Ottawa writing off $178M in student loans

OTTAWA – The federal government for the second year in a row is writing off millions in student loans it will never collect, this time to the tune of $178.4 million.

The money represents 32,554 loans that federal officials believe they will never be able to collect, either because a debtor may have filed for bankruptcy, the debt itself has passed a six-year legal limit on collection, or the debtor can’t be found.

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Last year, the government wrote off 33,967 loans totalling $176 million.

Federal officials have increased their efforts in recent years to collect outstanding student loans after watching write-offs hit $312 million in 2012 and $295 million in 2015.

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The previous Conservative government ordered officials to ramp up collection efforts in order to bring the write-offs under control.

The Liberals’ first budget offered a new tool for the Canada Revenue Agency in its collection efforts: legal changes allowing it to use tax information for the purpose of collecting debts from the student loan program overseen by Employment and Social Development Canada. The CRA had expected to receive that power last year, but the federal election delayed political approval.

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Figures provided by the CRA late last year showed the agency collected $208.8 million in unpaid loans, a three per cent increase in collections between 2015 and 2016.

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