Debates of Sept. 25th, 1998

Canadian Student Loans

[John Richardson, Liberal, Perth—Middlesex, ON]

Mr. Speaker, I rise on the occasion to debate the motion brought before the House by the hon. member for Vancouver East.

The hon. member is asking for substantial changes to the way the government supports post-secondary education. With all due respect, I do not think the hon. member has done her homework before presenting her motion. I will address her points individually.

The first point is proposed changes to the Canada student loans program. The hon. member says the government should reverse the privatization of Canada student loans.

The government has stressed from day one that partnerships are the key to ensuring strong economic and social provisions that will serve Canadians. We still believe that. As for the Canadian student loans program, we can go back to its inception in 1964 and find that the government of the day worked with private sector lenders to finance the Canadian student loans program. That is hardly a radical concept.

Prior to 1995 the Canadian student loans program provided students with financial assistance in the form of 100% government guaranteed loans from private sector lenders. These lenders financed and distributed the loans and were responsible for servicing and collecting them.

In theory this seems like a good system but in practice there was little incentive for lenders to maintain loans in good standing, to prevent defaults or to provide quality service to students. The result was a significant cost to the government.

Hon. members will recall that in the early part of this decade Canadian taxpayers insisted that we get our financial house in order, which we have done. Part of that necessary and beneficial process was to negotiate new financing arrangements for the Canada student loans program, which we did.

New arrangements were introduced in 1995. Under these new arrangements lenders assume responsibility for servicing and collecting the loans.

In return for the risk of loans not being repaid, the Government of Canada pays lenders a premium of 5% of the loan's face value when it goes into repayment. This is a much more favourable arrangement for Canadian taxpayers.

Before these new arrangements were implemented, the Government of Canada held over $1 billion in loans for which it had reimbursed lenders under the guaranteed loans provision, a rather costly situation and one that Canadians would no longer tolerate.

The hon. member may ask how the system is an improvement. As a transition to risk shared system progresses, the cost of claims for guaranteeing loans will decrease dramatically while the cost of the risk premium will increase only moderately.

For example, payments against loan guarantees are expected to decline from $382 million in the fiscal year 1996-97 to a more reasonable $67 million for the year 2000-2001.

But during the same period it is estimated that the risk premium will increase only from $200,000 in 1996-97, the year after risk sharing was implemented, to $73 million in the year 2000-2001.

If we were to adopt the hon. member's motion and reverse this process the result would be forfeiture of the projected savings and there would be a significant increase in costs regarding claims for guaranteed loans. Surely that is not what the hon. member wants.

The government has signed contracts with lenders. Changing these arrangements would mean breaking contracts or renegotiating them, both of which could prove very costly.

The hon. member's motion also calls on the government to reject proposals for income contingent loan repayment. If the hon. member had done even preliminary research she would know that after discussions with our provincial partners it was agreed that a system of income contingent loan repayment was not feasible.

The idea of income contingent loan repayment came about following reforms to the Canadian student loans program and the coming into force of the Canadian Student Loans Financial Assistance Act in 1995.

In the 1997 budget we again expressed our willingness to discuss the possibility of an income contingency repayment with interested provinces. The bottom line is that only the province of Ontario expressed interest and potential lenders were, shall we say, less than enthusiastic about participating in such a scheme.

Ontario and the lenders have not been able to come to an agreement and the Ontario government said an ICR plan would not be introduced by the 1999 deadline it had set.

Last November a national stakeholders working session on the Canada student loans program determined that an ICR scheme was not viable so the government has no intention of implementing an ICR system at this time.

I point out, however, that the February 1998 federal budget is sensitive to a student borrower's income. The budget announced a package of new measures, including interest relief changes and new grants.

For example, eligibility for interest relief is based on income. The 1998 budget increased the threshold for students to qualify for interest relief, extended the interest relief period over a longer period of time and introduced debt reduction measures to assist students in severe financial hardship.

