STANDING COMMITTEE ON HUMAN
RESOURCES DEVELOPMENT AND THE STATUS OF PERSONS
COMITÉ PERMANENT DU
DÉVELOPPEMENT DES RESSOURCES
HUMAINES ET DE LA CONDITION DES PERSONNES HANDICAPÉES
[Recorded by Electronic Apparatus]
Tuesday, October 30, 2001
The Chair (Mrs. Judi Longfield (Whitby—Ajax,
Lib.)): Good morning, ladies and gentlemen.
I would call this 36th meeting of the Standing
Committee on Human Resources Development and the Status
of Persons with Disabilities to order.
Today we are here to discuss the delivery of the
Canada student loans program. We have a number
of guests with us.
We'll hear you
in the same order that you are on the agenda. Try to
confine your remarks to between five and six minutes,
and at the end of all the presentations we'll
open for general questions.
Our first witnesses are from the Department of Human
Resources Development. We have David Cogliati
and Dale Barbour.
Mr. David Cogliati (Director General, Canada Student Loans
Directorate, Department of Human Resources Development Canada):
Bonjour. Good morning. Thank you, Madam Chair.
First, I would like to thank you for this opportunity to
provide an update on how the directly financed Canada Student
Loans Program is working.
Since the department's last update on the administration of
the Program in April, we have successfully completed our first
peak disbursement period. I am pleased to be able to say that,
in conjunction with our service providers, the Program has met
the challenge of processing and disbursing thousands of loans a
day over the month of September.
Overall, the directly financed student loans program is
working well, but, as with any major change, it has not
been without some challenges and some difficulties that
we have had to deal with.
Together with our service providers, provincial and
territorial governments, and our stakeholders, we're
taking the necessary steps to apply our lessons learned
from the month of September and to put whatever
corrective action that needs to be taken into place.
Today I would like to share our experiences with the
first major test of the directly financed student loans
program. I would also like to highlight a couple of
other changes that we are working on as we work our way
toward service excellence.
The shift to direct financing of the Canada student
loans program occurred on August 1, 2000, a little more
than a year ago now. As outlined in our previous
appearance in April, the implementation occurred in
two phases: a bridging phase between August 2000 and
February 2001, and then a longer-term transition phase
that included the selection and the establishment of
our service providers.
Our two service providers, EDULINX and BDP Business Data
Services Ltd., have been operational since March 1, 2001, at
which time they assumed the responsibility for the management and
administration of the direct loan portfolio. By having the
service providers start in March, one of our lowest volume
months, it allowed us to gain the necessary experience to face
our peak period in September.
To give you a sense of some of the dimensions of the
program, since August 1 of this year over 253,000
student loans have been disbursed, with a total value
of slightly over $1 billion. At no
point did our systems fail, and the vast majority of
student loans were processed without incident or complaint.
We couldn't obtain such a success if it were not for
the partnerships with our provincial and territorial
counterparts and with other stakeholder interest
groups who have been a tremendous help to us.
However, we recognized and certainly acknowledged that
there had been some client issues around the payment
process. One of the foremost was the length of time
it took to get the money into the hands of students.
It has been our service commitment with the Canada
student loans program to disburse the funds within one
week of the “do not disburse before” date, indicated on
the student loan documents. We did experience some
interruption in service, unfortunately, as a result of
the tragic events around September 11.
We rely on air
services to move both the applications, and
interestingly enough, even in the era of electronic
deposit, to actually move the payments out as well. We
rely on tapes, and those tapes need to be transported by air.
So during the period between September 11 and
September 17 we did experience some disruptions in service.
Despite the unfortunate events that did occur, 90% of
the loans were put through the system
within our standard service delivery of one week. While
the events of September 11 explained some of the
problems we encountered, unfortunately, there were some
others that had to do, quite simply, with
communications. There was considerable confusion with
our client groups.
The “do not disburse before” date coincides with a
student's study start date, ensuring that the loans are
not issued to anyone who has withdrawn prior to the
commencement of studies. The one-week timeframe we
refer to as our service standard begins from the
“do not disburse before” date. However, many students
weren't aware of this date and assumed the
one-week period actually commenced as soon as they
dropped off their forms. So we had to deal with
In order to address this issue, we have worked hard to
develop clear and accurate messages about the process,
while ensuring that those clarifications are reaching
students. We met with key stakeholder groups to
explain the process. They could, in turn, inform their
memberships. And we will continue to work closely with
these groups to ensure that a situation like this does
We have also made sure that the scripts used by the
service providers are clear and consistent with
respect to the one-week timeframe, including when
the timeframe begins. We also recognize that to
rectify the confusion around the disbursement date does
not address the key issue of how long it actually takes
to put the funds into play.
I'm quite happy to report that we are changing that,
and we are changing our process so that we will better
align the disbursement date and the payment date. We're
going to start the processing before the
“do not disburse before” date.
We have adopted a lot of the processes the banks use, and
no blame to the banks, don't read that
into it, we are changing our process to better align
the payment and the due date.
This change should significantly reduce the
disbursement timeframe from a student's perspective,
while allowing the Canada student loans program to
prevent the disbursement of funds when notified of a
withdrawal. This improvement will be in place for our
second peak period, which is in January 2002. Again,
this is simply the application of a lesson learned
Another area that came to light in the lesson learned
was the issue of training. In some cases we had some
training issues with the Canada Post outlets and our
on-campus kiosks. Both service providers had
contracted with Canada Post to act as a national
service agent, assuming the front-line verification and
authentication role similar to that performed by the
bank branches previously.
In addition, the service provider for public education
institutes provided on-site kiosks at universities
during the month of September to handle the peak disbursement.
We're aware that at some Canada Post outlets,
particularly those with high volumes of traffic,
students received a very high level of service from
well-informed staff. However, we also know that at
some outlets there was some confusion amongst the staff
as to their duties. In the cases that were brought to
our attention, the service providers ensured very
quickly that the problem was rectified through
We'll continue to work with our service providers to
make sure that employees at Canada Post outlets who
handle Canada student loans receive the appropriate
level of training.
With respect to the on-campus kiosks, some students
expressed a level of frustration with the lack of
knowledge of the representatives who were at the kiosks.
In our case, the kiosks were intended to be on
campus to supplement the work of Canada Post. The
representatives were hired to authenticate and verify
student loan documents, but unfortunately were not
trained to answer some detailed program questions.
They were asked to supply a 1-800 number where people with
better training would be able to answer.
Some of the upcoming changes I'd like to talk about
aren't specific to the disbursement period, but I think
they're quite enhancing for the program. The first is
integration. We've signed integration agreements now
with two of our provincial colleagues, Saskatchewan and
Ontario. As we work through those integration
agreements, students in these provinces will see a
simplicity of the loan, better service, and reduced
I think these agreements accurately
reflect our commitment to the principle of one student,
one loan, and we will continue to pursue these discussions
with other interested provinces.
Our first large wave of loan consolidation occurs in
the month of November. We've been working quite hard
with the service providers to prepare for this next
spike in our business. Simplifying the administration
of debt relief measures, in particular the Interest
Relief Program, has been our first priority.
We've revised our application process so that all students
with a direct loan, regardless of whether or not they have
previous risk-shared or guaranteed loans, will only have to
apply to the service providers for interest relief.
Our service providers will liaise with the banks to
coordinate information and determine the student's
eligibility for interest relief.
In concluding my remarks today, I'd like to thank the
members of the standing committee for the opportunity
to provide a further update on how the directly
financed Student Loans Program is working.
Since March 1, when we moved into this area of direct loans,
we've disbursed 323,000 student loans, with a value of
approximately $1.2 billion. While we recognize that
there's always a need for ongoing improvements to the
program, we have received positive feedback from our
stakeholders that, in general, things have worked
reasonably well. In conjunction with our partners,
we'll continue to look at ways to enhance our service
delivery and our communications.
Of course, we'd be
pleased to answer any questions. Merci, Madame.
The Chair: Ms. Barbour, do you have anything to add at
Ms. Dale Barbour (Director, Program Management,
Canada Student Loans Directorate, Department of Human Resources
Development): No, I don't, Madam Chair.
The Chair: We will now hear from BDP
Business Data Service Ltd., David
Frankham and John Thurston.
Mr. David Frankham (Vice-President, Business
Development, BDP Business Data Service Ltd.): Good
morning. I'm pleased to introduce my associate, John
Thurston, director of implementation at BDP.
I would like to thank the chair and the members of the
standing committee for this opportunity to provide an
update on how the directly financed Canada Student
Loans Program is working from a private educational
At the outset, I would like to state that we have
developed a very constructive and cohesive working
relationship with the Canada student loans program
at HRDC. The schools, the students, and the private
educational associations have significantly
contributed to a successful September peak
During the September disbursement period, we processed
15,691 loans with a total value of $55.8 million.
Less than 10% of all loans received involved an exception or
error that may have caused a slight delay in students
receiving their funds.
However, 98% of the
September disbursements that did not contain an error
were received by the private educational institution
students within the seven-day commitment standard Dave
just spoke about.
Concerning staffing levels, we tripled our servicing
staff to handle the additional volume brought about by
the September peak, which allowed us to add an extra
shift in the evening. We are pleased to say that the
actual volume of loans processed was within 7% of our
projected volumes, thereby demonstrating our staffing
levels were correct for the volumes experienced.
