Madam Speaker, I am pleased to speak today on Bill C-28, the student financial assistance bill.
We Reformers understand that in order to sustain our standard of living the youth of Canada must be properly educated with the goal of becoming net contributors to Canadian society. Money wisely spent in this regard is an investment in the future. Our looming debt load and increasing numbers of students however have meant that for many years the funding of post-secondary education has suffered from less money going to more people.
Strains to the system are increasingly evident. Cuts to funding and overcrowding are diminishing the quality of education in Canada and increasing the costs of education to students. Yet these same students find themselves less able to pay back the money they owe because of the growing gap between what they learn in the school and what they need to know to find meaningful, well paid employment.
The less able they are to financially benefit from their schooling, the less able they are to pay back their loans, the less money there is in the pot for future educational requirements and the entire system spirals down toward new depths of mediocrity.
That is the present system of post-secondary education in this country. Obviously something needs to be done to address this problem. Is Bill C-28 an adequate response? My answer is only partially.
With apologies to friends in the medical community, I am going to use a medical analogy to describe our position with regard to this bill. When someone staggers into the emergency room of a hospital haemorrhaging all over the place, the first thing the staff has to do is deal with the immediate emergency, stanch the bleeding and stabilize the patient. The next thing which must be done is assess the reason for the damage and determine what if any long term treatment is needed to bring the patient back to full health. There is little point in doing one without the other.
The way I view this legislation is that the government is addressing the immediate emergency of post-secondary education but has failed to operate anything but a band-aid solution to what is really a more complicated problem requiring radical treatment.
While Bill C-28 offers short term relief to those hurting most from this system, it fails to treat the underlying problem. Therefore our support for Bill C-28 is qualified. As Reformers we want to offer as part of this debate the second half which is missing from this legislation, an alternative to a system which is demonstrably sick.
Before I put forth our position I would like to comment specifically on the positive and negative aspects of this legislation. On the plus side, Bill C-28 does offer a number of improvements to the old system and for that the government should be commended.
The increase in loan limits offers short term relief to students who have had to pay for increasing educational costs with a smaller purse.
The movement of responsibility for the collection of loans to the banks to decrease the default rate currently at 25 per cent and save the government considerable money, the revision of the eligibility criteria to emphasize academic results and the expansion of the assistance to apply to a broader range of educational institutions are all welcome changes and again I commend the government.
Finally, it has made some movement toward the area of an income contingent repayment system although it is far too timid in our opinion. I will return to that later.
To balance this assessment out, there are other parts of the legislation which are not so commendable to us as Reformers and in our opinion fail to serve the best interests of post-secondary students.
The government has not changed or harmonized the needs assessment criteria among the provinces. For example, students coming from the family farm may find themselves disqualified for assistance because the on-paper assets of the farm are deemed too high. The fact that these non-liquid book assets have nothing to do with the ability to individually finance one's education inherently discriminates against a large segment of our students.
This is further compounded by a reverse discrimination built in to the new grant program whereby only specially designated groups in our society will be eligible based on arbitrary non-financial criteria such as gender. We understand and agree with extra help for the disabled but surely a two-tier system of financial assistance is discriminating against those who lack the politically correct gender to qualify.
We also have serious problems with this legislation regarding the minister's discretionary powers. In many areas they have amounted to a blank cheque, specifically in clause 5 dealing with any future negotiated agreement with the lenders, and clause 15 which governs the regulations that flesh out the principles in the bill.
Since the upcoming negotiated agreement with the banks is fundamental to the whole issue of student financing-and I think the minister would agree this is really so-why are the conditions of this agreement not incorporated in the legislation so that Parliament can scrutinize and, if necessary, amend it?
With regard to the regulations, we would like the legislation to specifically mandate that they be referred to the House standing committee for review before coming into effect. Such a directive would rightly transfer power away from the department officials and toward the more accountable Parliament.
The Liberal red book section on parliamentary reform specifically states:
-a Liberal government will give MPs a greater role in drafting legislation through House of Commons committees. These committees will also be given greater influence over government expenditures.
Now here is a perfect opportunity for the minister to make good on his promise or conversely, demonstrate to the Canadian people the emptiness of those words.
These are the types of improvements we would like to see made to the bill at committee stage. We will certainly be working toward that end.
As Reformers we believe our role as an opposition party lies farther than just opposing everything the government proposes. We believe we have the responsibility to offer to the Canadian people a constructive alternative to the proposals put forth by the government and that is what we will be doing today. It is particularly important with regard to this bill since the government has failed to show long term leadership toward the issue of funding and providing post-secondary education in this country.
