September is upon us and with that is the return to colleges and universities by thousands of Canadian students.
It also is the time they are reminded of their mounting student debts.
To understand how quickly these loans accumulate, we need some history regarding the program.
The Canada Student Loan Program was created in 1964. Between 1964 and 1995, loans were provided by financial institutions to post-secondary students who were approved to receive financial assistance.
The financial institutions also administered the loan repayment process.
In return, the Government of Canada guaranteed each Canada Student Loan that was issued by reimbursing the financial institution the full amount of loans that went into default.
On July 31, 2000, the risk-shared arrangement between the federal government and participating financial institutions came to an end. Ottawa now directly finances all new loans issued on or after Aug. 1, 2000.
Administration of Canada Student Loans is the responsibility of the National Student Loans Service Centre (NSLSC). Defaulted Canada Student Loans disbursed under this program now are collected by Canada Revenue Agency.
Confusing? Yes. But perhaps equally confusing is the number of programs to assist students who find themselves facing financial difficulty during repayment.
These include Interest Relief, Debt Reduction in Repayment, Revision of Terms, and the Permanent Disability Benefit.
Recently, the Vancouver-based Coalition for Student Loan Fairness released a powerful report outlining just how serious these debts are. Currently, Canadian students owe the federal government about $800 million in defaulted student loans.
The coalition says nearly $98 million of that amount is interest.
Under an Access to Information request, the group also has determined that Ottawa is spending more money collecting defaulted loans than ensuring its interest relief and debt reduction programs are accessible to students.
Clearly changes are needed to make the program more efficient.
In next week’s column, I will examine some of the recommendations made by the Coalition for Student Loan Fairness and share some of the examples I’ve encountered in my constituency offices.