Regarding training, a significant number of additional
disbursement servicing staff were redeployed from other
student loan operations and consequently were fully
trained and experienced going into September. All new
hires received two weeks of hands-on training and
subsequently had certification by the end of August. As
this was Canada Post's first peak disbursement period,
we worked very closely and in a timely manner with the
Canada student loans program staff at HRDC as well
as with the public educational institutions service
provider to quickly remedy situations at the odd postal
outlet where staff required additional training.
From a performance perspective as the private
educational institution service provider, we know our
clients are generally not represented by organized
student associations. Consequently, we very much rely
on feedback on our performance from a variety of
stakeholders, including the Canada student loans
program, the National Association of Career Colleges,
the schools, MPs, students, and of course this
Finally, going forward in conjunction with the Canada
student loans program team at HRDC, we will be
developing the necessary system changes to shorten the
existing seven-day turnaround of funds for students in
time for the January disbursement peak. As well, we
will be working with Canada Post to significantly and
continuously improve the level of service and to
strengthen the verification procedures to reduce the
number of loans that require exception processing,
thereby further reducing the time students have to wait
for their funds.
In conclusion, I'd like to thank members of the
standing committee for this opportunity to provide an
update on the September peak disbursement results
relating to private educational institutions, and we
will of course be pleased to answer any questions
you may have.
The Chair: We'll next hear from the EDULINX Canada
Corporation. We have Sandra Ferguson and Douglas
Gilhooly. Thank you.
Ms. Sandra Ferguson (Vice-President, Client
Relations, EDULINX Canada Corporation): Thank you very
much, Madam Chair.
I am Sandra Ferguson of EDULINX, and I bring with me
Douglas Gilhooly. We're delighted to be here today and
to have the opportunity to address the committee on the
progress that has been made to date.
EDULINX is the leading student loan service provider
in Canada and currently administers over one million
student loans across the country. Based in
Mississauga, we employ over six hundred student loan
specialists, with regional representatives across the
Since March 1 we've been under contract to the
Government of Canada to operate the National Student
Loans Service Centre's Public Institution Division.
So what does this mean? This means
that out of every 10 students receiving Canada student
loans, we provide service to eight of them. We have a
bilingual customer contact centre, which is open 8
a.m. to 8 p.m., borrower's local time. In addition
to that we have a 24-hour interactive voice response
system, commonly known as IVR. We have a
document-receiving network that includes, as Dave has
suggested, on-site campus kiosks during peak periods.
In the September peak period we are on campus at 112
campuses across the country. We participate with over
500 designated Canada Post outlets.
We've also created a best-in-class default prevention
centre, whose job it is to provide students with
assistance in the event they experience financial
difficulties during the process. Their job is to
educate student borrowers, provide tools and guidance,
and establish and maintain good repayment behaviour.
Those of you who are familiar with the student loan
process will recognize that this past September
represents the most significant disbursement cycle
since the launch of the public division in March.
Let's review the
September activity and the EDULINX support.
To prepare for the period, we hired 500 people beyond
our existing staff. We authorized over 170,000
disbursements, for $720 million—which is actually 55% of
the annual disbursement volume in a three-week period in
September. Nearly half of those certificates were
processed through our on-campus representatives and the
remainder through other sources, such as Canada Post's
During this period we handled over 110,000 calls,
answering them within 17 seconds on average. While we
believe September was a success, we recognize there are
opportunities for improvement. Let's review the areas
we're going to focus on for improvement for the coming
January peak period.
We will be enhancing both our training and our
communication with the front-line staff. We are going
to continue to assess the best distribution channels
through which to receive the student loan documents.
During this past September, approximately 10% of the
students completed their documents either incompletely
or incorrectly. We call these exceptions. We're
working closely with the program representatives to
analyze these problems and clarify how we can either
avoid them or respond to them more quickly.
This is a complex program for unsophisticated
borrowers that demands a comprehensive, coordinated,
and consistent approach to communication. We will be
working closely with program officials to reinforce
this approach. In fact, to ensure the integrity of the
program, monitoring and measuring our progress is of
To do this, we maintained weekly meetings internally
and with program officials to review our performance
against standards. We appointed a general manager for
service-issue resolution to work with program
officials, stakeholder associations, and members of
Parliament to resolve service issues impacting students
as they're in progress. We will be launching a service
advisory council later this fall to obtain regular
In summary, we're confident we're providing effective
student loan services and that we are on course to
enhance services through collaboration with all of the
In closing, I'd like to reiterate the enthusiasm and
the commitment of EDULINX in supporting one of Canada's
key education initiatives.
Thank you, Madam Chair, members of the committee, and
other association representatives here today.
The Chair: Thank you.
I would next call on the Canadian Alliance of Student
Associations. It's represented by Robert South, the
government relations coordinator.
Mr. Robert South (Government Relations
Coordinator, Canadian Alliance of Student
Associations): Good morning, Madam Chair and members
of the committee.
On behalf of the Canadian Alliance of Student
Associations—or CASA—and the over 310,000 students we
represent, I'd like to thank you for the opportunity to
present here today.
The Canada student loans program is obviously very
important to a great number of students CASA
represents, for without it many of these students would
not be able to attend school. Working in conjunction
with the policies and procedures of different
provincial student loans programs makes the process of
getting a Canada student loan complicated at the best
of times, and the situation faced by the program this
fall was certainly a challenging one.
The transition from risk-shared loans partnered with
various banks to loans that are directly financed by
the federal government and administered through service
providers was surely no simple task. Fortunately, in
the eyes of CASA, the Canada student loans program rose
well to this challenge. Through good communications,
solid service, and quick responsiveness to problems, the
program avoided much of the potential confusion a
new system creates.
This is not to say that everything was perfect; there
were problems. I will give two specific examples of
problems of particular concern to CASA members.
In Kelowna, B.C., near the University College of the
Okanagan, there was poor training of employees at the
Canada Post outlet that led to a failure to accept as
valid identification the social insurance cards of
married women when these cards bore the woman's maiden
This situation was very frustrating to these women, who
needed Canada Post to validate their ID so their loans
could be properly processed.
Further, at the University of Alberta—and this is a
problem Mr. Cogliati mentioned in his speech—the staff
provided to help students with the processing of their
documentation were undertrained and unable to answer
questions students had regarding the program.
This resulted in a lot of student frustration during
this part of the process. However, these instances
were the exception rather than the rule when examining
the quality of service provided to students.
One very positive note was the ease with which new
students accessed student loans in Saskatchewan and
Ontario. Integration agreements reached between the
federal government and these two provinces made the
loan application and disbursement process much simpler
for the students. The challenge was obviously a little
less easy for those students used to different systems,
but all students are growing accustomed to the new
system and are pleased with its simplicity.
Overall, our review of the latest disbursements of
Canada student loans is quite positive. There were a
few problems, but the program showed a good commitment
to try to resolve these problems. The program can do
better, and CASA expects it to do so. Much credit is
deserved for a very good first run under challenging
Thank you very much for your time.
The Chair: Thank you, Robert.
I next would ask, from the Canadian Association of
Student Financial Aid Administrators, Jennifer Orum.
Ms. Jennifer Orum (Past President, Canadian
Association of Student Financial Aid Administrators):
Madam Chair and members of the committee, my name is
Jennifer Orum, and I am past president of the Canadian
Association of Student Financial Aid Administrators and
the coordinator of financial aid and awards at the
British Columbia Institute of Technology.
CASFAA represents financial aid
administrators at universities, colleges, and
technical institutions across Canada. Our members
oversee the administration of both needs-based and
merit-based financial aid and awards programs at public
and private post-secondary institutions. We have
direct experience dealing with students, with both
provincial and federal government departments
delivering student aid programs, with financial
institutions that have been involved for many years in
the guaranteed and risk-shared government loan
programs, and, more recently, with the National Student Loans
The implementation of the new direct loan CSL program
has been a very challenging task for all parties. Given
the complexity of the federal student loan process, we
expected there would be problems, and indeed there have
been. With the cooperation we have received from the
Canada student loans program staff and from the two
National Student Loans Service Centre contractors,
EDULINX and BDP, we are optimistic that the
challenges that have not as yet been met will be in the
Many of the problems still being faced are very
significantly impacting students and post-secondary
institutions and must be solved if the federal
government student loan program is to be successful. I
have made a written submission that has details of our
concerns and our recommendations. Today, orally, I
will only present on a few limited items.
We hope CASFAA will continue to be consulted on
an ongoing basis regarding ways to address problems
and ensure the CSL program meets the government
objective to make post-secondary education accessible
to citizens in all areas of the country and from all
I'm choosing to address five issues.
The most significant problem faced by students and
post-secondary institutions has been the significant
delays in students receiving Canada student loans funds
in this initial year. I'm going to indicate several
recommendations we have.
Number one, the disbursement date on student loan
documents needs to be understood by the Canada student
loans program and the service providers to mean the
point at which funds are received into the students'
Second, the Canada Post received date—not the date a
loan document is received by the National Student Loans
Service Centres—must be used in determining which
documents are stale-dated and therefore invalid.
Third, legislative, regulatory, or process changes
that will allow the National Student Loans Service
Centres to issue funds directly must be put in place,
not requiring routing through the Canada student loans
program and Public Works and Government Services
We understand there is legislation through the
Financial Services Act, and specifically section
33. It is evidently preventing an efficient way of
addressing this problem.
