant deputy minister, learning branch; and Marc Perlman, chief financial officer and senior assistant deputy minister.
As well, from the Financial Consumer Agency of Canada, we have Judith Robertson, commissioner.
For those of you who are making presentations, you will have five minutes to make your opening statements, and we'll begin with Ms. Hogan.
Ms. Hogan, you have the floor.
:
Madam Chair, thank you for this opportunity to discuss our report on student financial assistance, which was tabled in Parliament in July 2020.
Joining me today are Philippe Le Goff, who was the principal responsible for the audit, and Mathieu Lequain, who led the audit team.
At the time of our audit, the federal government had two programs to help students obtain financial assistance to attend college or university. These are the Canada student loans program and the Canada education savings program. The government considers this type of assistance to be an essential investment in Canada's labour force and economic growth.
This audit is important because there is a significant cost to the government when student loans are not repaid. In the 2018-19 fiscal year, that cost reached $500 million, and the Chief Actuary of Canada predicted that the value of unpaid student loans will continue to grow.
Our report does not cover any assistance to students related to the pandemic as it was completed in December 2019. However, the pandemic is a compounding factor that has come into play since we issued our report. It may well cause labour market conditions to worsen, thereby limiting prospects for young adults. This might jeopardize their ability to repay their federal student loans. As a result, the value of unpaid and defaulted student loans reported earlier in the year would increase.
Overall, we found a number of areas in which Employment and Social Development Canada could improve how it manages student financial assistance.
On the loan side of student financial assistance programs, we found that the department did not properly check that information on applications to the repayment assistance plan was accurate, such as income. The department has known about this integrity problem and about the resulting risk that ineligible students might participate in the plan since 2015. At the time of our audit, the department did not have access to the Canada Revenue Agency's tax information to verify applicants' income, a practice that is used at the provincial level and that the department recognizes to be valuable.
[English]
As of July 31, 2018, 24% of borrowers whose student loans were due were participating in the repayment assistance plan. That translates into more than 200,000 borrowers who were struggling to repay their student loans, with the total loan value of $3.6 billion. Almost nine out of 10 participants in the repayment assistance plan were making no payments. We found that Employment and Social Development Canada did not offer enough tools to help students understand their financial obligations under the Canada student loans program, despite recommendations from the Financial Consumer Agency of Canada to make this sort of information available.
Financial literacy is important, as for some students this is the first large financial commitment of their lives.
We also found that the Canada Revenue Agency did not have the tools it needed to maximize recovery once borrowers defaulted and student loans were transferred to the agency for collection. For example, the agency was using Employment and Social Development Canada's information system, which made it impossible for the agency to know exactly how much money was recovered by its own different activities and collection methods.
Finally, on the savings side of student financial assistance programs, we found that the government invested $1.1 billion in the Canada education savings program in 2018, but low-income families did not fully participate in the program. For example, even though the Canada learning bond is paid by the government without any contribution from families, about 62% of eligible children did not receive it as of 2018 because no account had been opened for them.
In our view, it's important that Employment and Social Development Canada undertakes an evaluation that considers both the loans and the savings components of federal student financial assistance. This type of comprehensive review would work to ensure that the system is consistent and effective in achieving the objectives of promoting access to and completion of post-secondary education. We made five recommendations to Employment and Social Development Canada, and the department has provided us with an action plan. The committee may wish to ask the department what progress it has made to address our recommendations.
Madam Chair, this concludes my opening remarks. We'd be pleased to answer any questions the committee may have. Thank you.
:
Madam Chair, thank you for the opportunity to appear before you to discuss this report.
As you know, I am accompanied by Marc Lemieux, Assistant Commissioner of the Collections and Verification Branch at the Canada Revenue Agency.
For the CRA portion of the audit, the Office of the Auditor General examined whether ESDC and CRA analyzed student loan recovery activities and adjusted procedures accordingly to maximize the funds recovered for the federal government.
[English]
The Auditor General acknowledged that the CRA did not have the necessary tools to maximize the recovery of student loans in default. The methods available for the agency to recover student loans were more limited than those available to the agency under the Income Tax Act.
