Mr. Speaker, I will try to be as brief as I can and I do thank the House for agreeing to extend my time.
The present student loans program is a program under which the federal government-for which one can read taxpayers-pays interest on loans negotiated by students at the banks. In 1991-92 the cost was around $465 million, less about $110 million recovered on defaulted loans. The program assisted about 235,000 students.
One of the improvements to the program which has been proposed by the Reform Party is the adoption of a repayment system similar to that already in place in Australia, Sweden and New Zealand. The repayment system would be income contingent and would work in conjunction with a more generous loan program.
Such a change would recognize the need by students to have funding available for their education, but it would also ensure that taxpayers were repaid at a future time at a rate dependent upon the earning power of the student.
A carefully instituted income contingent loan program would make university education more accessible. It would move more of the responsibility for the cost of university education on to the students themselves, albeit on a deferred basis.
I have met some students who feel that society should bear the entire burden of their education costs with no loans and no repayment ever required. It would be nice if it were as easy as writing a cheque, but reality is now dictating a more prudent approach.
For those members opposite who rolled their eyes skyward when I said that more responsibility for the cost of education should fall upon the students, I ask that they consider the ability of taxpayers to continue to foot the bill.
Two of the countries I mentioned which have instituted the income contingent loan program, Sweden and New Zealand, have faced debt crises within the last decade. We should talk about these things before we are also forced into a situation where a cash crisis makes us make hasty decisions.
I would like to quote from an editorial entitled: "The universities we deserve" which appeared in the Globe and Mail on July 27, 1993. It describes how an ICR loan program would work. To quote:
Every university student would be offered a government sponsored loan. These loans would be available not only to poor students, but to anyone who wants help supporting themselves through university. After graduation, the student would begin paying the loan back, with collection taking place through the income tax system. And here is the key to ICR: repayment is income contingent. Everyone would pay back a set percentage of income, not a set amount. Those making a higher income would have to pay their loans off sooner than those making a lower income who would pay it off over a longer period of time. Combined with greater freedom for universities in setting tuition, ICR loans would make it possible for universities to charge a realistic price for their services without harming accessibility.
It would in fact make it easier for some people to go to university, by giving loans to the middle class who are not now considered to be poor enough to merit a Canada student loan. And ICR recipients could rest assured that the government would not, the minute they graduated, be breathing down their necks for payment.
The current Canada student loan plan has a very high default rate. It is only available to people from low income families and has a tough repayment schedule regardless of post-graduation income. ICR would address these problems whilst also helping to deal with the funding crisis in the universities.
The general thrust of Bill C-28 is good but it would be even better with the incorporation of an aggressive income contingent repayment scheme. I hope that government members will support an amendment along these lines at some stage.
In 1991 the Smith Commission of Inquiry on Canadian University Education concluded that: "A preoccupation with underfunding pervades every campus-.The effect is extremely negative". Unfortunately, the solution to that funding problem is not going to come from the federal government. The deficit and debt burdens will prevent us from increasing allocations. Creative approaches are needed and Sweden, Australia and New Zealand have shown that income contingent repayment schemes can assist students and universities at a time when funding is a problem.
A spinoff benefit for taxpayers would be the knowledge that defaults would be all but eliminated. Loans would be repaid over time and in a manner sensitive to the long term earning ability of the student.
By 1992 defaults under the present Canada student loans program had reached almost one-third of the student loans which were at repayment stage. The value of defaults accumulated on the books since 1964 has reached almost $1 billion and there are significant costs to the taxpayers for the hiring of collection agencies to try to collect on these defaulted loans. The costs are currently reported to be in the range of 18 to 29 per cent of the loans recovered.
Enough is enough. Society is prepared to help students to pay for their education. In fact it wants to help students pay for their education, but some responsibility to repay those loans must be part of the contract. An income contingent repayment plan automatically deducting at source is the fairest and most efficient way to protect the interests of students, universities and taxpayers alike.
It is a fact that individuals with university degrees have a considerably larger lifetime income than those whose highest level of education is high school. In fairness to the taxpayers who helped them get this higher education, students should be prepared to begin repaying their loans as soon as their income permits. This might sometimes mean that loans would not be fully repaid until students were into their 30s or even early 40s, but at least there would be assurance of eventual repayment without the need for collection agencies.
One practical problem that must be overcome is the actual funding of an ICR program. Our cash strapped finance minister is not in any position to raise additional revenues or increase deficits, even for such a commendable cause. We again need to look for alternatives.
We could continue to try to raise the necessary money through the commercial banks of course. Alternatively the lending program could raise funds through the issue of bonds. A stock exchange market for second-hand bonds could be subsequently developed, similar to the system used by the Student Loan Marketing Association of "Sallie Maes" in the United States.
What an opportunity for parents, to invest in bonds which would be used to fund income contingent loan programs for students, an investment in the future with the knowledge that repayment would occur through automatic deductions at source. Students applying for loans would of course have to supply their social insurance numbers and their loan contracts would have to be registered with Revenue Canada.
The ICR system is supported by the Association of Universities and Colleges of Canada. The system would remove the present interest exemption during attendance at college and university. This would result in worthwhile savings to the
taxpayers without having any significant effect on student loan repayments.
In 1987-88 the interest payments by government for students still at college amounted to over $150 million and collection costs that year were almost $11 million. The cost of exempted interest payments and collection procedures falls directly on to the taxpayers, but two-thirds of those taxpayers do not have post-secondary credentials. In other words, the present system places an unfair proportion of the cost of the present student loans program on a segment of taxpayers who receive no benefit in return for their generosity. It only seems fair that students who benefit should ultimately be responsible for the cost of the assistance they receive from the taxpayers.
Subsidies in our society are usually justified on the basis of a social benefit of some sort, but in the case of student loans the recipient can expect to receive significant long term private benefits. While these private benefits are accruing the present loan subsidies represent a transfer of income from taxpayers who do not use higher education services for their families.
The sighs and eye rolling on the opposite side of the House may be reaching epidemic proportions so I feel I should give an example of an income contingent loan payment plan.
Let us say that when a student first graduates he or she does not immediately secure a long term job but settles for a temporary job at $12,000 a year, quite a low salary. The payments on the student loan would be 3 per cent of earnings, or $360 a year. That is just $30 a month, hardly likely to cause hardship.
Let us say that as time passes the student secures a job earning $50,000 a year. The payments could increase to maybe 5 per cent per annum, or $2,500 per year. It is not an excessive amount but enough to get previous student loans paid off fairly quickly.
If the student became unemployed, then payments would be deferred until his or her annual income rose above the preset threshold once again.
Many students who oppose the ICR program do so because they do not like the idea that responsibility for loans should be more firmly placed upon individual students. They feel that society should pay the full shot. Unfortunately the reality is that the money is not available and unless we introduce programs like income contingent loans, there will be a continuing deterioration in funding levels for higher education.
I might suggest that if the government wants to free up a little more money it would be well advised to take note of an item sent to me by Evelyn Leeburn of North Vancouver. It is a newspaper clipping which reads: "Two Clayoquot protesters themselves facing contempt charges have won a $16,000 Canada Council grant to do a documentary on women at the anti-logging blockades". What sort of nonsense is this? This money would be much better spent on higher education.
In summary, I would like to say that Bill C-28 does improve the present situation, even though it fails to show strong and decisive leadership in terms of ICR loans. I give the government credit for including clause 15, part (o) of the regulations, which provides for some experimentation with ICR. We in Reform hope that this will lead to a much larger scale ICR program in due course.