Fourth, secure data communication links must be set
up such that funds can be sent electronically to
students' accounts in banks and credit unions.
The second area of concern is the process complexity.
To address this, I will make two recommendations.
First, one-stop processes need to be developed and
implemented by the Canada student loans program and
National Student Loans Service Centre providers to allow
a student to complete one interest continuation
document and one application for interest relief. It
will be applied to all the students' federal and
provincial student loans, direct, risk-shared, and
Secondly, a feasibility study needs to be initiated,
related to the establishment of a government
student loan data warehouse, to centrally maintain
comprehensive information on individual government
student loan borrowers, and to include data during
study and repayment.
The third area is communication among the
post-secondary financial aid offices, the Canada
student loans program, and the National Student Loans
Service Centre. There are two recommendations.
First, protocol should be developed so staff from the
Canada student loans program, the National Student Loans
Service Centre, and the post-secondary financial aid
offices can discuss student cases in an effective,
Secondly, a comprehensive listing of all contacts,
Canada student loans program, National Student Loans
Service Centre, previous risk-shared lenders, as well
as provincial government contacts, should be developed
for use by post-secondary financial aid office staff.
Third is Canada Post. As a result of not
insignificant problems with quality control and
training, we recommend a review be made of all training
processes and quality control measures, and more
comprehensive training and monitoring be developed.
Finally is the issue of Canada student loans documents
being accepted on campuses. Our recommendations are as
As of January 2002, the National Student Loans Service
Centre should be allowed to make arrangements with
post-secondary institutions interested in having the
Canada student loans program documents received by the
financial aid office for forwarding to the National
Student Loans Service Centres.
Secondly, the National Student Loans Service Centre
should consult with CASFAA, our organization, to
ensure training and training materials for both service
centre and kiosk personnel are appropriate.
Thirdly, and finally, on-campus kiosk staff should
report to campuses one working day prior to the date
when Canada student loans documents are to be accepted
to ensure adequate time for kiosk set-up and
orientation by the financial aid office personnel.
I want to thank you, Madam Chair, as well as the
members of the committee and my colleagues, in the
delivery of this very complex program. I'm certainly
prepared to answer any questions later. Thank you.
The Chair: Thank you, Ms. Orum.
Our final presentation today is on behalf of the
Canadian Federation of Students. We have Jennifer
Anthony with us.
Ms. Jennifer Anthony (National Deputy Chairperson,
Canadian Federation of Students): Good morning.
On behalf of its 425,000 members, the Canadian
Federation of Students would like to thank the standing
committee for the opportunity to present here today.
My comments today will be directed at the current
process for disbursement of the Canada student loans with
the service provider, EDULINX Canada Corporation.
However, as the Canadian Federation of Students clearly
stated following the welcome retreat of the banks
from the program, we believe student financial
assistance is a core social program best administered
publicly in order to maximize accountability and
The transition to the direct finance model is a
positive step but should not be seen as the final one
on the path to the best possible aid program. This
fall's disbursement arrangements between HRDC, Canada
Post, and EDULINX have produced mixed results.
Notwithstanding the delay in air freight delivery,
students with financial need witnessed a general
decline in the service standards, measured by the
amount of time required for processing loans to the
Students were waiting between four and seven business
days for the loans to be deposited into the accounts.
In some unusual cases, students waited for ten to
fourteen days to receive the financial assistance.
Our frustration was compounded by the poor
communication between the CSLP department and members
of the National Advisory Group on Student Financial
Assistance. It ultimately led to wildly differing
expectations about processing time. If we were aware
the average processing time was going to be as long as
it was, we could have, and would have, communicated
this to our members. Extended waiting periods resulted
in students at some institutions losing their priority
on course waiting lists and ultimately being
The Canadian Federation of Students has already
discussed this on several occasions with
representatives of the Canada student loans program. We
were encouraged by the responsiveness of new leadership
in the Canada student loans department in seeking
solutions to the problems we have encountered. The
federation is committed to continuing this dialogue
about improvements to the direct lending model while
at the same time maintaining the security and
integrity of the program.
One of the ways to ensure faster turnaround time is to
eliminate the requirement for the service provider to
hold onto the approved applications until the
disbursement date. The disbursement date is the day
selected by the CSLP to ensure applicants have enrolled
in school. Students cannot get loans released before
Currently, in the first of four steps in the
processing of the loan, the service provider holds onto
applications until the disbursement date. Under this
scenario, when the disbursement day passes, the
application must proceed through three more steps
before money is deposited into students' accounts. By
shifting the hold responsibility to the final step at
Public Works, students' money can be deposited
immediately when the disbursement date expires,
allowing students to meet institutional deadlines. We
encourage the standing committee to approve this
Looking forward, we hope when students under the
direct finance model begin to consolidate up to three
loans, in addition to the fact that some of the loans
will be provincial and national, the Canada student
loans program will deliver on its promise to exercise a
degree of flexibility when assessing penalties for
Thank you very much for the invitation to speak today.
I look forward to your questions.
The Chair: Thank you.
One of the things I always enjoy when I have a variety
of people here is you seem to be taking notes when
other people are speaking. I think part of the good
thing that comes from this is being able to hear each
other's concern face to face.
Now we get to the round where the members of
Parliament get to pose the questions. I'm going to ask
members on the committee to remember that we have
five-minute rounds. If you use the five minutes in
expressing your own views, then we don't have an
opportunity for our witnesses to respond.
Keeping that in mind, we'll start the five-minute
round with Mr. Johnston.
Mr. Dale Johnston (Wetaskiwin, Canadian Alliance):
Thank you, Madam Chairman, and welcome to the
I noticed Mr. Cogliati said the interest relief
program has been a priority. I'm interested to know,
at a time when interest rates are at a 40-year low, are
the students with existing loans getting any benefit
from low interest rates at the moment?
Mr. David Cogliati: The simple answer is yes.
Anyone who has a loan in good standing can apply for
and receive interest relief, if their outside income
falls within certain thresholds.
Mr. Dale Johnston: Only if their income falls
within certain thresholds? Would they be in a position
where they could refinance their loan? If they're
paying 7%, 8%, or 9% on a loan, could they go to the
bank and get a loan to pay it off?
Mr. David Cogliati: It would be up to the bank to
renegotiate an existing loan after a consolidation, to
be perfectly honest with you. We haven't done any
consolidations of direct loans yet.
Mr. Dale Johnston: I think this is something we
certainly should be looking at, with a downturn in the
economy. When the central bank rate has fallen to
literally the lowest rate since 1961, there should be
some interest relief passed on to the students who are
diligently trying to make payments.
Mr. David Cogliati: Could I make one very brief
We do offer two different models. One is a fixed rate
and the other is a floating rate. The vast majority
pick the fixed rate because it's prime plus 2.5%.
The floating rate is prime plus 5%. So the
vast majority are in the fixed-rate situation.
Mr. Dale Johnston: The other thing I'm wondering
about is that although this is early going, my
understanding from your presentation is that the
contracts with EDULINX and BDP will expire in
2004, but they could be extended for two years, so
that's 2006. Is that correct?
Mr. David Cogliati: That's correct. Contracts are
for three years, plus two option years, if we desire to
exercise those options.
Mr. Dale Johnston: Okay. So then there is a
possibility that in 2004 you'd be looking at
re-tendering. That's not a given but a possibility.
Mr. David Cogliati: Yes, very much so.
Mr. Dale Johnston: By what standards are you
assessing the delivery facility, the delivery of the
program? Is it an ongoing assessment by the
department, and is there a possibility that there will
be a tendering process started? It seems to have taken
several months, almost a year, if I'm reading this
correctly, to get the tendering process done in the
past. What is your timetable for the possibility of
I realize that's kind of a hypothetical question.
Mr. David Cogliati: Fair enough. We're gearing up
to start the re-tendering process about 18 months
before the three years expire on the existing
contract. We are continually monitoring, and there are
a number of incentives built into the contracts in
terms of monitoring the service providers and how well
Of course, this is a personal gut reaction, but I
think we probably will re-tender after the three years,
because the business we'll be providing will be
substantially different from what it was when we went
to tender last year. By that I mean largely services
provided online. So I think a lot of the environment
within which we deliver benefits will change, and we'll
quite possibly be looking at a different kind of model
where, with a lot more of the services, instead of
moving paper all over the country, we'll be dealing
online by that point in time.
Mr. Dale Johnston: Could you address the other
part of my question, please, about the assessment
method? Is there an assessment method on the
delivery and the efficiency and effectiveness of the
Ms. Dale Barbour: We have a number of service
standards within the contract, so those service
providers will be monitored in terms of their
responsiveness and actually processing the applications
and answering the calls that come into their call
centre. That's all part of the contract we have with
both of them.
The Chair: Thank you.
Mr. Bellemare, you have the floor.
Mr. Eugène Bellemare (Ottawa—Orléans, Lib.): Thank you,
My question is addressed to any one of you, and I
would appreciate a short answer since I have about six
or seven questions.
You're talking about the delivery of information, the
processing of applications, the approval of loans, and
the dispensing of funds. You all do that.
Is that a yes or a no, or you don't know?
