Public Accounts Committee on Dec. 1st, 2020

[Matthew Green, NDP, Hamilton Centre, ON]

Sorry. You're just repeating your original answer. The question was, do you believe from a policy perspective that the reason people defaulted 15 years ago is that when they had to declare bankruptcy because of the absolute burden of student debt, once they declared bankruptcy, that loan was forgiven.

Do I understand it correctly now, that even in bankruptcy, people still have to pay these loans?

[Graham Flack]

Atiq.

[Atiq Rahman]

Thank you.

The rule right now—and it's the Bankruptcy and Insolvency Act that has this provision—is that student loans are not discharged when someone declares bankruptcy. If they declare bankruptcy within seven years of leaving school, it's not discharged. If it's after seven years, it would be. In that sense, the loan survives bankruptcy.

[Matthew Green, NDP, Hamilton Centre, ON]

That's what I thought. I just want to put that out there to caution us from using these past retroactive successes, when really what it did back then was to force people to claim bankruptcy. Now they can't get out of it that way.

However, I want to talk about the reverse onus, which I think Mr. Flack brought up, which I do agree on. I want to state on the record now that if Mr. Blois, in bringing that up, wanted to work on a private member's bill that created an automatic opt-in for low-income folks, to reverse the onus to allow them to access this program, I would be happy to work alongside him and any members of government to make this happen for students.

Thank you.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Green.

We will now move to our next round of questioning, starting with Mr. Berthold for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Actually, Madam Chair, it's going to be me.

That's perfect. Thank you.

[The Chair, Conservative, Kelly Block]

Thank you, Mr. Lawrence.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Mr. Flack, I was just a bit challenged by one of your responses and the fact that you didn't seem to have any motivation to decrease the default rate. Maybe I heard you wrong. Maybe you could just clarify that quickly, if that's not correct.

[Graham Flack]

We have every motivation to reduce the default rate, and we have, by a point every year. It has gone from 28% default to, in the latest year, 8%.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay.

[Graham Flack]

What I was referring to was in terms of the repayment assistance program. That is a separate program that Parliament put in place to say, for individuals who have an income below that level, you should support them by covering their payments.

However, the default rate has come down, and continues to come down, and we are very focused on that.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

One of the things the Auditor General pointed out was that you were using a default rate of 9%, but in fact, there are much more fulsome numbers that I think are more useful to Parliament, and arguably, more predictive, such as a 14% non-payment rate.

Why don't you provide more non-payment rates? Do you agree with the AG's number of 14%?

[Graham Flack]

We do provide those rates. If you add them together, you do get that larger number, but we report in both the public accounts and the Canada student loans annual report on the value of the grants we provide, on the value of the repayment assistance program, on the default and on the cost of the default. All three of those are reported on.

Our point is merely that the repayment assistance program is a parliamentary decree that we shall provide benefits to people if they meet those conditions. That's what we do, which is why we do not characterize them as losses, nor do we think they're properly characterized as losses—

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay, I don't mean to cut you off but you have repeated that same line several times and my time is short.

The other number...I think there's a bit of an equity issue here. I think of many students who don't make access to the RAP program, some who are probably earning less than $25,000 and are still paying off their student loans diligently. The number I would like to know is the following. What is the percentage of total student loans that are completely repaid without any assistance from RAP or similar programs?

What percentage of students are fully paying off their loans without any assistance from government?

[Graham Flack]

Atiq, do you have that number?

[Atiq Rahman]

We could get precise numbers but for example, eight per cent, as Graham mentioned, go into default. There are about 25% to 30% who end up using the repayment assistance plan. Roughly speaking, if you used that, the rest of them are paying off their loans without either defaulting or using the repayment assistance plan. We could get more precise numbers, for sure.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

In reality, then, we have more like 30% or 40% of students not repaying their debts fully, which I think is a substantial issue. Then we add that to the fact that the value of outstanding loans—this is not including the RAP program in default—was $2.3 billion. Just to give you context, that would pay for both the Canadian recovery sickness benefit and the Canadian recovery caregiving benefit.

In 2018 and 2019, the federal government wrote off $160 million in student debt as unrecoverable, despite the fact that legally they don't have to. Students are having enough of a time with COVID, but I want to understand, from an audit perspective, why are we writing this money off? Is there not a better way to do this?

I think this is to Mr. Hamilton if he's involved in collection, or to Mr. Flack, if he is better placed to answer, please jump in, but either one of you could answer.

[Bob Hamilton]

Perhaps I'll start and Graham may want to add. In recovery, after the loan has not been paid for nine months, it comes to us and our job is to try to collect. We have various ways to go out and try to collect that money. If at the end of that process we just decide that it is not recoverable for one reason or another—bankruptcy, you name the circumstances—then we recommend to ESDC that the loan be written off. Then there's a process that follows at ESDC and ultimately at Treasury Board.

I'll ask Graham if he wants to add to that.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Hamilton. I'm afraid Mr. Lawrence's time is up. Perhaps this can back in another line of questioning back.

I will turn it over to Ms. Yip for five minutes.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you all for coming.

I would like to hear Mr. Flack's answer to the previous question.

[Graham Flack]

There's also a legal obligation once government debts have been unrecoverable for seven years that we move to write them off as well. The write-off approach is part of all of our collection activities. Where benefits are provided and they're not ultimately recoverable by individuals, an analysis is made of the recoverability after those efforts are made. When they aren't, we are obliged to write those off. We do report those to the Treasury Board and they represent, as a percentage of the total value of the student loan account...Mark, is it about one per cent? Is that right?

[Mark Perlman, Chief Financial Officer and Senior Assistant Deputy Minister, Department of Employment and Social Development]

Yes, it's hovering about the 1% rate.

[Graham Flack]

It's been a little lower over the last two years, but it's been pretty constant over time that 1% of total value of the book would be written off in any given year.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

The OAG found that ESDC did not offer enough tools to help students understand their financial obligations under the CSLP.

In 2014, ESDC established a statement of work for the service provider that specified that students must have support throughout the loan process so that they can make sound financial decisions.

The initial plan was to provide support starting in April 2018, but the implementation date was postponed the first time to March 2019. The department later told the OAG that it was planning a gradual implementation up to 2021.

Why is there such a delay? Why is it taking seven years for this plan to be implemented?

[Graham Flack]

Atiq, you've been managing the project. Do you want to give the update on what it involved?