In the report, the Auditor General of Canada made five recommendations. None are addressed to the CRA. One audit recommendation does mention the CRA. To address that specific audit recommendation, ESDC is working with us to establish an information-sharing agreement, expected by the spring of 2021. This will enable CRA to strengthen verification of borrower marital status, income, spousal income and number of dependents against tax data during the repayment assistance plan application process.
Thank you, Madam Chair. I'm happy to answer any questions you may have.
:
Thank you, Madam Chair.
The report's recommendations align with our continuous work to strengthen the Canada student loans program, while making post-secondary education more affordable and accessible to all Canadians.
The government has made significant investments in recent years, including increasing Canada student grants and expanding its eligibility to make post-secondary education more affordable.
Since the onset of the pandemic, the government has taken measures to address the impacts of COVID-19 on students, which included temporarily suspending the repayment of student loans and applicable interest, and doubling Canada student grants for the current school year.
[English]
The government has also taken steps over the years to make student loan repayment more manageable. Most notable was in budget 2008, where the government announced the introduction of the repayment assistance plan, which was subsequently approved by Parliament and implemented in 2009.
RAP is a form of an income-contingent repayment system that allows student borrowers to repay only what they can reasonably afford given their income and family size. The government contributes to their payments such that the loan is paid off within 15 years of leaving school. In 2016, the government made it more generous by increasing the zero payment income threshold to $25,000. This is a benefit, effectively like a deferred grant, and should not be viewed as a loss. In fact, the department has made and continues to make efforts to raise awareness of RAP, so that eligible borrowers can take advantage of it while they're trying to integrate into the labour market, but do not have sufficient revenue.
Spending on the RAP is very different from the write-off loss due to default. Therefore, we report separately on the two on the public accounts. Parliament has chosen to use to grants to help students in financial need. The RAP is a means to assist students in precariously financial situations through the payment of their loan.
We agree with the OAG that we can improve on informing Parliament on program costs. We are already taking steps to do so. However, we intend to continue reporting program spending such as the RAP and write-off loss separately.
[Translation]
While we have made great strides, we know that there is still more work to do. We acknowledge the longer-term issues raised by the Office of the Auditor General. We agree with their recommendations, and we are taking action to address them.
Student loan repayment continues to be one of the priorities for the Canada student loans program. Our efforts in this area need to be coordinated with the provinces and other delivery partners.
Given the work that the department has already undertaken, we are confident that we will be able to implement our action plan, though some of the timelines may need to be reassessed due to the pandemic.
With respect to student financial literacy, we agree with the Office of the Auditor General that more needs to be done to improve financial literacy among young Canadians.
To this end, Employment and Social Development Canada, in consultation with the Financial Consumer Agency of Canada, developed a financial literacy plan in 2017 to inform borrowers of their repayment obligations and provide them with financial literacy tools.
The department has already launched a virtual repayment counsellor on the National Student Loans Service Centre web portal. New financial literacy content continues to be added on repayment options and obligations.
The department also has a plan to consult with provincial partners and external stakeholders on mandatory financial counselling for borrowers.
[English]
Finally, the OAG has recommended a comprehensive evaluation of both the Canada student loan program and the Canada education savings program.
While our ongoing evaluation work has focused on the impact of the two programs individually, the department has been working with Statistics Canada for several years now on developing appropriate data sets that would allow us to do a comprehensive evaluation to examine the interaction between the two programs.
After much technology and privacy work to link those data sets, that has now been completed. Our first evaluation of the interactions between the education savings program and the Canada student loan program is underway. With better understanding we will be able to take appropriate steps to reduce financial barriers to students.
All of the efforts we have been undertaking have ensured that the default rate on student loans continues to decline, from a high of 28% in 2003-04 to its current all-time low of 8%.
Some of this success can be attributed to the repayment assistance program, which provides support to borrowers in financial difficulty so that they can get back on their feet and focus on their careers. The use of this model—
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Thank you. Good morning.
[Translation]
Madam Chair, members of the Standing Committee on Public Accounts, thank you for inviting me to appear before you today.
[English]
The Financial Consumer Agency of Canada is a federal agency that operates independently. We are primarily funded by the financial institutions that we regulate. Our mandate is to protect financial consumers in Canada, and we do that in two principal ways.