Ms. Dale Barbour: We all play a part in the
processing of the loans. We have a life cycle for a
loan, and if you look at the needs assessment, our
provincial partners are involved in that. The actual
review of the loan agreement is done by our service
providers, and then that information comes to HRDC and
we look at the verification in terms of financial
requirements we have. Then Public Works and
Government Services Canada would either issue the
cheque or issue the direct deposit. So it's a very
interdependent relationship we have with the
Mr. Eugène Bellemare: Does anyone know if Revenue
Canada is part of this family?
Mr. David Cogliati: I could answer that.
Yes, but they're at the back end. They're not in
the disbursement business.
If a loan goes into default, there are provisions
whereby certain refundable tax credits can be used to
offset that debt to the crown. So Revenue Canada does
play a role at the very tail end.
Mr. Eugène Bellemare: Regarding the loan
applications, who audits—I don't mean verifies, but
audits—the information given by the students?
Ms. Dale Barbour: When we receive a loan
application, we also receive at the same time a
document from the province. The provincial document
actually has the amount of loan that has been
authorized for that individual based on the needs that
individual has. So that initial check is done when the
loan agreement is received, to make sure it
compares to what the province has authorized.
We also have audits that are done throughout the
program to review all steps of the process in a
Mr. Eugène Bellemare: Taxpayers out there may be
driving through a campus and noticing the number of
automobiles, sports cars and so on, and wondering how
many of the sports car elite are borrowing money
through student loans. How do you control that?
Ms. Dale Barbour: That's part of the assessment
Ms. Jennifer Orum: Perhaps I could add something,
because our financial aid administrators are familiar
with what the provinces do.
The assessment for the Canada student loans
program—that is, the need assessment of an individual
student—is done by the provinces. Each province has a
verification and audit section, and I believe they are
required under the Canada Student Loans Act to
audit a certain percentage of applications. So there
is that process at the provincial level, which would
check into things such as motor vehicle listings.
There's cross-data sharing with the provincial motor
vehicle branches. So I believe what you're speaking
of, that type of audit, is certainly also done at the
provincial level before the amount the student
will be receiving is determined.
Mr. Eugène Bellemare: In the—
The Chair: I think Ms. Anthony wants to add
Ms. Jennifer Anthony: If I may add one quick
thing, in some provinces, at this point, audits are
being done on 100% of the student loan applications.
In the province of Newfoundland and Labrador, that has
been the case for the last year or two.
With specific reference to cars, if you study at an
institution like Memorial University of Newfoundland,
which I did, and you live far enough away from the
university where there's no public transportation, it's
actually considered part of your expense needs.
So the fact that you have a car is considered
an asset and considered into your borrowing, but it's
also considered to be a necessary mechanism to get you
back and forth to school, depending on your particular
residence location, and obviously the further away you
live, the cheaper it is.
Mr. Eugène Bellemare: In the three large cities
in Canada, you see on the campuses students who
live the good life, and possibly rightly so, but one
always wonders, are they on the student loan program?
My experience with student loans is possibly
negative in the sense that I sat for five years on the
public accounts committee, and we discovered a great
number of eyebrow-raising situations in Canada. People
were borrowing money to go to school and then just
disappearing and never paying.
The Chair: Mr. Bellemare, can you leave your other
questions until the second round? You're well in excess
of your first five minutes.
Mr. Eugène Bellemare: Okay. Thank you.
The Chair: I'll put you on the list for
Mr. Robert Lanctôt (Châteauguay, BQ): I will try to make this
a fairly short preamble. First, I would like to thank the witnesses
for coming. I especially want to thank the committee for such an
in-depth evaluation. We were here in April and I heard some of you
then. Today I will hear you again. My questions, however, are for
The numbers in the 2001-2002 budget for Human Resources
Development show an envelope of about $719 million. I believe that
represents a total net cost for the entire CSLP. I see that since
March 323,000 loans have been granted, for a total of $1.19 billion
and that, over a period of only seven months and not for the entire
year. With the numbers available, we were talking of transfers to
Quebec of about $193.5 million.
I want to be very sure that Quebec, Nunavut and the Northwest
Territories are not part of this program. I would like to be told
that specifically. In addition, if in seven months $1.19 billion
have already been disbursed in loans—there are still five months
left—, will the amount of the transfer to Quebec be increased?
When will it be disbursed? What are the increases? How does the
reimbursement or transfer to the provinces system work? Will the
amount of $193.5 billion be increased proportionately to what will
be granted to the others?
Mr. David Cogliati: Maybe I could try to clarify
some of the numbers and the difference between what we
disburse on an annual basis of $1.5 billion, which the
government treats as an asset, and the numbers that
show up in the public accounts documents in the main
estimates, which are not the loan disbursements but
include things such as the cost of administration.
They include things such as the loan write-offs, which
are approximately 14% of the amount loaned, and they
also include the interest subsidies that are paid out
for in-study—while students are in-study or in
interest relief. So it's really a question of apples
and oranges between the loans that are disbursed of
$1.5 billion and the $700 million that shows up in our
estimates. They're not the same thing at all. They're
Interestingly enough, I just met with our colleagues
from Quebec about two weeks ago. We keep a pretty
close look on the disbursements and the sharing of
information and the set-offs that go to those areas
that do not participate in the Canada student loans
program. So the $1.5 billion, or the $1 billion
we've just disbursed, is separate and distinct from the
$700 million. They're just apples and oranges.
Mr. Robert Lanctôt: To confirm that fact, Quebec, the
Northwest Territories and Nunavut still do not participate in the
program. Is that really the case?
Mr. David Cogliati: There are still three.
Mr. Robert Lanctôt: There are still three.
Mr. David Cogliati: Yes, that's it.
Mr. Robert Lanctôt: O.K. Given that, will we be close to the
amount of $700 million forecast in the 2001-2002 budget? Will we be
close to this amount or are we already in a position to evaluate
that the amount will be higher? The amount that you will give to
Quebec, i.e. $193 million, is it within the norms?
Mr. David Cogliati: It'll be in the same order of
magnitude. I can't give you an exact number, but
generally speaking our loan portfolio is going up about
4% per year. So my guess is it'll be a little bit
bigger. But it'll be in the same order of magnitude of
somewhere between $700 million to $750 million as the total, and
it does include the transfers to those opting-out
jurisdictions. It includes the transfers, the
interest subsidy that's given for in-study loan and
interest relief, and the cost of administration. So
that's where the $700 million comes from.
Mr. Robert Lanctôt: In that case, I would also like to know
how the transfer is made. Is it done at the end of the year or
Mr. David Cogliati: I'd have to confess I just
simply don't know that.
It is done six months after the end of the year.
Mr. Robert Lanctôt: Six months after the end of the year, is
Mr. David Cogliati: After the end of the year. Yes, that's it.
Mr. Robert Lanctôt: Thank you very much.
Mr. David Cogliati: I imagine that it is done that way to
allow the numbers to be checked.
Mr. Robert Lanctôt: Do I still have a little time?
The Chair: You have about thirty seconds.
Mr. Robert Lanctôt: Okay.
I would like to know what percentage of student loans are
granted. What are the public and private percentages?
Mr. David Cogliati: Once again, about 80 per cent public and
20 per cent private. That's more or less it.
Mr. Robert Lanctôt: O.K. Thank you very much.
The Chair: Ms. St-Jacques.
Ms. Diane St-Jacques (Shefford, Lib.): Thank you, Madam Chair.
I would like some information about loan reimbursements. Have
the rules changed since it is a new service? If a student cannot
reimburse his loan immediately, are there mechanisms in place to
help that student reimburse it over a longer period? Have means
been set up in this regard?
Mr. David Cogliati: That depends on the definition of new
mechanisms. In 1998, we made certain changes called the Canadian
Opportunities Strategy. I'm sorry, I don't know the translation for
that. We announced that we had added three provisions dealing with
the possibility of prolonging the reimbursement period. First,
there is a renegotiation between the student and the bank. The
reimbursement period can be extended for another five years, which
means it can go from 10 to 15 years.
Second, an important change to the Interest Relief Program was
made. I apologize once again, I don't know the French term for this
program. The assistance period has been extended considerably.
Students can now receive assistance for a period of 54 months. If
the student exhausts this period, he can obtain a $10,000 reduction
on the principal.
Ms. Diane St-Jacques: O.K.
The Chair: Ms. St-Jacques.
Ms. Diane St-Jacques: No, thank you.
The Chair: Okay.
She'll share the rest of her time with you.
Ms. Diane St-Jacques: I don't think it will be
The Chair: Okay.
Mr. Robert South: I would
like to add one thing about the debt reduction and the
repayment system, for the information of the committee.
That program does exist, but it is a big concern of my
organization that it's a very difficult program to
According to statistics from within the Canada student
loans program, 75% of those students who exhaust
interest relief are not eligible for debt reduction and
repayment, because it goes on much more stringent
criteria than the interest relief program does. There's
a big disconnection there between the eligibility for
interest relief and debt reduction and repayment.
I know that's not the topic of broader conversation
for today, but I feel it is important that the
committee be aware of this.
Ms. Jennifer Orum: Could I comment as well?
The Chair: Yes.
Ms. Jennifer Orum: Our organization is, in
addition, concerned about the debt reduction repayment,
because the promise was there in the 1998 budget and
the program has not really got off the ground. Our
understanding is that there are ongoing discussions
with the Ministry of Finance. I presented before the
Standing Committee on
Finance last week, asking that the finance ministry be
cooperative with HRDC in creating a program that will
actually work. It is a good program in theory. It just
doesn't seem to be working in implementation. So we
are very hopeful that the two ministries will be able
to solve this problem.
