Finance Committee on May 28th, 2019

[The Chair, Liberal, Wayne Easter]

I'll call the meeting to order. As everyone knows, we're still doing Bill C-97 and our continuation of clause-by-clause. We ended yesterday by finishing up with division 20.

We'll start with division 21. We have a witness here from Veterans Affairs. Faith McIntyre is the Acting Assistant Deputy Minister of Strategic Policy with VAC. This relates to the Veterans Well-being Act.

If there are any questions on division 21 in clauses 318 to 322, we're open to that. I see none and there are no amendments in this section. Are we in agreement to carry clauses 318 to 322 on division?

(Clauses 318 to 322 inclusive agreed to on division)

You get off easy, Faith.

(On clause 323)

Starting with division 22, we have witnesses here from ESDC: Milena Gulia, Director of Policy and Research, Canada Student Loans Program; and Rachel Torrie, Senior Analyst, Canada Student Loans Program.

If there are any questions for officials, we're open to that.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Before we start examining this section, I first have a question in order to clarify something. Could someone explain the difference between the Canada Student Loans Act and the Canada Student Financial Assistance Act, so that members of the committee are aware? Essentially, the proposal is that the same changes should apply to both acts. I would like to know the difference between the two.

[Milena Gulia, Director, Policy and Research, Canada Student Loans Program, Department of Employment and Social Development]

Thank you very much, Mr. Dusseault.

I can explain that.

As you can imagine, the Canada student loans program has been in operation since the 1960s. Over the course of its evolution, we have introduced various changes along the way.

We have two pieces of legislation that cover off different loan regimes. For example, under the Canada Student Financial Assistance Act, we cover borrowers who came under our direct lending regime that was introduced in 2000. The reason why we have two pieces of legislation is to cover off any of those remaining. They're quite small in number, but nonetheless, this covers off any remaining loans that still fall under the previous regime.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You say that a small number of students come under the previous scheme. I suppose that very few, if any, students under the previous scheme will finish their studies after this bill is passed.

[Milena Gulia]

It is a very small number.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay. Thank you.

[The Chair, Liberal, Wayne Easter]

If there are no other questions for officials to start off, we'll turn to amendment NDP-28.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

My first amendment in this section is similar to the next one. It follows up on testimony we have heard about the proposal for loans only to be subject to interest six months after students have completed their studies.

We have heard that interest on student loans generates $700 million per year for the country’s coffers. That is far beyond the cost of the program. Simply put, the government is getting rich at the expense of students. That seems to me to be what we can deduce from this.

Students have taken on debt in order to be able to finish their studies. The cost of the studies is too high, so they have to go into debt in order to be able to finish them. The Government of Canada is getting rich at their expense. It would perhaps be to their advantage to put that money somewhere else. Those $700 million could help them to buy a house, for example, to look after their needs, to have children, or to improve their professional skills. In our opinion, those $700 million should stay in the pockets of the former students.

We are proposing that student loans be interest-free for borrowers. That is our proposal. Why limit the interest exemption to six months when it could apply to the entire loan in the future?

That is my proposal, Mr. Chair. I hope that you will find it to be in order and that you will accept it.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

I just need clarification because this amendment requires a monetary adjustment to the BIA.

Is it in order? My understanding is that this amendment would require no interest to be paid on the Canada student loans. Is it in order or out of order?

[The Chair, Liberal, Wayne Easter]

I'll ask the legislative clerk to explain. You're wondering if it really requires a royal recommendation.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Yes.

[Jacques Maziade, Legislative Clerk]

This amendment doesn't need a royal recommendation because it's less money coming into the consolidated revenue fund. It's outstanding.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you for that clarification.

The BIA legislation that we put in place following on budget 2016 greatly increased the Canada student grants. The BIA legislation takes a number of steps to make student loans more affordable for Canadian students coast to coast. It's an approximately $1.7-billion investment expenditure to reduce the cost of student loans for students. We've done a lot on that front and we continue to do a lot.

With that, I'll be rejecting this amendment brought forward by Mr. Dusseault.

For example, we brought in a measure to help students, so they didn't have to pay back their student loans until they reached an income of $25,000. To date, that has helped over 325,000 student borrowers who received that support. We are undertaking a number of tangible measures on that front.

[The Chair, Liberal, Wayne Easter]

Is there any further discussion?

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I want to ask officials what the impact of this measure would be, in dollar amounts.

[Milena Gulia]

I wouldn't be able to give you that assessment right at this moment. When you think about it, we are already asking, through the budget 2019 announcement, for $1.7 billion to cover the cost of reducing the interest rate, as well as the grace period. The bulk of that amount is for reducing the interest rate.

If you can look at it in terms of that volume of figure, you would see whatever additional amount beyond the $1.7 billion in order to reduce interest rates entirely. It would be a significant amount.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

It's been a while since I've been a student—in Canada, at least. Are students charged prime plus 2%?

[Milena Gulia]

For our floating rate, students are currently charged prime plus 2.5%. For the fixed rate, students are charged prime plus 5%.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Wow.

[Milena Gulia]

The majority of our students choose the floating rate.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

It's a wise decision, I would think.

[Milena Gulia]

Yes.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

It's prime plus 2.5% or, on the fixed, it's prime plus 5%. As interest rates have come down, it has obviously become cheaper to borrow. It would have been really expensive in the late 1990s to the 2000s.

[Milena Gulia]

It would have been, with whatever the prime rate was at that time.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

What's the default rate on student loans?