First, we supervise the federally regulated financial entities, primarily banks, for their compliance with the consumer protection measures in legislation. Second, we strengthen the financial literacy of Canadians through programs, tools and resources to help them make informed financial decisions, as informed consumers are better protected consumers. In addition, we undertake research and experimentation to provide the evidence to support these efforts.
All of this work is carried out in close collaboration with many organizations and individuals in the public, private and non-profit sectors. This enables us to extend our reach and our impact across the country.
As you know, financial literacy is a vital skill that people develop and augment as they go through the various stages of life, and starting young makes a difference. We thus undertake various activities focused on helping people develop good financial habits early in life.
For example, young Canadians were a key target audience of ours during the tenth annual financial literacy month, which just wrapped up yesterday. We hosted a webinar in collaboration with the Canadian Bankers Association that targeted young graduates.
We've also developed and piloted educational training materials for post-secondary students in collaboration with the Canadian Association of Student Financial Aid Administrators and Colleges and Institutes Canada. We chair a federal government committee of departments and agencies, which includes ESDC, that exchanges information and coordinates efforts on financial literacy.
These are just a few examples of how FCAC is helping advance financial literacy. As you can see, collaboration is central to our efforts, and our partnerships have proven to be a successful way to develop and deliver financial education initiatives.
Turning to the Auditor General's report, FCAC welcomes the recommendation that involves our efforts to strengthen the financial literacy of post-secondary students in collaboration with ESDC.
FCAC and the Canada student loans program team have a long-standing and positive relationship. Our joint focus is to help student loan borrowers improve their financial literacy and better manage their finances.
As discussed in the Auditor General's report, our two organizations have been working together to include the financial literacy tools and information in ESDC's National Student Loans Service Centre portal.
We are pleased to report that over the past year, FCAC's educational materials have been added to the student loan portal as well as to the personal dashboards of student borrowers. They include links to FCAC's budget planner and information on how loans and credit cards work and on consumer rights related to credit products. There are also tips on paying back student loans and setting up an emergency fund.
Going forward we will continue to build on our close partnership with ESDC and support its efforts to make enhancements and to integrate new content into the portal.
In closing, I'd like to bring your attention to the fact that we recently announced the launch of public consultations to renew our national strategy for financial literacy. The first national strategy was adopted in 2015 and successfully laid out a road map to where we are today. These consultations for a new strategy will help us plan for the future. We invite anyone who is interested to share their ideas.
In closing, FCAC is committed to continue advancing financial literacy in Canada, with the support of federal government partners like ESDC and other stakeholders.
This completes my opening statement. I would be happy to answer any questions that you may have.
:
Madam Chair, the way the RAP operates is that it largely deals with individuals who face sudden income loss. For sudden income loss, the income tax return that CRA has from the previous year is not actually useful for us in determining that.
For example, if we had someone who lost their job today and applied under the RAP, even if I had access to that person's data at CRA, the data would be for their 2019 tax year and it would not allow me to evaluate whether they were eligible for the repayment assistance program. We have to do that evaluation based on their income in the previous month. That's the way the program is structured. It's not retrospective and looking at their income in the previous year because indeed their income from the previous year would have been higher to be able to do that. That's why, for individuals who suffer that sudden loss, we have to use pay stubs and other methods to assess whether they're doing that.
Where the CRA data would be very useful for us is looking retrospectively where you have individuals in the program for a longer period of time. Since the program was set up in 2008, the government has never looked at making it obligatory for individuals to file taxes. The rules around filing taxes are rooted in whether an individual has sufficient income. For example, if they have no income, there would be no obligation to file taxes and we would have to find another way. That's something we can certainly look into. It's just not something that's been in place since Mr. Solberg set up the program in 2008.
:
Thank you very much, Madam Chair.
Good morning to all the witnesses.
Ms. Hogan, it is a pleasure to see you appear before the committee again.
My questions are about the relationship between the.... Perhaps I should say it in English.
[English]
My questions concern the financial accountability of the recipient of the loans to the department and the relationship between that and falling into default or being delinquent on their loans.
If we look at recommendation 2.35, I know the Auditor General indicated the following:
To prompt borrowers to be more diligent about repaying their student debt, Employment and Social Development Canada should inform credit bureaus about student debts in default.