The Chair: Thank you.
Ms. Anthony has a comment.
Ms. Jennifer Anthony: If I may, I have one other
thing about interest relief. It goes back to a question
that was asked earlier. The question was asked about
how interest relief works and whether or not students
could refinance interest relief by regular loans. But
the primary reason why students wouldn't do that is
because if you graduated, got a good job, started
paying your loan, and then refinanced through the bank
as a non-student loan, you'd lose any opportunity to go
on interest relief at a later period if it became
Some of the mechanisms that are in place to help
students make it through the repayment period actually
require that you have to maintain the Canada student
loan. You couldn't just refinance through a bank and
maintain access to some of those programs. In terms
of some of the programs that do exist, I think that's an
important point to make.
The Chair: Were there any others?
Mr. Cogliati, did you have anything?
Mr. David Cogliati: I wanted to advise on what Rob
has said and that we are working quite closely with our
Finance colleagues to enhance the debt reduction
repayment feature of the plan. It does have a very low
take-up, but that's largely because of the five
years—in effect the 54 months—of interest relief, and
as people exhaust that....
But there is an issue—and Rob is quite
correct—vis-à-vis the tables when one goes off
interest relief onto debt reduction, and we are
working, as Jennifer has also noted, with our
colleagues from Finance to try to sort that out.
The Chair: Good. Thank you.
Ms. Diane St-Jacques: [Inaudible—Editor]
The Chair: Well, he has about 12 seconds.
I don't think that's going to be
enough. He appreciates the offer, though.
Ms. Libby Davies (Vancouver East, NDP): Thank you
to everybody for coming today.
When we first started this discussion about direct
delivery, there was a lot of information that this
would improve the situation for students in terms of
more direct contact, less problems, more
problem-solving, more flexibility. As a result of
either this direct program or interest relief and so
on, is there actually a decrease in the number of
students who are now moving over into the collection
agency part of it? Who is responsible for keeping tabs
on that information, and what does the information tell
Mr. David Cogliati: That would probably be me.
But I think it may be a little too early for us to
have much of a reading. We actually started the direct
loans in March of this year and we really haven't
started the repayment and consolidation. It's
actually starting next month.
Generally speaking, we've built into the service
provider contracts incentives to get the default rates
down, and we've given them 270 days instead of the
regular 90 days to try to work with the students.
We've put in incentives that there be regular
communications during the study period.
One of the biggest challenges when we talked to the
banks was that when they finished their student loan
and went into the repayment, a lot of times the
students would lose touch with the bank. Obviously
students move after they have finished studies, and
there were some real disconnects on a communications
So we're desperately hoping that with the service
provider contracts, we'll do a better job of keeping in
touch with the students throughout their study period,
so that they'll know about interest relief and about
the availability of certain financial counselling we
may be able to give them to help them through this.
Defaults are bad for everybody and we desperately want
to get them down.
Ms. Libby Davies: If a student unfortunately moves
into default, is it then outside the realm of the
direct service providers? Does it go over to the
collection agency and you lose contact with the student
at that point?
Mr. David Cogliati: No, the way it works now is
if a student gets into difficulty with their student
payment, we have 270 days, which if you work out the
math...where we give them a chance to, as we call it,
rehabilitate the loan and get it back in good standing,
and off you go to all the help. Eventually, if they go
into default, if they've missed enough payments, if we
can't work without them, then unfortunately it goes to
our collection services. They'll try to help with them
as well, but again the collection agencies are agents
of HRDC. So if they're a little on the rough side....
I've read the letters and in some cases they tend to be
a little aggressive. I get all the letters. We're
working with them as well to try to soften them up.
Ms. Libby Davies: That actually leads to my next
question, Madam Chair.
When we had the initial discussion, HRDC provided
information that you would have staff and resources
available through the department to also help deal with
problems and resolution of problems and so on. Can you
provide information to tell us how many staff positions
are available and what kind of budget you have to do
Mr. David Cogliati: I can tell you what the
interim arrangements are. Interestingly enough, we're
going to Treasury Board in November to try to solidify
the funding for the Canada student loans program. We
currently have about 170 people on staff—a lot of them
in our client services area. We've about doubled the
size of that group to about 45 people, and assuming
that we can get some further resources through Treasury
Board, we're looking to augment the client services and
the other parts of the Canada student loans program
itself. So we have ramped up big time.
Ms. Libby Davies: Do I have any more time?
The Chair: You have another minute.
Ms. Libby Davies: I have just a short question to
follow up the issue of the interest rates. Who sets
Mr. David Cogliati: The Department of Finance sets
Ms. Libby Davies: Is there any possibility that
this will now be reviewed as a result of the lowering
of interest rates overall?
Mr. David Cogliati: I'm not aware of any
discussions to change those interest rates—the
prime plus 2.5% and prime plus 5%.
Ms. Libby Davies: Yes, or even to lower the 2% or
the 5%—the prime plus 2% or the prime plus 5%.
I'm just curious to know again whether that is part of
any built-in review, because it's pretty awful if many
people are benefiting from lower interests rates, yet
students are still having it hammered to them. I'd be
curious to know if there is a review.
Mr. David Cogliati: Our discussions with our
Finance colleagues tend to revolve around the
wonderfulness of the 17% tax credit and what a relief
this provides for all those students who pay interest.
I would certainly broach the subject. To be honest
with you, we broached the subject in the context of
integration. As we've signed integration agreements
with Saskatchewan and Ontario, program differences tend
to be highlighted even more. In Ontario their
interest rate is prime plus 1%, whereas ours is prime
plus 2.5%. We can disaggregate those
behind the scenes when students repay, but those kinds
of differences I think eventually start to drive the
program designs. We've already seen some movement in
Ontario in terms of extending their interest relief to
match the federal level. In Saskatchewan we've seen
some movement by the Saskatchewan government in the
area of disability considerations as well. When we
went to our colleagues at Finance, we said if and
when we sign more of these integration agreements, there
will be pressure to have a greater degree of
harmonization of program design.
Ms. Libby Davies: But isn't it province by
Mr. David Cogliati: Unfortunately, yes.
Ms. Libby Davies: So each one will be different.
Mr. David Cogliati: Each one will be different.
But if we were to make the change, it would be
national. We would not have a different interest rate
in Ontario, as opposed to Manitoba, as opposed to
Saskatchewan. It would be a national rate.
The Chair: Thank you.
Ms. Raymonde Folco (Laval West, Lib.): Thank you, Madam Chair.
I have two questions that are really information questions.
The first is a follow-up on Mr. Lanctôt's question about Quebec.
Thank you, Mr. Lanctôt, for asking the question for me. I will
simply continue along the same lines.
If we compare the students in Quebec with other students in
Canada, excluding students in the provinces and the territories
that do not participate in the project, what is the percentage of
Quebec students who reimburse their loans? Is it higher or lower
than elsewhere? Can you give us some hypotheses why this is so?
Mr. David Cogliati: I'm afraid I don't have the
information specifically on whether or not Quebec's
repayment or default rates are any different from ours.
The one point I would underline is that in Quebec,
generally speaking, the student loan amounts are much
lower because of their system of grants, subsidies,
scholarships, and tuition caps. Generally speaking, I
think the Quebec programs are considerably more
generous than in other parts of the country. As a
result, student loans tend to be quite a bit lower. I
don't have the percentages or the numbers and I don't
have any numbers on default rates in Quebec. But
generally speaking, the amount owed is significantly
less in Quebec than in other parts of the country.
Ms. Raymonde Folco: Could you provide that number later, Mr.
Mr. David Cogliati: I could certainly ask my
colleagues in Quebec. As I said, I just met with them
about two or three weeks ago and we had a full-day
session. We gave them volumes of information, so I'm
sure I could ask for those numbers.
Ms. Raymonde Folco: What I would really like to know, on the
one hand, is the average amount, in real numbers, of student loans
in Quebec compared to the average amount of those loans in the rest
of Canada since you tell me it is substantially lower in Quebec. On
the other hand, I would like to know the percentages of Quebec
students who reimburse their loans and the percentage of students
outside Quebec who do so. You may not get those numbers right away,
but when you do I would appreciate getting them.
Mr. David Cogliati: I'll be happy to share those
once we get them, and I'll converse with my counterpart.
Ms. Raymonde Folco: I have a second question, Madam Chair.
I'll say this in English because the text is in
front of me in English. Contrary to my colleagues,
who seem to understand all the ins and outs of this
very complex question of student loans.... You said, Mr.
Cogliati, that you have revised your application
process so that all
students with direct loans, regardless of whether they
have a previous risk-shared or guaranteed loan, will
only have to apply to the service provided for
Could you explain to me what exactly this Interest Relief is?
How does it apply directly to student loans?
Ms. Dale Barber: After a student actually finishes
their studies, they have a six-month period during
which there is no requirement to make any interest or
principal payments on that loan. We call those six
months after they have finished the consolidation
period. They have to consolidate their loan, and
during that process the student finds out exactly how
much they will have to pay on a monthly basis.
Sometimes once a student gets that information, and
even after they've received that information, they find
it very difficult to actually pay that amount of money.
