HUMA Committee Report
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The Honourable Jane Stewart, P.C., M.P. Dear Minister: I am writing to you regarding a roundtable meeting that was held by the Standing Committee on Human Resources Development and the Status of Persons with Disabilities on 13 June 2000. The purpose of this meeting was to explore the views of a number of stakeholders interested in short- and long-term issues pertaining to the management, administration and design of the Canada Student Loans Program (CSLP). This meeting also reflects our continued interest in this program and our desire to build on work previously undertaken by the Committee on this subject. The following identifies several issues and views presented during our roundtable meeting. Our roundtable participants included: Gerald Brown, Association of Canadian Community Colleges; Robert Best, Association of Universities and Colleges; Mark Kissel, Canadian Alliance of Student Associations; Judy Stymest, Canadian Association of Student Financial Administrators; David Robinson, Canadian Association of University Teachers; Michael Conlon, Canadian Federation of Students; Brad Wuetherick, Canadian Graduate Council; Tom Lumsden, Financial Arrangements Working Group; Paul Kitchin, National Association of Career Colleges, Frank Smith, National Education Association of Disabled Students; and Thomas Townsend and David Good from your Department. According to a representative of the Financial Arrangements Working Group, several lenders are not yet prepared to sign a draft agreement for the disbursement of student loans under the CSLP for the period 1 August 2000 to 28 February 2001. The Committee is concerned that no agreement has yet been reached and encourages you to instruct your officials to treat the outstanding concerns of lenders as a matter of utmost importance, so as to insure that an interim agreement is signed as quickly as possible. In our view, this initial step is critical in realizing everyone’s desire for uninterrupted delivery of the CSLP. Many witnesses expressed concern that the transition period preceding the full implementation of the direct financing regime may be fraught with confusion, especially for borrowers who have loan repayment obligations under the old and new systems (i.e. both risk-shared loans and direct loans). Like other roundtable participants, the Committee believes that a comprehensive communication strategy is essential in order to make a smooth transition to the direct delivery system. All stakeholders spoke of both their wish and their need to be kept fully informed throughout the transition period. Several roundtable participants also suggested that the additional program complexity associated with the transition to direct delivery might increase what was referred to as the "technical" default rate. Hence, as part of a comprehensive communication strategy your Department should ensure that information is readily available to those individuals whose loans become repayable during the transition period. In moving to a direct loan delivery system, the Committee is heartened to learn that your Department intends to take this opportunity to improve service delivery to borrowers. In particular, we were pleased to discover that Department staff will be available to advocate and intervene on behalf of borrowers who are experiencing difficulty with a service provider or a collection agency. The Committee also suggests that the statement of requirement currently being developed by your Department should incorporate clear and enforceable performance standards and requirements for information sharing. In terms of the latter, the Committee was reminded of the importance of having current information for making good policy decisions. The Committee also supports the call of some stakeholders for there to be a clear separation between program delivery and the formulation of program policy. Over the longer-term, several witnesses encouraged the federal government to continue to pursue a more simplified and harmonized nation-wide student loan system. Roundtable participants also identified a number of non-delivery issues and expressed the hope that the government would take this opportunity to revisit several important issues including, for example, the needs assessment used in determining student assistance, student debt and the official definition of default on student loans. As you know, current rules permit students to earn up to $600 (including scholarship and bursary income) after which their loan is decreased by 80% of any additional income. All the roundtable participants who addressed this issue thought that this income threshold should be increased, some suggesting a figure as high as $3,000. The Committee recommended in its December 1997 report Ensuring Access: Assistance for Post-secondary Students that students be allowed to earn at least $1,500 during the school year and that loans be reduced by 40% of any additional income. The Committee encourages the Minister to review the assessment of need under the CSLP, particularly with a view to increasing substantially the current income threshold. Student debt continues to be a serious problem, representing a real barrier to higher learning for some. Roundtable witnesses voiced frustration with the government’s failure to introduce the student debt reduction measure announced in the 1998 Budget, whereby the principal of a loan would be reduced if annual payments exceeded, on average, 15% of the individual’s income. Many witnesses expressed the need for HRDC to work with the Department of Finance to implement this measure, as promised two years ago. Since direct delivery does not have the same revenue raising objectives as the shared risk regime, some roundtable participants suggested that the government consider lowering the rate of interest on Canada student loans. This would reduce the cost of carrying student debt and contribute to an overall improvement in loan repayment. The Millennium Scholarship Fund was criticized as being an ineffective vehicle, in some instances, for reducing student debt, especially in Ontario and Nova Scotia. One witness characterized this situation as a revenue windfall for both provinces. Concern was also raised about the fact that this Fund is available only to undergraduates. Although recent federal measures to address student debt are beginning to help drive down the student loan default rate, that rate nevertheless remains high. One of reasons for this is thought to be that in Canada a loan is considered to be in default when a borrower does not make any payment for a period of 90 days. Most of our witnesses regarded this definition as inadequate and recommended a significant increase (e.g. 360 days) in the period referred to. The Committee was told that loans in the United States are not considered to be in default until no payment has been made for 270 days. In a related issue, a few witnesses expressed strong disagreement with the recent changes to the Bankruptcy and Insolvency Act that prevents an order of discharge from any debt arising from a Canada student loan for a period of ten years after the date on which the bankrupt ceased to be a full- or part-time student. A few witnesses expressed specific concern about financial assistance for two student sub-populations – part-time students and students with disabilities. The Committee was told that existing financial assistance measures for part-time students were "significantly problematic and inadequate" and in need of study in the short-term. With respect to students with disabilities, the Committee was reminded that two recommendations in its report Ensuring Access: Assistance for Post-secondary Students are still as relevant for disabled students today as they were then. These recommendations are that Canada Study Grants should not be treated as taxable income and that the government work with the provinces to ensure that the successor to the Vocational Rehabilitation of Disabled Persons Program provides the necessary support to enable individuals with disabilities to pursue post-secondary education and training and assist them in covering their disability-related costs that are without other support. It is the Committee’s hope that you will examine all the issues presented above and, to the greatest extent possible, incorporate the views expressed as you move toward implementing direct CSLP delivery and improving the vital support that this program provides to Canada’s post-secondary students. As the Committee intends to follow-up on these issues after the summer break, it would greatly appreciate receiving a response from you regarding the issues raised in this letter. The Committee also hopes to receive, in a timely manner, the information it requested from your officials during the roundtable meeting. Once again, the Committee would like to stress the importance of securing an interim agreement with lenders, since this step is critical in achieving uninterrupted delivery of the CSLP. The Committee looks forward to continuing its work with you and your officials on this very important policy matter.
Sincerely,
Peter Adams, MP |
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