Madam Hogan, are a lot of students defaulting on their debts?
I'm just thinking back to the time when I was young and I wasn't perhaps the most responsibly financial person there is. Would you find that there would be a better solution than reporting them to the credit bureau, which would, of course, put a stain on their credit record, which can carry forward, just as they're starting in life and their careers?
Next, then, I have two questions for the FCAC.
First, what progress can you report regarding providing ESDC with access to education materials for inclusion on the web portal?
My second question is a little more qualitative. What sense do you have that providing more information has led to better outcomes? Do you have any data on that front that would point to the default rate being lower, or the repayment rate higher, when students are provided with more of an informed choice as to what they're undertaking when they have these loans?
:
Thank you. I'm happy to respond to this question.
The first part is on the progress. We're actually very happy to report the progress that has been made, which has been made in stages. There are links to the various materials that we already have on our website, many of which are designed specifically for students.
In addition, one of the things I would point to that we think is quite pertinent to this population is the link to our budget planner, which is a tool that we introduced last year. It is a very simple and easy-to-use planning tool, really—I know that budgets tend to be a bit non-sexy—but it incorporates behavioural insights and prompts and nudges, so we're really looking forward to this as a way to see the—
:
Thank you, Madam Chair.
First, I would like to take some of my time to express the deep unease I felt earlier when my colleague Mr. Fergus began his speech in French and then stated: “Perhaps I should say it in English.” It is as if the French language is from another planet and it will be impossible for witnesses and committee members to understand.
Madam Chair, as a Quebecker, my official language is French. I want to make it clear that I have no qualms about speaking French, and I hope that my colleagues do not feel embarrassed or afraid to speak in one of Canada's two official languages. I just wanted to say this at the beginning of my speech, because I can absolutely—
:
Madam Chair, a point of order from me as well.
I would like to tell my colleague that I did not suggest any ill intentions on his part. I never clearly stated that he did not respect the French language. I simply expressed the discomfort I felt at the beginning of his speech. I welcome his clarifications. However, I find it more difficult when people suggest that I said things I did not say or, even worse, when people claim that I said things I did not say. At any rate, I thank my colleague for his clarification.
Madam Chair, while I have the floor, let me continue on the topic that brings us together today, which is the Auditor General's report.
Good morning, Ms. Hogan, distinguished witnesses.
Of course, we notice—
:
That is excellent, Madam Chair. My thanks to you and to the clerk for that clarification.
So let's come back to the main topic, that is, the Auditor General's report.
Of course, Quebec has its own student financial assistance program. So the federal student financial assistance program supports students from other provinces. In its report, the Office of the Auditor General showed some gaps in the management of this program, in terms of debt recovery. The reality is that students do not understand their financial obligations. The Auditor General reported that $2.4 billion in debt was outstanding. While this does not directly affect Quebec students, it does affect Quebec and Canadian taxpayers. Actually, if students in the rest of the country don't pay their student debts, ultimately, all taxpayers will have to pay them.
Ms. Hogan, looking at your speaking notes, I stopped at paragraph 6. You say that the department has known about the integrity problem and about the risk that ineligible students might participate in the plan since 2015. On the loan side of student financial assistance programs, you say that the department does not properly check the information on applications to the repayment assistance plan, because it has no way of checking the accuracy.
At the time of the audit, did the Canada Revenue Agency not have the information to check the income of applicants? This was a well-known practice in other provinces, particularly in Quebec.
Can you tell us in more detail what measures the Canada Revenue Agency should put in place to properly check the applications?
:
Thank you very much, Madam Chair.
I have to share that reading this report was actually a pretty difficult thing for me to do. I think back to the briefing we had with the Canadian Audit and Accountability Foundation. I'm really struggling with whether we're even asking the right questions here.
So far we've heard about the individual responsibility of students, about whether or not they're able to plan for their expenses, about their ability to budget, and I'm wondering, when we look at the information on the supports for students on financial assistance, whether this report is fundamentally answering the right questions.
Through you, then, let me ask a general question, and forgive me for taking a shot in the dark here. What analysis went to the flip side of this, to the rising costs of tuition, the rising costs of rent, the rising cost of living relative to previous generations' ability to pay?