We have some things to assist them during a period
when they're having difficulty making those payments,
so they don't go into a default status. One of the
things we can offer is an interest relief period,
usually in six-month components, when they do not have
to pay any interest on their loan.
Ms. Raymonde Folco: But they're still paying the
Ms. Dale Barber: They don't have to. They can pay
it if they're in a position to pay something. Then
that money can just go against the actual principal
amount. But in a lot of cases, a student is not in a
position to actually pay anything.
Ms. Raymonde Folco: Do I have any time left, Madam Chair? I
would like to ask Ms. Jennifer a question. I'm sorry, unfortunately
I can't see the rest of her name. No, it's not Ms. Orum.
It's Jennifer Anthony, I beg your pardon.
You explained something a little while ago about
interest relief and how, once some students were
working and trying to pay the interest, it was
detrimental to them. I didn't quite understand that
explanation. Perhaps you could go into it in more
Ms. Jennifer Anthony: During the period of
interest relief, it is the case that most students
don't make repayments toward their loans on either the
principal or the interest. However, it's not a
requirement to get interest relief
immediately when your repayment should be starting.
If you go to work immediately after finishing school,
you can begin paying your loan at the 2.5% interest
rate, and you can pay on the principal over a period of
time. But if due to a job loss, for example, you lose
your ability to pay, at that point you can still
apply for interest relief.
Whether or not you're granted interest relief is
purely dependent on your income. So if your income is
low enough during a certain period, you can get
interest relief. At that point you can get, say, six
months' relief from making any payments. However,
that's only if you maintain a Canada student loan and a
provincial student loan.
When you first get a job, if you decide to go to a
bank like CIBC, for example, to get a regular loan at
the prime lending rate and pay off your Canada student
loan, you're paying back the bank, so you're no longer
eligible for programs like interest relief because you're no
longer in any way associated with the Canada student
Ms. Raymonde Folco: Okay. Thank you very much.
The Chair: Mr. Thompson.
Mr. Greg Thompson (New Brunswick Southwest, PC/DR):
Thank you, Madam Chairman.
Going back to interest relief, the debt
load, and following up more closely on
Mr. Johnston's question, what is the secret for
students applying to negotiate interest relief?
I think the point he was making, which I want to
follow up on, is that today's interest rates are the
lowest they've been in 40 years, yet students are
paying back at very high rates, and some of those loans
go back many years. Is there any possibility of
lightening or easing the burden by reapplying for those
loans? In other words, if a student owed $35,000
dating back over the last eight to ten years, the
interest on that would be staggering and would be
choking them. Is there any easy way that can be looked
at and addressed?
A voice: Refinance.
Mr. Greg Thompson: We've heard that. We're
getting some side comments here, but we understand the
risk of going to the bank. Obviously, there's a risk
in doing that.
I want to hear from you, Mr. Cogliati, and I guess
my colleagues can interject at a future time. We want
to discount the idea of going strictly to the banks.
Mr. David Cogliati: Unfortunately, the way the
student loan agreements work right now, when somebody
negotiates, they negotiate for the life of the loan.
Unfortunately, it's a little bit like a mortgage. It
goes up and down and you negotiate for a year or two.
I'm unaware of any provision or any discussions with
Finance that would allow the rates to be renegotiated
over the 10-year period.
Mr. Greg Thompson: Okay.
Ms. Jennifer Anthony: I have a supplement to that.
There is one thing a student can do to drop their rate.
My understanding is if a student who has been in
repayment returns to school full-time and gets another
student loan, when they finish the second time they get
a combined rate. I wouldn't suggest a student go back
to school merely to get a lower rate, but I
believe—and I could be corrected—the student can go
back to school for a year and end up with a
significantly lower rate, and then go back to work.
Mr. Greg Thompson: One of the interesting things
I've noticed in the EDULINX brochure is their association
with their American counterpart or company. I guess I
want to get an understanding of that U.S.A. group and
their association with EDULINX.
What is the U.S.A. experience versus the Canadian
experience? In the U.S.A., education is
constitutionally the domain of the federal government.
In Canada, in absolute terms, it's the domain of the
provinces. What are the differences between those two
Do you find a difference in the
administration of the loans? Are there difficulties
from your perspective in administrating those different
jurisdictions in Canada called provinces, versus the
Ms. Sandra Ferguson: First of all, the U.S.A.
group, the Sallie Mae group, which is a 49% shareholder
of EDULINX, participates as a base of experience for
EDULINX in the student loan service bureau environment.
That's their particular role, not policy program
management. It really is for their experience as a
service bureau and in maintaining appropriate service
levels for the client.
The U.S. program itself is significantly different
from the Canadian program. It has remained a
guaranteed program, but with a lot of different
participation by different stakeholders. One of the
more significant differences between the two programs
is that the educational institutes pay a much larger
part in the program in the U.S. In fact, funds all go
to the educational institute and are then distributed
through that process.
There are different stakeholders. There are financial
institutions. There's a stakeholder group called
“guarantors”; if loans go into default, it's the
guarantor who then takes on the responsibility. In
addition, there's another whole group called “the
secondary market”, which then takes large groups of
portfolios and moves them through the process. It is
very, very significantly different from the Canadian
There is, though, the involvement of the states along
with the federal government. Although the roles are
different—the complexities of having states and a
federal government and provinces and a federal
government in Canada are different—nonetheless, this
does add complexities to the processes. But the two
programs are really significantly different when you
Mr. Greg Thompson: Yes. My time is up.
The Chair: Your time is up.
Mr. Greg Thompson: Thank you, Madam Chair.
The Chair: Madam Folco, do you have any other
Ms. Raymonde Folco: No.
The Chair: Then, Ms. Skelton.
Ms. Carol Skelton (Saskatoon—Rosetown—Biggar,
Canadian Alliance): Mr. Cogliati, you mentioned
earlier there's a 14% default rate. What is the
difference in this default rate between the private
institutions and the public institutions?
Mr. Cogliati: I'll give you some really rough
numbers, because I don't have them right off the top of
my head. Here are some really rough numbers that will
put it in context.
This default rate is not net, but gross. A certain
percentage will default at some point in time. They
don't all default the first day. At the university
level the ballpark figure is around 12%. At the
community college level the default rate is between 22%
and 25%. At the private institution level it's
slightly in excess of 40%. The overall weighted
average is somewhere in the low teens, around 14%.
We're dealing with the actuaries in the Office
the Superintendent of Financial Institutions. They'll
be putting out a report fairly soon, and the buzzword
they use is something called a provisioning rate, but
it's around 14%, give or take a half percent either
way. It could be as high as 14.5%; it could be as low
as 13.5%. As a point of comparison, the default rate
in the United States is below 7%.
Ms. Carol Skelton: Mr. Frankham, you deal with the
private schools then...your loaning. I understand the
majority of your students are very different from those
who go to university.
Is that correct?
Mr. David Frankham: Right. The terms are
generally shorter and so on.
Ms. Carol Skelton: And you deal with a lot of
single moms and people who decide one day they're
going back to school.
Is the default rate going to be that high? The way
you're now administrating it, is the rate going to be
Mr. David Frankham: That was the jump-off point
when we took over the portfolio. It's our intention to
drive that down significantly.
We view this whole area of debt management as much
more of a servicing and an education. We start very,
very early in our process, before consolidation even
occurs, to start educating students as to what options
they have and so on and so forth.
The other very encouraging thing for us has been
the level of support we're getting from the
private educational institutions themselves.
Perhaps under the old model they weren't consulted or
involved. As you know, these schools are smaller: they
know their students; they know the families; they know
where to get hold of students; and they want to be
very much a part of this because it obviously impacts
on their future as well. We intend to make significant
progress in improving this whole area of debt
management around private schools.
The Chair: Mr. South, you wanted to make a comment.
Mr. Robert South: If I may.
Mr. Cogliati can correct me if I'm wrong, but one of
the things it's important to realize with the default
rate is that when a student is said to be in default,
it means he or she missed a payment for a period of
over 90 days. It doesn't necessarily mean the
loan is never repaid.
Loans often go into default and then are repaid later,
particularly when the program initially...when it
wasn't a risk-shared program. When it was a 100%
guaranteed program, there were a lot of problems with
loans being listed in default, but in fact what had
happened was that some students had just moved—as
people often do when they are recent graduates from
university—and their financial records hadn't caught
up with them. This can take a period of over 90
days, so it pushed the default numbers up.
Mr. Cogliati, if I'm wrong, can certainly correct me.
Mr. David Cogliati: Mr. South is 100% correct.
Rob and I have dealt with each other a fair bit; I
find it odd that he keeps calling me “Mister”. But he is
correct. That's exactly what's playing itself out
Ms. Carol Skelton: With the integrated program in
Saskatchewan, if one of our students there has a
problem repaying a loan, who is held responsible for
it? Is it the federal government or the Government of
Mr. David Cogliati: It depends on what you mean by
having trouble repaying.
Ms. Carol Skelton: I mean if they go into default;
they can't pay their loan.
Mr. David Cogliati: Generally speaking, the loan
will have two components, a provincial loan and a
Canada student loan, and we're asking them to make one
payment as a result of integration. If they're not
making payments, then they're not making payments to
both of us. But from an administrative perspective,
this will all get passed through the National
Student Loan Service Centre. So in fact we're both
Ms. Carol Skelton: How was it before? Was the
federal government accepting responsibility totally?