The hon. member for Vancouver East is calling on the government to implement a federal student grant program. Where was the hon. member during the budget speech debate? Is she not aware of the Canada millennium scholarship fund and the Canada study grants? Both have been topics for discussion in this House on a number of occasions and both are student grant programs.

The Canada millennium scholarship fund will start off with an endowment of $2.5 billion from the Government of Canada. Over 10 years scholarships will assist more than 100,000 low and middle income students annually. Grants will average $3,000 a year.

The new Canada study grants for students with children and other dependants which came into effect on August 15 will help over 25,000 students this year alone. Other Canada study grants have been in effect for some time and include grants for certain female doctorate candidates, high need, part time students and students with permanent disabilities. The government is backing its commitment to Canada study grants with an allocation of $100 million in the upcoming fiscal year.

I trust these federal student grant programs will satisfy the hon. member who is also calling on the government to establish accessibility to a new national standard for post-secondary education. Again, accessibility has been a fundamental principle of the Canadian student loans program since its inception in 1964. That is some record. Not only that, but both federal and provincial governments have stated that accessibility should be the key principle in any joint programs offering student loans.

I also point out that since post-secondary is the responsibility of both federal and provincial governments, the Government of Canada cannot unilaterally declare a national standard, if that is what the hon. member is suggesting.

I encourage all hon. members to give the new provisions designed to help post-secondary students an opportunity and see how effective they will be. It is far too early to start considering amendments to these programs, and for that reason I cannot support the hon. member's motion.

[Lynn Myers, Liberal, Waterloo—Wellington, ON]

Mr. Speaker, on behalf of the residents of Waterloo—Wellington I am very pleased to speak on this motion.

While I share the member's concern for students and their ability to finance higher education, I do not see how the proposals presented here in this motion would produce a better system than the one we now have.

For example, the motion calls on the government to reverse the privatization of the Canada student loans program. The implication is that we have changed from a publicly funded program to a private one, and yet the Canada student loans program has always been based on private capital. That has not changed so there is nothing to reverse.

The student loans program has been financed by private capital since it was first introduced in 1964. There were some changes made to the program in 1995 but the objective was not to privatize the plan. These changes were made in order to broaden risk sharing and to put more decision making into the hands of the private lenders. The changes were designed to improve the way the plan operated, not to privatize it.

When the plan was first introduced in 1964 the federal government provided guarantees to private sector lenders who in turn financed and dispersed loans, but this system gave little incentive to private lenders to maintain their loans in good standing, to prevent defaults or to form a close service relationship with the borrower. If the loans failed, the lender simply called in the guarantee from the Government of Canada.

This resulted in significant extra costs for the federal government under the original program design. In fact, by 1995 when changes were made the Government of Canada held over $1 billion in defaulted loans for which it had reimbursed lenders under the guarantee provisions of the plan.

Under the new risk sharing arrangement private lenders assume responsibility for both servicing and collecting the loans as well as dispersing them. As its contribution to the risk sharing approach, the federal government pays private lenders a premium of 5% of the face value of the loans when they go into repayment.

The government estimates that this risk sharing approach will significantly reduce the cost of the student loan program without reducing the money available to students from private lenders. Thus we have brought the federal government and private lenders more closely together in a public-private sector risk sharing approach to achieve a reasonable balance between costs to the federal government and loan availability.

The second part of the motion asks us to reject proposals for income contingent loan repayment plans. While it is true that the question of income contingent repayment plans was discussed with varying degrees of interest by other parties, including the provinces, discussions were broken off, and that is unfortunate.

The Government of Canada was alone with the Government of Ontario among the provinces in advocating this approach. The lenders and Ontario did not come to an agreement.

The motion proposes the implementation of a federal student grant program. The Canada millennium fund will go a long way toward providing financial assistance to improve access to education and these scholarships are to be based on need and on merit.

This $2.5 billion program will provide scholarships averaging $3,000 each to cover over 100,000 low and middle income students each year. Eligible individuals will be able to receive up to $15,000 over a maximum of four years toward undergraduate degrees, diplomas or certificates.