Also, was there any analysis put to the ongoing cuts and continued profitability from the financialization of education in Canada?
:
No, I guess it would be addressed to people from ESDC or any of the other staffers who are here. It's more a policy question. I know that Ms. Hogan is responsible only for answering the questions that are provided for in the particular study.
But Madam Chair, when we look at the default rates and we're positioning this as though somehow this is about students' ability to pay, for me the biggest elephant in the room is COVID. If we think this 2019-20 report is bad, I promise you, wait for the defaults in the years to come.
I am wondering, then, whether there has been a shift, in policy discussion, about how to adequately prepare for this.
:
Indeed, the program has evolved over time in response to the changes you've described, and the most significant change in the evolution was the introduction of the repayment assistance program.
Effectively, there are two ways you could have come at this at the front end, because, as you know, the dominant principle behind this program is to ensure a level playing field between students coming from lower-income families and those from families with means.
If those from families with means get into trouble a little bit into their career; if they get an illness and can't repay the loan, they are going to have parental support that will ensure that this doesn't affect their credit.
Low-income families, however, don't have that fall-back to turn to. There is, then, a high risk, if you just have a loan program, that those individuals will not go to university or to higher education because they think they will be taking too much risk.
:
There is always an option, I guess, for individuals to go to private sector institutions to seek funding, but I think the way the student loan program is designed means that the vast majority of students will come in through the student loan program because of its favourable terms.
Just to get back to the repayment assistance program, the reason it's so key, particularly for low-income students, is that it takes out that risk. If it turns out that you're unable to get a job that pays more than $25,000, or if it turns out that you develop an illness or lose a job, you are going to have the government provide you effectively with a deferred grant to cover the cost of interest—and principal, eventually, if necessary.
This is one of the most important features that has evolved over time. I point out that, on the thousands of people who would be in the repayment assistance program, far from viewing that a negative factor, we in fact view that as the implementation of Parliament's explicit design. We want to ensure that for those individuals who don't have that income, we do not require them to repay as long as they don't have that income. That's one of those features that I think has been critical in ensuring that burden of debt. Individuals' fear that they're going to lose their credit rating if they don't get a job that pays well or if they lose their job is taken out of play. That's one of the most important features of the program, which is why—
:
Thank you, Chair. I'm delighted to sit in today.
Thank you to all of our witnesses.
Mr. Flack, continuing from your last answer and given the various extensions, this is a question that we discussed at the human resources committee, but given those who may be watching this committee meeting—students, families, the general public—it is continues to be relevant. Given the various extensions and deferrals of so many government programs, why has ESDC resumed its collection activities of Canada student loans?
I've had constituents ask me if there is data showing that student loan borrowers are in a better position than other Canadians to make repayments now than they might be in September 2021.
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It's a question of government policy, so I'll tread delicately because that would ultimately be for Parliament and the government to decide. What I can say is that the mechanism that has historically been in place to deal with individuals who, whether on an individual basis or on a systemic basis because of a recession, are unable to make their payments has been the repayment assistance program.
There was an agreement we were able to reach with the provinces for the first six months of the pandemic, which they supported because we co-deliver the program with them, to freeze that for that period of time.
I would point out that there are a number of provinces that have expressed to us the fact that they would not be interested in extending that, and that it would greatly complicate the delivery of this because it's an integrated program on a single platform, but that would ultimately be a policy decision for government.
As Atiq indicated, the government has announced in the fall economic update that it will freeze interest for all borrowers in 2021-22.
:
Atiq can talk about the fact that he has managed to double the capacity. I think we have wait times down to 13 or 14 minutes.
For the honourable member, the key thing that hit us is that November is usually the time when we have more people coming in. You start paying your loan six months after graduation, so it's normally a peak time.
As you will recall, the added thing was that there were cyber-attacks on a number of government systems. They did not directly affect the Canada student loans program, but we were concerned that they could affect the system. As a result of our putting additional security measures in place, a considerable number of our clients had to call in to authenticate their accounts. That greatly increased the volume, but we thought it was the prudent thing to do, given the risk that their accounts, in principle, could have been hacked using similar tools.
Atiq, can you give an update on where we are on wait times and your efforts to reduce them?