With the present system fiscal transfers under the established programs financing or EPF act have increased much more slowly than the rate of inflation during the 1980s. This is despite increased enrolment. Another flaw is that the federal government is unable to target its transfers specifically to education which means that the provinces have the ability to divert some of their funds to other social areas.
Since the federal government transfers money to the provinces based on population and not enrolment, what happens when a province's universities are in such demand that they attract large numbers of people from other parts of the country? They are penalized in essence for their success.
Such is the situation in Nova Scotia where there are as a proportion of the population more full time undergraduate and graduate students studying in its institutions than those of any other province, a whopping 54 per cent more than the Canadian average. Yet under the present EPF system this amounts to a financial penalty for building a high quality post-secondary education system that attracts out of province students. Where is the logic in that?
Given our fiscal reality it would be misleading to tell people we can fix the problem by pouring in more money we do not have. That is old style politics: promising the moon and offering no means to pay for it.
The public demand more from their representatives today. If we cannot promise to spend more, we can do better with what we are able to spend. This is where our proposal comes in, what we have called the advanced education voucher system.
Right now the federal government spends approximately $2 billion a year on transfers for post-secondary education. Under our proposal this amount would be divided into 650,000 vouchers of $3,000 each. These vouchers would take the form of grants to students which they could spend only on higher education anywhere in Canada. Students would turn over their vouchers to the colleges or universities in which they enrolled. The institutions would redeem the vouchers for cash from the federal government.
The reason for this reorganizing of federal funding for higher education is straightforward. Under our new system the effective choice and bargaining power of students will be increased because they will now have the power to spend their voucher where they can get accepted. Colleges and universities will be encouraged to compete for students in order to get the cash value represented by the voucher.
The focus of our institutions will shift from governments as a source of funding to the students who will now be bringing with them not only their tuitions of $2,000 or more but their vouchers worth another $3,000.
We believe the federal voucher system would work in the right direction by encouraging universities and colleges to compete for enrolment. This would set up incentives for universities to emphasize teaching and the other aspects of university life which attract students, such as the rate of employment for their recent graduates.
For those who may want to lament these proposed changes and the pressures they will place on our universities to compete, it is worthwhile to refer to a recent Globe and Mail editorial entitled: ``University heal thyself''.
While not recommending any particular solution, it very aptly presents the problems in our current system that our voucher system would address. The facts are that financial and other pressures are forcing our post-secondary institutions to review their mandates and in many cases work smarter with less money. Here is a quote from the Globe and Mail article:
Over the past generation Canadian universities have succeeded in being all things to all people. Governments financed the creation of new institutions and programs to serve a vastly expanded and more diverse clientele, all reaching for the middle class dream.
For the next generation, for financial and other reasons universities face a tougher job to choose between what they do well and what they do less well. They
will either have to make the changes themselves or allow these changes to be forced upon them by governments.
Increasingly, universities will have to be more inventive about carving out an area of expertise and delivering it in ways that are transparent to students, faculty and the public. If Canadian universities are to move beyond the rhetoric of excellence and quality in post-secondary education, they will have to become less homogeneous than in the past. Universities will also have to become more transparent in deciding what programs to save or drop in the name of quality.
Our voucher program changes the way funding is delivered to the universities and colleges and allows them more freedom to adapt themselves so as to meet these goals.
There is another immediate real world advantage of vouchers. Federal support for advanced education is in serious danger of being eroded down to almost nothing-and this may sound cynical but I must put it forward-because federal politicians derive few political rewards from providing it. They transfer the money to provincial politicians who then reap the political rewards of building campuses, providing programs and appointing their faithful to boards of governors. In today's age of austerity there are few powerful advocates in Ottawa compared to those who lobby for medical care, aboriginal land claim settlements, or subsidies to business.
At one stroke the advanced education voucher system would create a large and powerful political force for higher education at the federal level. This force would consist of students, parents, husbands and wives, all those who receive the vouchers and participate in decisions about how to use them. Advanced education could then compete on more equal terms for its proper share of what government could afford to spend.
That is our constructive alternative to the present system of funding post-secondary education, but this would only partially address the financial pressures of our students. We would also change the current financing system so that every student was eligible for loans under an income contingent repayment, or ICR, plan.
