August 30, 2015 8:10 pm
Updated: August 30, 2015 8:13 pm

Canada Student Loans program to ramp up collection efforts, documents show

Hundreds of thousands of university and college students walking onto campuses this week with help from federal loans could find themselves targeted harder than ever to repay billions of dollars in loans and grants.

Christopher Furlong/Getty Images
A A

OTTAWA – Hundreds of thousands of university and college students walking onto campuses this week with help from federal loans could find themselves targeted harder than ever to repay billions of dollars in loans and grants.

Employment and Social Development Canada, which oversees the Canada Student Loans program, has set more aggressive collection targets after feeling pressure from its political masters to stem the rising amount of student debt the government must write off each year, an amount that topped $300 million just two years ago.

Story continues below
Global News

The push to increase collection results — and the detailed work plan to do so — are outlined in internal government documents from last fall.

READ MORE: Half of post-secondary students worried about debt: poll

The government annually has to write off some of the $16 billion owing in student loans for a number of reasons: a debtor may file for bankruptcy, the debt itself passes a six-year legal limit on collection, or the debtor can’t be found.

The amount of writeoffs were high enough that the Conservative government wanted ESDC to “improve recoveries and reduce the writeoff” of loans, the then-deputy minister at ESDC wrote to his counterpart at the Canada Revenue Agency in an October 2014 letter.

The Canada Revenue Agency is responsible for collecting loans in default and can do so by withholding income tax refunds to cover the outstanding amount, or referring cases to the attorney general for legal action, which could lead to garnisheeing wages or seizing assets.

The letter from then-deputy minister Ian Shugart asked the CRA for a more detailed plan to improve collection and “reassure my minister that all reasonable efforts are being made to increase recoveries and reduce (loan) writeoff amounts.”

WATCH: Food banks becoming a growing need for students

A Nov. 17, 2014, briefing note to CRA commissioner Andrew Treusch said that in 2012-2013, 162,000 borrowers had their debts written off for a combined value of $308 million. About 90 per cent of those debts had passed the six-year legal statute for collection, mainly because the borrowers couldn’t be located, the briefing note said.

The reason? Many of those files had out-of-date contact information and the CRA wasn’t allowed to ask other departments for help because of privacy laws.

Treusch’s response to Shugart’s letter noted another part of the problem was that ESDC’s repayment assistance plan was working too well. The assistance plan, along with other changes, meant that default rates had dropped — to 13 per cent in 2012-13 from 28 per cent in 2003-04 — and collection rates had gone up — the CRA collected more than $198 million in 2013-2014, up 4.5 per cent from the previous fiscal year.

A copy of the letter and the associated briefing note were obtained by The Canadian Press under the Access to Information Act.

The decline in the number of defaults has meant the remaining debts are for borrowers who are unwilling to pay, can’t be located, or aren’t interested in repayment assistance programs, said CRA spokesman Philippe Brideau. Collecting these debts, he said, has been more time consuming and costly than anticipated.

The two departments are now sharing information more freely, and have had several executive meetings to work on collecting outstanding debts and “preventing abuse” in the system, said Marie-France Faucher, a spokeswoman for ESDC. Faucher said ESDC has also set “more aggressive targets” for collection as part of the strategy.

To meet those targets, the CRA can now request information directly from borrowers, rather than having to ask ESDC officials to do so, and officials from the two departments have met regularly to figure out how things can be improved, Faucher said.

The head of one of the country’s largest post-secondary student associations said the documents suggest the federal government appears more interested in image control than dealing with the issue of student debt.

“We’re seeing a government that is more concerned about the public image that comes with these numbers rather than the reality that perhaps these numbers are indicative of a pretty big crisis that needs immediate address,” said Bilan Arte, national chairperson for the Canadian Federation of Students.

© 2015 The Canadian Press

Report an error

Comments

Global News