The wait time varies a bit. Some days, we have had 15-minute wait times, and some days, up to 25, 30 or 35 minutes. Capacity has been increased significantly. More call centre agents have been added.
One of the challenges has been to get call centre agents during this pandemic, train them up and get their security clearances so they can deal with government data, but given all of that, the capacity has been significantly increased.
At the beginning, some of the students could not even join the queue. That is no longer happening, so things are improving. It will take another few days to get back to normal circumstances.
:
Thank you, Madam Chair.
What we're trying to do is to make sure that the information that's at our disposal is shared with the [Technical difficulty--Editor] to help get a better picture of the financial [Technical difficulty--Editor] the individual.
Getting better data on previous tax filings, dependants and, obviously, income will help us make better decisions collectively about what we should do.
I'd just add to a point that Graham made that one of the reasons this can become time-consuming or more complicated is just to make sure we are protecting the privacy of the information we share. This always comes up when we share people's tax data.
[Technical difficulty--Editor] and we need to make sure that whatever we do respects that.
:
Thank you, Madam Chair; and thank you to all of the witnesses for their testimony here today.
Very very similar to what Mr. Green said, I'll start by saying that there are, of course, broader considerations on policy grounds. I want to stick to the auditor's report.
I'm going to start with Deputy Minister Flack. It's great to see you, and as I'm an MP from Nova Scotia, it's great to see someone who has ties to that province.
This is an important subject. There's no doubt of that.
I went to exhibit 2.2 in the Auditor General's report. As I read it, in my quick math, about 85% of the student loan recipients are either repaying or are getting close to having that loan repaid. Obviously, this is an issue for about 15% with whom we have some work to do.
There is a lot of talk in the AG's report about improving the financial literacy tools on the website. I am a recent graduate of Dalhousie law school, so I went through these programs not that long ago. In fact, I am still enrolled in them.
What measures were already in place to help support students' understanding? I assume there were already some at the time this report was done. Do you know what those measures are?
:
Yes. We developed a plan in 2017 with the agency on how to do this. The plan was going to be implemented on the IT platform that our third party provider has. It has taken some time, given the transformation project they're doing to improve service to students, and things had to be prioritized.
For example, as of November of last year, we had a virtual repayment counsellor on line. As my colleague indicated, there have been other tools added and we have a new release due in January. There are new tools to attempt to improve the literacy of students.
However, if I could just make a plea for those students who are on the repayment assistance program, I wouldn't want to leave folks with the impression that the reason they're on the program is because they're not financially literate. They're on the program because their income is under $25,000. Parliament said, if your income is under $25,000, we're going to help you by paying, if you need it, your interest.
I wouldn't want to leave the impression with the committee that our ultimate end goal is to hope that there is never anyone using the repayment assistance program, because we know in the dynamic economy we have that there are going to be individuals who aren't able to find jobs or who are ill.
I didn't want anyone to get—
:
As we indicated in our response, we think it's worth pursuing what we started with the provinces in 2017, which is the work with the CRA to gather the CRA data. We think that has a good cost-benefit analysis, a good return on investment, particularly for people who are in the program for an extended period of time, when looking back at their tax records from prior years would be helpful.
The greatest challenge we have in the program is with the entry requirement, that the individual “in that month” have an income that was, on an annualized basis, below $25,000 a year. As members will know, we do not require Canadians to file taxes every month, so there is no real-time information that Revenue Canada has or we have that shows what the monthly income of each individual is.
When they suffer a sudden event, then, and lose the income, we have to use imperfect methods such as pay stubs and attestations.
:
One of the great success stories over the last decade is the increase in the uptake of that program. Individuals have to open accounts, but we have had, through a whole bunch of efforts—nudge methods, mail-outs, other forms of communications—a big increase in the program.
One option that has been mooted is a kind of reverse-onus position whereby, rather than requiring individuals to set up an account for their kids, you might have a situation in which, if that low-income child were going to university, they would automatically be able to access the resources.
That's not a policy that's been pursued to date, but if one wanted to maximize availability, this would be the way to do it. There are going to be limits to what we can do even for RSPs or RESPs. How many people are willing to take those up and set them up themselves?