The budget also recognized the changing demographics of our student population as more and more of them who have been in the workforce return to their studies to upgrade their skills.

The budget introduced a new Canada study grant for students with children or other dependants. These grants came into effect August 1, 1998 and are expected to help over 25,000 students over the next year.

There is also the Canada education savings grant to help families save for their education, and the Government of Canada will give a grant of 20% on the first $2,000 invested in a registered education savings plan.

The motion proposes the establishment of accessibility as a new standard for post-secondary education. Accessibility can mean many things. In terms of program funding accessibility has been a fundamental principle of the Canada student loans program since it was introduced in 1964, and it remains so.

If the motion refers to accessibility to education we must remember there is a shared responsibility between the federal government and the provincial and territorial governments on matters related to higher education. Traditionally the operations of an education system are seen as outside the federal area of responsibility.

Any proposal to establish national standards for access to education would have to be considered within the wider and broad context of shared responsibility between the federal government and our provincial and territorial partners. It could not be unilaterally imposed by the federal government.

Thus we cannot support the motion for a number of reasons. First, the system has not been privatized as the motion implies. We have moved to a system of sharing the risks of the Canada student loans program with the private sector but we have not privatized the program. Any moves to change a risk sharing arrangement would cause potential extra costs to the Government of Canada and would upset the existing program.

Second, the Government of Canada has already committed $2.5 billion to the Canada millennium scholarship fund which will provide students with financial support. We do not believe it is prudent to add further to our grant programs at this time.

Third, accessibility is already a fundamental principle of the Canada student loans program and will remain so. Issues of accessibility to education in the operational sense are matters for discussion at the provincial and territorial government levels. The Government of Canada believes in a partnership approach to policy development and has no intention of formulating and

or imposing any national accessibility standards in this regard.

We do not believe the proposals presented in the motion are necessary, nor would they improve the existing system in support of Canadian students. While the government is always willing to listen as always to constructive advice and to make helpful changes, we are not persuaded in this instance that the actions proposed in this private member's motion will provide the kind of result needed. It is for these reasons that I ask that we oppose the motion.

[Angela Vautour, NDP, Beauséjour—Petitcodiac, NB]

Mr. Speaker, the Liberal government has said in the throne Sseech and the budget that it was a government for youth. It even announced the millennium scholarship fund for students.

Before going any further, I must explain how this government is really helping today's young people. First, the Liberal government has cut $1.5 billion from federal funding to education via transfer payments to the provinces. Over the past ten years, tuition fees have increased by 240%. Last year, the increase nation-wide was 12%, seven times higher than the rise in the inflation rate.

The average student debt load is $25,000, compared to the 1993 level of $13,000 when the Liberals came in. There are even students in my riding with debt loads of over $50,000.

Student bankruptcies among those with loans have also attained record levels, with a 700% increase since 1989.

Thanks to the Liberal government, there is another factor contributing to the debt load of our young people: poverty. This government continues to impoverish the parents of these young people who end up at the mercy of the banks to finance their post-secondary education. We must not forget either the famous millennium fund, which is contributing to the debt load of thousands of young people throughout this fine country and will help 7% of the country's students.

Despite the increased assistance to students announced in the throne speech and in the budget, the situation of thousands of students is in fact very sad. The intent of the motion is to rectify this injustice, to underscore the hypocrisy of the Liberals and to clearly establish a link between the attempt to privatize post-secondary education and the heightened despair of the young at finding themselves unemployed, and some of them even in a state of poverty at the end of their studies.

The Liberal strategy has undermined public funding of post-secondary education to the point where it is now completely in the hands of the private sector. With this motion, the New Democrats are continuing to try to force the Liberal government to acknowledge that students are critically in debt.

We want the government to listen to what they are saying. We want members to defend public education and say that stronger measures must be taken to reduce the student debt load.

We must keep a close eye on the Liberal government. One would want to think that the government actually cares for our young people, for the ones who will be running this country sometime in the near future, but let us not be mistaken. The government is very clear: profits first, students' future later, much later.