Mr. David Cogliati: We were separate and distinct
entities. That's correct.
We're hoping that through simplification the
student will have access to better information and a
simplified repayment. We can disaggregate behind the
scenes if there are different interest rates, if there
are different amounts owed to each jurisdiction. It
will simply be one payment and we will disaggregate
behind the scenes.
Ms. Carol Skelton: Do I have any time left?
The Chair: No, but you'll probably get another
Ms. Carol Skelton: Thank you.
The Chair: Because there's no one on this
side, I'm going to take the chair's prerogative.
On the integration, we have Saskatchewan and Ontario.
How many other provinces are we close to reaching an
integration agreement with?
Mr. David Cogliati: I say this with a certain
amount of reluctance lest I jeopardize negotiations.
The Chair: You don't have to say which ones, just
Mr. David Cogliati: We're reasonably close to a
couple of others. We are having very preliminary
discussions with two others.
The Chair: And is there any chance you'll reach it
by this January?
Mr. David Cogliati: No. It's highly unlikely.
The Chair: Okay, what about next September?
Mr. David Cogliati: By next September we may.
The Chair: Good. Okay.
Mr. Robert Lanctôt: Thank you, Madam Chair.
I have two small questions, and one will be very brief.
Regarding transfers, if they are done six months later, the amounts
must be similar from year to year. I wonder a little why there is
no reimbursement before in the cases where there is interest paid
on these amounts due to Quebec. That is my first question. I will
come back to the second one.
Mr. David Cogliati: Unfortunately, I cannot answer. I don't
have the necessary information.
Mr. Robert Lanctôt: Is it possible to get them for the next
Mr. David Cogliati: Yes.
Mr. Robert Lanctôt: The preamble to my second question will be
a little longer. I know we often have the following problems. There
are students from here, wether from Quebec or from Canada, who go
to study abroad, often in programs subject to quotas. Otherwise
they would study here. Therefore they are often forced to go abroad
not by choice but because they are forced to, because they are not
accepted here as part of a program subject to quotas. That is the
case, among others, in medicine, even though we have a serious
shortage of doctors. Be that as it may, we have to live with that.
On the other hand, students from abroad come to study here and
they can benefit from the program. Of course it is a nice exchange,
and it's good if there are international exchanges. I think that
the students and the associations must agree on that.
Would it not be interesting, when we have surpluses, as there
are in Canada, to at least allow people who registered here—and it
is easy to check if thy are—, who have not been accepted and who
are forced to go abroad, to at least have the right to student
loans themselves? Would it be possible to do that for students from
Mr. David Cogliati: If I can respond—if I
understand the question correctly—Canadian students
can study abroad with the support of the Canada student
loans program. Landed immigrants who come here can
access the student loans. An area where we're doing a
little bit of work now is on convention refugees. But
a foreign student who is simply here studying is not
able to access student loans.
An interesting dimension with respect to Quebec is
that it specifically lists which particular disciplines
it will support for students studying outside the
province. If a student wanted to study nursing, for
example...there's a list of faculties or disciplines
that are supported and others that are not.
If I understand the question correctly, it may be
part of this dynamic where certain faculties and
disciplines are not supported because the province of
Quebec believes it already has adequate skills in those
Am I anywhere near the...?
Mr. Robert Lanctôt: Yes, that is right, quotas are part of
that. So what you are telling me is that in Canada, for your
program, quotas were not considered. Is there a difference between
Quebec and Canada? Is there a difference?
I know that in Quebec, when there is a quota, as I just
explained, there is a problem for students who go abroad. But you
are telling me you do not have that problem, you will always allow
students who go study abroad to have the same program.
Mr. David Cogliati: I'm not aware of any
restrictions on Canadian students studying abroad,
other than simply need. If there is a need
demonstrated, we do support students studying abroad.
Quebec does have certain restrictions based on
disciplines, so there's a difference between the way
the two administrations—Canada's and
Quebec's—administer financial support to students.
Mr. Robert Lanctôt: Thank you
The Chair: Mr. Spencer.
Mr. Larry Spencer (Regina—Lumsden—Lake Centre, Canadian
Alliance): Thank you, Madam Chair.
When you're this far down in line, you've had your
question beaten around a good bit, but maybe there are
still a few little loopholes here I can ask about.
I was going to ask about the process you use in
determining the interest rates on the loans. You've
described that—the fixed is 2.5% above prime and the
floating is 5% above prime. Why would that be?
Mr. David Cogliati: I may have misspoken. I
believe it's the other way around. I misspoke; it's the
Mr. Larry Spencer: Okay, it's just 2.5% above
prime for the floating.
Mr. David Cogliati: That's right.
Mr. Larry Spencer: Because I was going to
ask you.... Obviously they didn't want anybody to take
Some hon. member: Oh, oh!
Mr. Larry Spencer: I inquired last week at my bank
and the rate was only 1.5% for someone converting a car
Well that helps. We've straightened that one
We've also discussed the default rate of 14% or
thereabouts. When you appeared in one of our briefings
a while back it was also mentioned that one of the big
contributors to this loss rate was simply losing the
people. Where did they go? The banks were unable to
track them down.
So I want to hear from our two new providers how they
plan to keep track of the people better than the banks
do and to cut this 14% loss rate.
Mr. David Frankham: That's a very good question.
One of the cornerstones of the BDP's approach as a
service provider, and around this whole area of default
management, is our high reliance on technology. We
have built a state-of-the-art system purely for student
loans. It has not been a bank system that's been
modified to try to fit it to the handling of student
Our system has a high degree of capturing information.
Every time we're talking to a student, every time we
correspond with a student, any time a school inquires
about a student, it is recorded and captured. As well,
we're capturing next-of-kin information, which is very
powerful in trying to track down a student, if you know
where the parents or the brother or sister are, and so
The two cornerstones of our efforts are to use
technology to keep track of every conversation and to
work with the very regimented, structured communication
program we developed.
As I say, it starts right from day one in terms of
servicing that student, and every conversation is
recorded and noted with that student. Right through to
the time six months before the loan is consolidated,
we're actively phoning that student, explaining the
options to that student. We want them to actively
participate in signing the agreement—to say, “Yes, we
have a debt; we acknowledge that.”
Our real strength has been—and we've demonstrated
this with other clients we do student loan business
with as well—that if you get the student to make the
first payment, you're 90% of the way there. We have
historically improved first-time default rates by over
50%. I think we can do a significant job in that whole
area—on the private side in particular.
The Chair: Ms. Ferguson.
Ms. Sandra Ferguson: Thank you. I think
technology and retaining information comprise part of
the support mechanisms you need. But we believe
educating the borrowers is one of the most important
responsibilities we have as a service provider. That
starts almost before students take out their loan
applications. Part of staying in contact with the
students and making sure they're proactive on their end
as well is making sure they understand they're applying
for a loan—that there are responsibilities on their
end, as well as on the end of the service provider, to
EDULINX does information sessions at post-secondary
educations—and high schools as well—preparing
students to enter the world of having financial
obligations. We have pamphlets and brochures that are
distributed across the country. We participate in a CD
with a group called Hobsons. It gives
information on what it means to apply for financial
assistance, what the obligations are, and then how you
can manage, what financial assistance you can get
or—as we've talked about today—interest relief. It's
really about staying in touch with the students
all along the way, making sure we have communications
even before they apply for a student loan, so they
understand what they're getting into, so they can make
informed decisions about applying for a loan.
As we stated before, this is a very complex program.
These are unsophisticated borrowers simply because of
who they are. They're often young. This is often the
first time they have any sort of credit available to
them, and there's detailed understanding required in
the program. There are many avenues by which you can
stay in touch with the borrowers, both before and after
they take out their financial loan and obligation.
The Chair: Ms. Anthony would also like to
Ms. Jennifer Anthony: If I may, I'll make just a
couple of really quick points. One is I don't think
it's fair to call it a 14% default rate if you take the
private college default rate out of the numbers. It
has a significant impact on driving the number up to
14%. I think the distinction between private
institutional borrowers and public institutional
borrowers should be made every time this is talked
about. I wanted to make that point.
The reason private school students are not repaying
their loans is not that they're somehow less
financially able or less morally capable, for whatever
reason. It's that they're getting bad training at
private institutions and are therefore not able to find
jobs. It's a problem with a private system, and it
also is a problem with—to be honest—a private service
provider. It's part of the reason why it would be our
preference—the preference of the Canadian
Federation of Students—to return to a fully
publicly administered program.
What we see in the private college system is not that
dissimilar—the lack of accountability and the lack of
transparency—from what we will see in the private
service provider system. When it comes to repayment of
loans, the most recent number I know—and there may be
a more recent number that you may be able to
provide—shows 93% of student loans are eventually
repaid, as compared with 45% of Industry Canada loans.
I think we need to be really clear that these loans are
actually being repaid, in particular those taken out by
students who are in the public system.
The Chair: Your partner is going to have another
shot, so maybe she can ask some of your
Ms. Libby Davies: Just a couple of quick questions
to follow up. Jenn made a point earlier about the
possibility of shifting the hold responsibility to the
final step so that money can be deposited
immediately when the disbursement date expires, so that
students can meet the deadline.