:
In reality, then, we have more like 30% or 40% of students not repaying their debts fully, which I think is a substantial issue. Then we add that to the fact that the value of outstanding loans—this is not including the RAP program in default—was $2.3 billion. Just to give you context, that would pay for both the Canadian recovery sickness benefit and the Canadian recovery caregiving benefit.
In 2018 and 2019, the federal government wrote off $160 million in student debt as unrecoverable, despite the fact that legally they don't have to. Students are having enough of a time with COVID, but I want to understand, from an audit perspective, why are we writing this money off? Is there not a better way to do this?
I think this is to Mr. Hamilton if he's involved in collection, or to Mr. Flack, if he is better placed to answer, please jump in, but either one of you could answer.
The OAG found that ESDC did not offer enough tools to help students understand their financial obligations under the CSLP.
In 2014, ESDC established a statement of work for the service provider that specified that students must have support throughout the loan process so that they can make sound financial decisions.
The initial plan was to provide support starting in April 2018, but the implementation date was postponed the first time to March 2019. The department later told the OAG that it was planning a gradual implementation up to 2021.
Why is there such a delay? Why is it taking seven years for this plan to be implemented?
:
Atiq, why don't I start?
We have been in discussion with the provinces around this idea, because were we to have mandatory training, it would require legislative change at the federal and provincial levels.
The U.S. is the jurisdiction we looked at that did put this in place. The academic literature around their program is that it has not resulted in better outcomes. It's an online program that everyone has to take. People figure out what the answers are or look them up online, and it doesn't appear to have a long-term impact.
We are working with the provinces, because they would probably be the front line delivering this, to test viable options for this type of training to determine what would actually work and improve outcomes. I think before recommending to the minister that we move to mandatory training, we would want to be very confident that there was a return on investment from it and that it wasn't just a burden on individuals without any improved results in the outcomes.
That's what we intend to test.
:
Thank you. That's perfect.
I think this question will go to ESDC, on the credit bureau situation, with regard to some borrowers having their credit report or credit number impacted. At first glance, for these individuals going through university, taking on some debt potentially in the form of these loans and then finding themselves in a very difficult situation, we know how important the credit score is when you go to the bank and purchase a house, a car, and so forth. How are we looking at that from a holistic point of view? How is ESDC looking at the credit aspect of it?
Anybody else can chime in on looking at that, and also from the Financial Consumer Agency standpoint in terms of the education process.
We don't want to penalize youth right off the bat, coming out of university or college and finding themselves in a difficult position.
:
This is my last question, Madam Chair, and this probably will take me to my time.
In reading the Auditor General's spring 2020 report on page 15, the recommendation at paragraph 2.48.... You know, we have a program in place. The program is there to encourage and ensure that individuals have access to education. One barometer for measuring that is looking at the participation rate and fundamentally asking this question: Does this program increase the participation rate of youth accessing post-secondary education? We know how important that is for human capital development, for an economy to move forward.
There is a department response to that.
Mr. Flack, could you comment or elaborate on this? There were departmental plans to start in-depth CESP evaluations in the spring of 2020 to assess the interaction of the CESP. I look forward to seeing this report—I believe it's for the spring of 2020—when it is done.
Could you comment on that? I think this is incredibly important.
:
Thank you, Madam Chair.
My next questions go to Ms. Robertson, from the Financial Consumer Agency of Canada.
Ms. Robertson, in your opening statement, you mentioned that the role of your agency is mainly to strengthen the financial literacy of Canadians through programs, tools and resources to help consumers make informed financial decisions. You believe that informed consumers are better protected consumers. I agree with you.
However, according to the conclusions in the report, 44% of the people who take out loans do not know that interest will start to accumulate as soon as they finish their studies. That is almost every second person. It is quite incredible, actually, that so many people who have taken out loans do not know that, even in the final year of their studies.
What do you feel about this observation that the Auditor General made?
:
Thank you for that question.
[English]
I agree that it is....
First, let me correct or add a nuance. Our mandate is to protect consumers, and we do it in two ways. Financial literacy is one way. It is a major focus of ours. Nobody knows better than we do the challenge of delivering an effective financial literacy program and actually achieving the outcomes that you say.
