Mr. Speaker, I am happy to have the opportunity to speak on a bill that concerns the future of young Canadians in our country.
I commend the member for Halifax for encouraging us to revisit the timelines and procedures we have in place for the repayment of Canada student loans by those facing financial difficulties.
It seems that the bill is asking us to take a very simple step. Currently, students or recent graduates who declare bankruptcy cannot discharge their Canada student loans for 10 years following their declarations. The bill requests that we change the 10 year period to a 2 year period. We can presume that the intention behind the bill is to ease the financial responsibilities of those who declare bankruptcy by discharging their student debt earlier.
Unfortunately, the issue is more complex than we might at first think. We will need to examine closely the repercussions of taking such a step.
Let me first acknowledge that students today are facing increased costs of post-secondary education and, as a result, increased debt loads. It is not easy for them to finance their education and that is where the Canada student loan program comes into play. Without these loans, many Canadian students would never make it to college or university. It is our way of levelling the playing field, of increasing access to post-secondary education for all Canadians regardless of their socio-economic status, their gender or their ethnic background. Everyone can apply and everyone is treated equally.
For most students, post-secondary education helps them develop the skills and experience they need to launch their careers and find employment. With this employment, they are able to pay back their student loans over time.
Some students, however, face financial difficulties and have problems meeting their loan repayment obligations. Between 1990 and 1997, for example, 53,000 students and recent graduates declared personal bankruptcy to discharge this obligation, at a cost to taxpayers of $445 million in defaulted federal student loans. That is an average of over 7,500 students and $63.5 million per year. Incidentally, that was when we last had the two year rule: after a two year waiting period following bankruptcy, student debt was automatically discharged.
Not surprisingly, the Government of Canada became concerned about the high number of bankruptcies taking place in the 1990s. We did not and we do not want young Canadians to make such a drastic move so early in their lives. They often do not realize the negative impact that declaring bankruptcy will have on their credit rating and their future financial and personal well-being.
In 1998 the Government of Canada decided to act. We brought in the Canadian opportunities strategy, which introduced new measures to help young Canadians manage their student debt. For the first time all students were eligible to get tax relief for interest payments on their student loans.
Interest relief was extended for a maximum of 30 months to up to 54 months during the first five years after leaving school. The measure provides students in financial difficulty with relief of loan payments. While on interest relief, students are not required to make any payments on their loans, of either principal or interest.
Students were able to extend their loan repayment period from 10 years to up to 15 years in order to lower their monthly loan payments to more manageable levels.
Debt reduction in repayment was introduced to provide students remaining in financial difficulty five years after leaving school with a reduction in loan principal of up to $10,000 or 50% of the loan principal, whichever was less.
These debt management measures were introduced in tandem with a change to the bankruptcy rule from two years to 10 years to help students manage their debt and provide an alternative to bankruptcy.
As a direct result, the number of student loan bankruptcies in defaults declined significantly. Between 1998 and 2000, only 5,945 borrowers declared bankruptcy, representing $42 million in federal student loans. This is less than half the average annual figures for the previous seven years.
As demonstrated by the Canadian opportunities strategy, we are doing much to support students as they work to repay their student loans. In doing so, we are also making sure that bankruptcy is absolutely the last option and one they will hopefully never have to take.
The 2003 federal budget announced further enhancements by extending eligibility for debt management measures to students who, despite their best efforts, found themselves in bankruptcy. As of May 11, 2004, students who declare bankruptcy may be eligible for both interest relief and debt reduction in repayment. In addition, new Canada student loans are available to students who declare bankruptcy while still in school so that they can finish their post-secondary studies and meet their obligations to repay outstanding student loans.
The 2004 federal budget further enhanced existing measures to provide even more support for borrowers who face financial difficulties. These include: increasing the amount of debt reduction available from $20,000 to $26,000; and increasing the income thresholds used to determine eligibility for interest relief by 5%.
If we are doing all of this to support Canadian students, why not go one step further and change the 10 year rule back to the 2 year rule that we had before 1998? It is for three very important reasons: we need to be fair; we need to be realistic; and we need, most of all, to be accountable.
First of all, we need to be fair to Canadian citizens. We are using taxpayer revenues to finance Canada student loans. Canadians are therefore investing in the future of their country by investing in the future of its young people. As investors, they have every right to expect that legally binding agreements will be respected and student loans will be repaid.
We need to be fair to other students by treating them equally and affording them all the same rights and responsibilities under the Canada student loans program. Canadian students have the right to apply for a student loan, but they also have the responsibility to pay back that loan, even when times get tough. We are responsible to them, but they are responsible to us.
We need to be fair to future students. The Canada student loans program has existed for 40 years. We must ensure that it remains an economically viable program for the next 40 years and beyond.
Our parents benefited from student loans and many of us have benefited from student loans. We must protect this program so that our children can also benefit. We cannot do that if the money loaned out today does not get paid tomorrow.