After a year long review, the Conservative government announced only administrative changes to the Canada Student Loans Program in the 2008/09 federal budget.
Although sources close to government expected an interest rate cut, the Conservative government did not set student loan interest at prime. The federal rate will remain 2.5 per cent above prime, unlike Nova Scotia and Alberta that have recently announced plans to lower their provincial student loan interest rate to either prime or below prime.
The 2008 budget included plans to reform the administration of student loans but did not provide many details.
Monte Solberg, Minister of Human Resources and Social Development Canada, said in November to expect major policy changes. The announcements came as a disappointment to student loan advocates who participated in this year’s review.
“The federal budget completely ignores the key issue of reducing sky-high interest rates on borrowers in repayment. Our interest rates remain amongst the highest in the G8,” said Julian Benedict, co-founder of the Coalition for Student Loan Fairness. “The plan also ignores Canadians’ call for a national student loan Ombudsperson Office.”
The government plans to implement a “new service delivery vision” for student loans and increase the ability of students to manage their loans online from initial application until final repayment. The government will spend $23 million over four years to achieve this. The goal is to create a national portal for student loans where students from any province can apply for their loans and upon graduation, students will be able to use the site as a “one-stop” service to repay and track their loans.
The government says that students who presently deal with multiple payment points, such as students who currently negotiate their loans directly with the banks, will be able to make one payment to the website. One of the findings of the year-long review was that the current system is too complicated and many students are facing difficulty navigating the direct loan programs.
“Given all the time they had since forming government, I expected something more substantial and meaningful that just some administrative tweaking,” said NDP post-secondary critic Denise Savoie. “We are looking at the budget, but the devil is in the details and this budget was short on those details.”
The only non-administrative tweaks that were announced were the decrease of the expected spousal contribution and the increase to the amount of loans given to part-time students. These changes will cost the government $26 million over four years to implement.
Part-time students will now be able to receive up to $10,000 a year in student loans to fund their studies and will no longer be required to make monthly interest payments on their loans while studying. The government says that only about 2000 part-time students currently receive loans and they hope by making the changes, more adults will enter into part-time studies.
The government plans to spend $76 million over four years to assist graduates experiencing difficulty repaying their student loans. The government did not provide any details of what this support will entail saying they need to negotiate agreements with the provinces. The government says that only 50 per cent of students who qualify for interest relief are actually receiving it due to the complicated application process. The primary goal of the changes is to negotiate agreements with the provinces, which will result in students most in need of repayment support being able to easily access new support programs. The government is looking to create a system which will allow students facing difficulty repaying their loans to set their maximum payment to a percentage of their income.
The federal student loan program has received considerable criticism in recent months stemming from media reports claiming that the system is “broken.” For instance, Maclean’sreported that two thirds of applicants are being denied the student loan disability assistance program even if they receive disability support from their provincial government.
Critics also drew attention to the program’s interest rates and alleged poor customer service and communication. Some borrowers have been forced to file freedom of information requests to get information about their own loans. Others brought complaints directly to their MPs after not being able to resolve them directly with the program. This has lead to critics calling for a student loan ombudsperson.
Solberg’s review was announced in the 2007 federal budget. Although critics feared that the scope was too narrow — addressing only bureaucratic efficiencies.
*-with a report from Erin Millar *