By introducing this motion today, the NDP wants to make it very clear that it resolutely defends our public education system. We in the NDP will not let the federal government forget the debts that students face and the crises these debts provoke.

A number of surveys were carried out in 1997. In one survey done in the maritimes, high school students were asked why they were not going to university. Forty per cent of them said they were not going on to university because they simply could not afford it.

In 1995, the Liberal government gave financial institutions greater responsibility over financial assistance to students. Until then, although they were assessed by the banks, student loans were fully guaranteed by the government.

In the last budget, the federal government announced another giant step towards privatization. Buried deep within the budget legislation is a provision giving banks greater authority to turn down student loans. This provision allows cabinet, outside of the scrutiny of the House, to decide which students do not deserve loans. The implications of this are staggering.

Instead of creating student loans programs or millennium funds, which duplicate existing scholarship programs and are of no assistance to students in need, we have on several occasions asked the government, and we will continue to do so, to take measures that will reduce student debts, rather than defer them.

By the time the millennium fund is established in the year 2000, $3.1 billion will have been cut from post-secondary education. At about $250 million a year for 10 years, the millennium fund will not even come close to compensating what we have lost as a result of this Liberal government's policies.

Today's motion calls on the government to promote public education and restore the $550 million that was cut from this year's budget.

We in the NDP are asking the federal government to create, in co-operation with the provinces, a national grant program for first and second year students. We have had enough of the kind of unilateral actions we have seen in this House with regard to post-secondary education. The millennium fund was established without any consultations with the provinces and other stakeholders. It was an arbitrary measure that was taken by the government with no consultation and no information provided.

We believe that a national grant program has to be established within the context of a new federalism in which the provinces are active participants. The federal government must take the lead in establishing accessibility as a new national standard. The issue of accessibility must be tied to the federal government's financial contribution and payments to the provinces. This is what we need to do in Canada, and what the Liberal government needs to do.

It must also be kept in mind that this is a fine country we live in, but there is something increasingly unfortunate happening to that fine country, as it becomes very clear that there are two systems of post-secondary education. Perhaps, in fact, there is actually only one, a system for young people who can afford post-secondary education, or whose parents can. This must stop.

Too many young people are without access to post-secondary education, and this causes social problems, which result in additional costs to government and to the taxpayers of this country. Steps must be taken today to put an end to this vicious circle, which ends up costing the taxpayer very dearly and is highly unfair to families who need help if their children are to gain access to education, good jobs and success in life. Unfortunately, governments are continuing to present policies that are harmful to our young people.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I am glad to join the debate on the motion.

The idea of post-secondary education has come up a number of times in the House. To listen to the various parties one would think it was an issue of great concern but in actual fact the track record has been that the Liberal government has been cutting funding for post-secondary education in a significant way ever since it has had the power to do so. Since 1995, $1.5 billion has been removed from federal funding to post-secondary education. These are startling figures.

The motion as put forward by the member for Vancouver East tries to remedy the problem. It tries to say something about access to funding for post-secondary education for the many students who need it and who are not getting it.

Virtually every study emphasizes the need for a highly skilled workforce and more education. We are hearing the point made over and over again that grade 12 is not enough any more. At least one post-secondary degree is needed to make it in the world of work today. When the public schools act came into place in the 1930s, grade 12 was adequate. That is why it was decided that it should be freely accessible to everyone who wanted it and needed it. Students were strongly encouraged to stay in school to at least get their grade 12.

The facts have changed. All the experts are telling us 15 years to 17 years of education is the minimum. Although I understand why the motion was put forward and I believe in it, it does not go far enough. Our caucus is calling for free tuition. I believe that we should join the 27 countries in the world that already provide education free of charge to all the students who have hopes, ambitions or aspirations to join the workforce of the 20th century with the tools that they need.

Only 15% of students actually graduate; 15% of our youth are getting the education they need. What we are hearing is that many more students would take part in post-secondary education were it not for the insurmountable barrier of access to affordable loans so that they can follow through with their dreams and ambitions.

