Budget 2008: Student loan borrowers keep propping up loan program

With yesterday’s budget, the federal Conservatives have now put their own stamp on student aid in Canada by tweaking the Canada Student Loans Program (CSLP), sinking the Millennium Scholarship Foundation (MSF), and injecting millions into a restructured loan program. The only problem is, the money will be going right back into the very Ministry that has already proven itself to be inefficient and unresponsive to the needs of students.

In addition to the over $300 million in cash the CSLP will receive after the MSF dies, another $100 million will now be earmarked for an as yet undefined “modernization” strategy. Here, voters might ask this question: after dozens of meetings with post-secondary groups, and thousands of e-mails from Canadians across the country, why is it that the feds are still unable to define exactly what is wrong with the student loan program? In any event, insiders say that this is really a slush fund aimed at those provinces which still haven’t signed on to integrated loan programs — many still have concerns about how much flexibility they will lose if such agreements are signed with the federal government.

Equally concerning is the government’s new eligibility system for loans, which will see millions more in grants going to middle-income students, with fewer dollars flowing to lower-income students.

This is not exactly what the CSLP was envisioned to do, but in a seemingly unending election cycle, more cash for future Conservative voters and their parents just makes good political sense — or should we say, cents!

Another key initiative will be more than $20 million in cash for a shiny new CSLP website — which will largely do what the old one did: tell you what your sky-high balance is, how much interest you owe, and when your next payment is due.

Meanwhile, borrowers looking for a more responsive student loan system, complete with an Ombudsperson Office, can forget it. Even though the United States established one in 1998, Canadians will have to continue to rely on the Member of Parliament for escalated student loan disputes. This is a bitter pill for stakeholders, since an Ombudsperson would have been one of the easiest and least expensive initiatives the Conservatives could have implemented — making the system more transparent and accountable.

Those who will continue to escape accountability, however, include the dozen or more ruthless collection agencies commissioned to recoup millions in interest and principle on defaulted student loans — indeed, no new regulations are planned in the budget to address the activities of these frequently unscrupulous agencies, seeking to extract a few more dimes from borrowers.

But where will all the cash come from for all these new and expensive initiatives? After all, the Finance Minister himself has said these are difficult economic times.

Well, it will come in large part from struggling borrowers in repayment.

Currently, well over $300 million in interest is drained from the pockets of cash-strapped borrowers each year — about the same amount being dolled out by the now defunct Millennium Scholarship Foundation. In a true twist of fate, borrowers who graduate from post-secondary school and end up in low paying jobs also end up paying the most interest — often extending their repayment periods by several years just to stave off default.

And this isn’t pocket change we are talking about either. Consider this: a borrower with a loan of $40,000 dollars, paid back over ten years, can expect to pay over $18,000.00 in interest. If the budget had cut the interest rate by 2.5 per cent, it could have saved this borrower as much as $6,000 in interest. In turn, this borrower’s savings could have been invested in the Canadian economy, purchasing goods and services, or put towards the borrower’s principle loan balance.

Please forgive borrowers, too, for not jumping on the government’s new tax-free savings accounts — as studies already show they are saving less in RRSP contributions precisely because of mounting student loan debt.

Quite simply, student loan borrowers are a lucrative revenue source for the feds, and just like any other tax on the poor, the system appears willing to continue gouging Canadians for years to come.

So the next time you meet a student loan borrower paying 8.25 per cent in interest or more on their loan, thank them for subsidizing the existing loan system — they are doing it whether they can afford it or not.

Budget 2008: Student loan borrowers keep propping up loan program
By Julian Benedict