I would say that my reaction to the Auditor General's report is that it is a fair assessment and that it points us in the direction of the work that needs to be done. It's, quite honestly, not an unusual outcome at this stage, but we are finding over time, as I say, through our research and experimentation, more and more effective ways to try to improve those results.
:
Thank you for those clarifications, Ms. Robertson.
We sense the goodwill on your side in terms of the recommendations and about the work that remains to be done and the improvements that need to be made. In November 2019, a virtual repayment counsellor service was launched online. The service provided the people who had entered into loans, the borrowers, that is, with the information they needed on their student loans, including, for example, the repayment options likely to help them.
Since that virtual service was launched, have you gathered any data about its use? Have any adjustments been made? Can you tell us more about it?
:
Thank you for those clarifications, Ms. Robertson.
What tools would you like to have at your disposal and that could be given to Employment and Social Development Canada in order to improve financial literacy, aside, of course, from mandatory training and a virtual service centre?
The report by the Auditor General of Canada is actually quite eloquent. As I mentioned, about one person in two does not know that they will be starting to pay interest on their loans as soon as they finish their studies. So I am trying to find an effective way of informing people. I know that people do not always read what is written at the bottom of a contract in fine print, but the fact remains that they are entering into a contract for a loan. That is a serious matter. It can have consequences on their lives.
:
Thank you. I'll end this session by saying that I'm still very uncomfortable about all the time and energy we have for means testing and putting individual onus on people without really thinking deeply about the systems—the wholly inadequate systems—that are currently in place to provide education for our workforce, which of course, is one of the key cornerstones of our economy.
We've heard students be categorized as consumers, and I would agree that the financialization, the privatization, the increasing capitalization of education tilts them in that direction. We've also heard a lot about financial literacy, but I'll put this question to Ms. Robertson, who I believe is in charge of this.
Given everything that we've heard in the report, Ms. Hogan states that it doesn't cover any assistance to students related to the pandemic; however, the pandemic is a compounding factor that has come into play and that will cause market conditions to worsen, thereby limiting the prospects of young adults.
For young people who are watching and who graduated into one of the worst and most precarious economies prior to COVID, knowing that COVID is going to be a compounding factor, if you were to give financial advice to people looking for secondary education, would you advise them even to pursue it, at this point?
:
Thank you. I will accept that because, of course, it was a rhetorical device that we use politically.
I'm going to say this to the committee: I'm still challenged by this. I challenge every person over 50 to think about what they paid in tuition, relative to their ability to earn through summer jobs and through immediate employment, relative to the cost of living that they had decades ago, and then compare it in real terms to today's economy.
I feel like this report, despite the many ways in which it's been explored today, still fails to answer the fundamental questions that young people are facing in this economy based on education.
Now I want to get to the end of the cycle of debt recovery, and I want to ask the question, through you, Madam Chair, and I put this in terms of the way people used to use bankruptcy to discharge their debt. What happens now after seven years when it's been written off, in as easy a way as possible to explain it?
This isn't to Ms. Robertson. This is to ESDC or whoever would be responsible for that.
:
Okay, colleagues, thank you very much for allowing for this quick little bit of committee business that we need to take care of before December 10th. We have three meetings left until the House rises for the Christmas break, and we still don't have anything scheduled for one of those meetings, the date that I just mentioned, December 10th.
In the proposed calendar, we had recommended studying either the report on respect in the workplace from the fall of 2019, or oversight of Government of Canada advertising from the spring of 2019. However, in discussions with the Treasury Board, the clerk has learned that they would not be available to appear on December 10, so I'm wondering if the committee wishes to move forward with a study on respect in the workplace on December 10.
If you have any thoughts on that, please raise your hand.
I see Mr. Blanchette-Jocas.
:
Great. Thank you so much for that. I know it's a second part of a study that we'd already embarked on, so we are hopeful that we won't be taking our members' time for questions.
With no further discussion, next Tuesday, December 8, the committee will meet in camera to study draft reports, and you will be receiving these drafts by Friday so that you can prepare for the meeting.
With that, is it the will of the committee to adjourn the meeting? I see thumbs up again.
Thank you very much, colleagues. It was a great meeting. Enjoy the rest of your day.
The meeting is adjourned.