ICR is not a new concept. There are currently different elements of ICR implemented in three countries, as the minister pointed out, in Australia, New Zealand and Sweden. Simply put, it is a program which allows a student to take out a loan regardless of whether they are dependent on their parents. Students are not penalized on the basis of their parents' wealth or more accurately, middle class status.
Under the current system it is often those coming from the middle income level who find it most difficult to go to school. Their families do not have the funds to pay for the schooling directly, yet the government says that they are not poor enough to qualify for assistance.
Under the ICR plan everyone would be eligible because it would become the student's total responsibility to assume loan payments commencing when they graduated and had a job. Their repayment would be based on a flat percentage of what their salary happened to be.
Under one proposal, if the student had a job with an annual income of $10,000 to $12,000, then the loan payments would be approximately 3 per cent, or $350 a year. As an individual's income increased toward say, $50,000 the rate of pay back would increase 4 per cent and then 5 per cent until they were paying approximately $2,500 a year, until their debt was paid off.
With ICR, if the graduate became unemployed then the payments would be deferred until their annual income rose to exceed the set threshold. If they were unable to pay off the debt in 15 years, then the remaining sum would be forgiven. Also, if the graduate were to die or become permanently disabled, the debt would be forgiven. Since forgiven debts would have to be paid off somehow under ICR, those graduates with the higher income would be charged with an interest rate higher than the government's borrowing rate to offset the forgiven debts.
This system would eliminate the complicated, arbitrary and often uneven eligibility process for financial assistance across the country. ICR would not have any eligibility processes due to the fact that the payments would become the sole responsibility of the student during the 15 years following graduation.
The repayment schedule would eliminate the current situation of students with very low paying entry level jobs being forced into default simply because their loan repayment rates are too high for their salaries.
Under ICR the amounts of money they would pay would be determined by their annual income as determined from their tax return. This system however could only run smoothly if the ICR recipient had entered a proper and accurate income statement. Safeguards would have to be built into the system to prevent fraud or misuse of the funds borrowed.
How would we initially fund such a system, especially since the federal government's cupboard is bare? One way would be to raise funds through the current sources, the commercial banks.
Under the current system if a person defaulted on their loan then the bank would have to hire a private collection agency to collect the owed money. The collection costs were nearly $11 million in 1987-88. In the ICR system the lending program could be administered by an independent agency which could raise funds from the issue of bonds while a stock exchange for second-hand bonds, similar to the Student Loan Marketing Association in the U.S., could subsequently be developed.
Another government saving would be the significant reductions in write-offs and the new ability to charge compound interest according to the full duration of each loan.
With the ICR program it would be possible for the universities to become independent from the governments by allowing them the freedom to raise and set their tuition fees as they felt necessary. It makes sense that medical school tuition rates ought to be significantly higher than a post-graduate arts program, since a doctor's earning power is much greater. Therefore the medical school graduate ought to be able to afford a higher school debt load and loan repayment cost.
I realize that any increase in tuition fees to bring them more in line with the actual cost of education is bound to be met with howls of protest from certain areas. Student leaders in Canada have stridently opposed any increases as unfair to lower income students and a deterrent toward attending school.
However, we believe that under our ICR program the opposite would be the case. The argument of a deterrent factor simply fails to stand up to the facts. If these were the deterrents to schooling they claim they are, student leaders must have difficulty explaining why Canada with its fee structure has twice the percentage of university age people in school compared with France where fees are zero, or why the United States with the highest fees also has the highest percentage of its population in universities among the leading industrial countries.
Another criticism to this ICR proposal is that universities could poach each other's students especially when the market is so unstable. I would suggest this is not necessarily bad. If poaching took place, either by a university reducing its fees while keeping quality constant, or increasing its fees and offering more than a proportionate increase in quality via new courses, programs or facilities, the beneficiaries would only be the students in particular and our overall quality of post-secondary education in general.
These are the proposals we as Reformers would like to put forth as a creative alternative that would offer high quality, affordable, post-secondary education to our students.
Under Bill C-28 we may stabilize the patient and it is a slight improvement to the status quo, but that does not mean the patient is cured.
While for the benefit of our students in the system today we may support in principle the emergency procedures of this particular bill, we believe our responsibility goes much further. We owe our future students a better system than that which exists today, a better system that delivers an affordable, quality post-secondary education.
We believe these two goals can be achieved through our advanced education vouchers and an income contingent repayment plan. The options for our youth are either improving on a poor system or designing an entirely new system. As a long term policy we Reformers favour the latter.
