Evidence of meeting #208 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was payment.
A video is available from Parliament.
Director General, Service Delivery and Program Management, Department of Veterans Affairs
All of the qualifications in terms of the days are based on the CAF's superannuation numbers. It is CAF that actually calculates this. We are hoping that is not an issue, but we do direct anyone who is applying to go back to CAF to get those days.
Liberal
The Chair Liberal Wayne Easter
Okay. They actually could go back to CAF. That's clear.
Does anyone else have any questions on division 21?
Thanks very much, Ms. Douglas.
It was nice of you to bring the sunshine to Ottawa from Prince Edward Island.
Director General, Service Delivery and Program Management, Department of Veterans Affairs
Thank you.
Atiq Rahman Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
Thank you, Mr. Chair, for giving me the opportunity to come here today.
This division proposes amendments to the Canada Student Loans Act and Canada Student Financial Assistance Act to make Canada student loans interest-free during the six-month period between students leaving studies and when they go into repayment. The amendment will make those six months interest-free. This will help the students transition into the labour force more smoothly and help them manage their student debt. It will also bring Canada student loans in line with some of the provincial student loans programs in Canada, which also have six-month, interest-free grace periods.
Liberal
The Chair Liberal Wayne Easter
Okay, that's student loans.
We'll go with Ms. Rudd and then Mr. Dusseault.
Liberal
Kim Rudd Liberal Northumberland—Peterborough South, ON
Thank you.
For the alignment of the policy for the industry grace period for that six months, it is British Columbia, Alberta, Manitoba, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island, but not Ontario. Just to be clear, I'm assuming that in Ontario students are paying interest during the initial six months.
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
It used to be interest-free, but the Government of Ontario has announced that they will reintroduce grace period interest.
Liberal
Kim Rudd Liberal Northumberland—Peterborough South, ON
It was interest-free and they have announced that it is now going to accumulate interest during that six-month period.
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
That is correct.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
Exactly to whom do students pay the interest on their debt?
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
Canada student loans are delivered by a third party service provider, but the Government of Canada funds Canada student loans, so the interest is paid to the Government of Canada through the receiver general.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
So, under this program, students who have debt pay interest to the Government of Canada. Can you say who's funding the Government of Canada?
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
The overall interest payment does go to the Government of Canada. For example, for the 2017 school year, the overall interest revenue for the government was slightly over $700 million. The cost of the program, for providing all kinds of other supports was—with the net of the interest payments—slightly over $2 billion. Yes, the interest does come in as revenue, but at the same time there are other benefits, such as Canada student grants and repayment assistance plans for those who are having difficulty repaying their student loans. With all of those together, the government spends, in net, $2 billion a year.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I assume that $2 billion doesn't just reflect operating costs or all the costs of the Canadian government's grants and loans program.
Exactly what are the operating costs?
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
Delivering the program does have some operational costs, such as administrative costs. They're mostly the cost of Canada's student grants, the repayment assistance plan and loan forgiveness for students in certain disciplines. Those are the major costs of the program. There are some administrative costs, too, but I don't have the numbers with me. Those are not substantive in the amount of $2 billion that I referred to.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Don't you think it would be preferable to abolish interest on student loans instead of delaying payment for only the first six months? As a result, students would stop paying $700 million a year directly into the government's treasury.
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
The measure that has been announced is coupled with another measure that reduces the interest from prime plus 2.5% to prime for students who will be in repayment. It is completely interest-free during their studies. Interest will accumulate once they go into repayment.
As you know, for the two measures combined, the government will be investing about $1.7 billion over five years. Making it interest-free will definitely be quite an expensive undertaking. What has been done in recent years is the injection of targeted funding. Student grants have been increased and eligibility has been increased as well. That's where the funding has gone. As I said, providing interest-free loans will come at a substantially higher cost as well.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I have a final question. What percentage of student loans does interest represent?
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
Of the overall payment that students are making, what percentage is in interest...?
Can you repeat the question?
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
In fact, I'm talking about the interest rate. I don't know whether it's the same for all types of loans?
What's the average interest rate on student loans?
Director General, Canada Student Loans Program, Learning Branch, Department of Employment and Social Development
There are two kinds of interest rates for Canada student loans. Stepping back for a second, there are federal student loans, which are Canada student loans, and students also receive provincial student loans. Provinces determine the interest rates for the provincial portion. For Canada student loans, there are two interest rates. About 99% of our students use the variable rate, which is prime plus 2.5% now.
The budget just announced a reduction of the interest rate from prime plus 2.5% to prime, so that would be a reduction of 2.5%. Prime right now is 3.95%. The current rate is 6.45%. That will be reduced to 3.95% if the prime rate remains the same.
NDP