In a 1997 survey of high school students in the maritimes, 40% of the students interviewed not going to university said they were not going because they could not afford it. They simply could not get the wherewithal to go to school.

The average student debt in the country is $25,000. That is up from a $13,000 average since 1993 when the Liberals took power. The average debt in 1993 was $13,000; today the average debt is $25,000. It is not tolerable and it is inconsistent with what we know about the need for access to post-secondary education.

Bankruptcies for students who are trying to pay off student loans are at record levels. They have increased by 700% since 1989. The number of students who are struggling to repay student loans and have been forced into bankruptcy has increased 700% since 1989, figures that we should be shocked at.

Currently 130,000 students are in default on student loans. This is not because of a lack of will or because they are charlatans or they are trying to defraud the system. Simply the structure of the system is such that it is not possible for them to get the education they need and make good on their loans.

It is easy to see why. Over the last 10 years tuition fees have climbed by 240%. When $1.5 billion in federal funding has been cut from post-secondary education, it is not hard to see why tuition fees had to go up. It is a natural consequence of starving our post-secondary institutions.

We are going in the direction of whole costing our tuition to where all the cost of tuition would be borne by the student. It was never the idea when we embraced the idea of accessible post-secondary education for it to be to the point where tuition fees almost have to match the whole cost of education. It is completely 180 degrees opposite from what most Canadians would embrace. This is the reason that we have to start looking at broadening the public schools act to include post-secondary education.

Maybe we could say that the first degree would be free of charge to students. It sounds like a radical idea but we have to start seeding that idea today and then find a way to make it happen and bring it to fruition. If we do not start talking about it now, it simply is not going to happen.

I would like to point to the example of the country of Ireland, my homeland. At a certain point in recent history, it was very slow to attract investment and have job opportunities for its young people.

The reason Ireland is enjoying a bit of an opportunity now and a bit of an increase in investment with high tech companies coming to that country is that it has the highest skilled workforce in terms of academic excellence in the world. Even though Ireland had high levels of unemployment, it never sacrificed the idea of post-secondary education for its people. Ireland knew it was building the base that would eventually attract the type of business and the type of investment that would ultimately lead it out of the economic slump it was in.

There is a real lesson to be learned there. We may say that we have high unemployment and that we need transition from school to work for young people. In actual fact, we need a more highly skilled workforce to where every student who has the ability can go forward as far as their ability will take them in a chosen field of study in post-secondary education.

The motion we are speaking to today, Motion No. 132, hopes to rectify this injustice but it is also really to highlight what can only be looked at as Liberal hypocrisy in this matter. To pretend that there is a real interest in post-secondary education and at the same time cut $1.5 billion out of funding for those institutions is such a glaring contradiction that more and more Canadians are starting to see how fundamentally wrong it is and how fundamentally wrong-headed it is.

It is said that poverty is a consequence of poor education and also a cause of poor education. We can bring this whole subject around to the issue of the war on poverty and the redistribution of wealth. One of the ways people who are stuck in the bottom echelons of the economic system can pull themselves up is to have the marketable skills that they need to go forward and follow their chosen field.

I am not saying that is the be all and end all. There are other aspects to post-secondary education. The universities do not have a monopoly on providing the skills people need.

I am a journeyman carpenter myself. I like to think of apprenticeship as legitimate post-secondary education. I would like to see any student loans initiative broadened to include labour market training as well as the more traditional B.A., Bachelor of Education or Bachelor of Science.

We know that the institutions are in crisis through lack of funding. They passed on that crisis to students. It is students who are now in a crisis. They need relief. They need a remedy and they need some support. That is why this motion would take us at least one step in the way to providing some satisfaction.

[The Acting Speaker (Mr. Morrison)]

The time provided for the consideration of Private Members' Business having now expired, the order is dropped to the bottom of the order of precedence on the order paper.

It being 2.45 p.m., the House stands adjourned until Monday next at 11 a.m.

(The House adjourned at 2.45 p.m.)