I guess I wanted some advice as to whether or not we
can do that by recommendation, or whether there's
actually an agreement, because it seems there's been a
fair amount of goodwill to actually look at this
program and what changes need to be made. Maybe you
should respond to that and tell us whether you're going
to do it, and if not, we'll have to recommend it.
Mr. David Cogliati: It's being done while
we speak. Yes, we are absolutely going to do that.
We're going to back the start-up to before the
do-not-disburse date. Our target is to put the money
in the account the day after the do-not-disburse-before
Ms. Libby Davies: Okay.
Mr. David Cogliati: So if the do-not-disburse date
is the first day of classes and they get their
application in on time, the money will be disbursed
into their account electronically the next day. Just
backing everything up is what we're trying to do.
Ms. Libby Davies: Okay. I have a follow-up.
The Chair: I think Ms. Orum has a
Ms. Jennifer Orum: We're
very pleased to see what David has announced.
Our concern, though, given our experience, is that
right now there are too many steps. That is, once the
National Student Loan Service Centres process a loan,
it has to go to the Canada student loans program and
then Public Works and Government Services Canada. Then
at the moment, as we've heard, it is couriered to the
We believe there are several improvements that can be
made in that sequence of events. One of them we
believe should be looked at is to take out of that
process, at the level of individual students,
the Canada student loans program step and the Public
Works and Government Services step.
The reason is that, in my understanding, the service
providers in this room are able to deliver provincial
loans into the student account much faster, because
they are given the right through provincial authority
to have either a line of credit or a transfer of funds
from the provinces allowing those extra steps not
to be in place. This is why we referred to the Financial
Administration Act, and particularly section 33.
Perhaps it could be looked at to see if possible—and
it may not be—whether the steps through the Canada student
loans program and Public Works can be skipped. It's
been proven to be much faster.
We are a bit disappointed that under the old programs,
risk-shared, the turnaround time for students was
faster. We're optimistic there are ways that can be
The Chair: Mr. Cogliati is very anxious to reply.
Mr. David Cogliati: I could possibly comment on
that. We are indeed looking at it.
Jennifer is quite correct that the hang-up right now
is the Financial Administration Act. Unlike the banks,
which are doing this and can make a turnaround in 48 to
72 hours, we do have to respect the conditions of the
Financial Administration Act. There are two sections
that HRDC has to look at, sections 33 and 34. Then
it's passed on to Public Works as the government
disburser of funds.
During the recent public service strike, one of the
contingencies we were seriously looking at was the
setting up of a line of credit at the two service
providers, in effect jumping over the Financial
Administration Act and doing a cleanup afterwards.
If we got into a situation—and of course getting
money into the hands of students in the month of
September is absolutely critical.... Unfortunately,
the Canada student loans section is not declared an essential
service. I think all those essential service
designations happened before we went to direct loans.
But we have seriously looked at that eventuality of
moving a large credit into the personal bank account of
Some hon. members: Oh, oh!
Mr. David Cogliati: —no, a large credit into
EDULINX and/or BDP so that they could directly disburse
the funds. So we're working on it.
I can't promise we can get around the Financial
Administration Act. I would never suggest we're trying
to get around it. The issue is whether we can delegate
some of those authorities out.
Ms. Libby Davies: As a follow-up, I wanted to come
back to the private institutions, because I personally
don't know as much about how they work. I do know just
from the casework in my own office some of the really
quite awful stories of students who have gone to a
private institution for some sort of career training or
vocational training and really got ripped off. Then
they get into absolutely severe difficulties, because
they still have a loan but they actually didn't get
what was meant to be delivered to them.
I know there's a provincial accreditation program, but
because this is still part of the Canada student loans
program, does the federal government have any leverage
in terms of monitoring those institutions—particularly
where you see there is a higher default rate because
the institution is not performing in some way? What
can the federal end then do as a lever in terms of
examining what's going on and providing some
Mr. David Cogliati: It's an excellent question.
The provinces are responsible for the designation of these
institutions, and we've worked quite closely with them
to try to get a national designation policy in place.
Part of the move to direct loans forced, I think, the
federal government and certainly all those provincial
governments that are in the direct loan business...some
of the eastern provinces are still associated with
banks; for the most part, Ontario and the west have all
gone to direct loans.
To take a really serious look at portfolio management,
Ontario started to do some things around the private
institutions in Ontario that tie eligibility for
student loan access to the performance of previous
students in paying back those loans. I'm not saying
we're going that far yet, but we're having discussions
with all of our provincial counterparts.
I sit on a couple of working groups, and one of them
is called the Intergovernmental Consultative Committee
on Student Financial Assistance. We're looking
specifically at designation policies to try to deal
with some of these private sector issues.
Ms. Libby Davies: Am I correct that this would
again be on a province-by-province basis, where you have
worked out an agreement for some sort of integration?
Mr. David Cogliati: The way it would work, if we
can get it all to work, is to have a
standardized set of principles that each province could
try to accept and tailor to their own individual needs.
So if a particular institution is either
designated or de-designated in the one province,
another province would accept that designation or that
de-designation. We would try to get a certain minimum
standard that all the provinces would adhere to.
Without belabouring it, it is fairly political. It's
really not a designation policy that we're working
with. It's a de-designation policy. When you remove
designation you're removing jobs, sometimes in small
communities, and you're removing access to higher
education for some people who may not have the marks to
get into the public institutions. So in some ways,
like anything else, there are some
very good private institutions and there are some
that are not so good. They're stuck with that.
The Chair: Your five minutes is up.
Ms. Anthony, I know, wants to respond.
Ms. Jennifer Anthony: On the issue of
designation and de-designation, right now the
Province of Nova Scotia is considering
de-designation legislation. They're considering it for
public institutions, which is a real problem.
The students who attend the University College of Cape
Breton, for example, as you might imagine,
have particularly high default rates.
It's an economically disadvantaged area of the country.
There's an incredibly high percentage of students at
that institution who actually receive student loans.
So I want to clearly state the
position of the Canadian Federation of Students, for the
record, in this committee. While we support the
complete de-designation of private institutions for the
purposes of Canada student loans, we do not support
the de-designation of public institutions.
The Chair: Ms. Skelton?
Ms. Carol Skelton: I will go back to private
institutions because I know we have an organization in
Saskatchewan that represents the private colleges. I
was very impressed with that group of people that did
come in. I know the demographics of their students are
totally different from the students who attend the
That was my point.
I want to ask Mr. Cogliati a question.
Is the purpose of the interest that you charge these
students totally to cover
the cost of the program only?
Mr. David Cogliati: I really don't know the
derivation of the interest.
We've been charging interest since 1964.
So I don't know the philosophy or the
rationale behind what specific rate was charged, unfortunately.
Ms. Carol Skelton: I'm just wondering how much
money you were making off this. Could the government
afford to lower student interest rates?
Mr. David Cogliati: I don't know if we make money
on this, to be honest with you.
Ms. Carol Skelton: I am curious. It
is a question. I just wondered how much money the
government is making off that interest that's being
charged to students.
Mr. David Cogliati: When the actuaries
produce their report on provisioning there will be a
section in there that articulates how much money is
loan, how much interest income is generated as a result
Of course, that's offset by how much you lose by the
defaults and the cost of administration.
The Chair: I think on that particular question Mr.
South wanted to add something.
Mr. Robert South: I'm sorry. I hope you don't
mind me adding a comment.
The Chair: No, please.
Mr. Robert South: I can provide a little history.
I can't provide the answer for Mr. Cogliati
either on whether money is being made or lost in
The current interest rates that came into effect,
though, came into effect when we moved to a risk-shared
system with the banks in the mid-nineties. The Canada
student loans program, at the time, was obviously
enduring certain costs because they pay the interest
while students are in school and for the first six
months afterwards. Those interest rates were designed
to take into account the costs that the Canada student
loans program was covering. The banks could make
money off the program; they had certain targeted
amounts they wanted to make.
The banks that were involved in the program
never released figures on whether they made money or
how much money they made. We tend to sense that they
did indeed make some money, but they didn't make the targets
they wanted to.
When we look back further into the history of the
program—and this is the important point that
CASA would like to make—the interest rates on this
program shouldn't be based on a figure of
whether it's profitable or not. This is a
social program trying to help to make sure that all
Canadians have the opportunity to participate in
At one point in time, funnily enough, interest rates
were linked to Canada Savings Bond interest rates;
they were a set percentage above Canada Savings Bond
interest rates. I don't know the rationale for that.
There's never been a set rationale for the
program on why interest rates are what they are,
except for the most recent ones that were instituted,
as I said, when the banks joined the program on a
risk-shared basis so that the banks could meet their
own targets for revenue.
Ms. Carol Skelton: Are the integrated loans more
costly to administer?
Mr. David Cogliati: No. Because of the
simplification, they're actually less costly. Instead
of having two administrations we've joined it and
there's a certain degree of—
Ms. Carol Skelton: So there's another good reason
why we can lower interest rates.
Mr. David Cogliati: I guess.
The Chair: Before I thank everyone, is there
any witness who wants a short opportunity to respond
Ms. Carol Skelton: Another question just popped
into my mind.
Robert, do you represent students from private
Mr. Robert South: No, we represent public
universities and colleges.
Jennifer, how about your organization?
Ms. Jennifer Orum: It does include financial aid
administrators from private colleges.
Ms. Carol Skelton: And Jennifer two.
Ms. Jennifer Anthony: There's no way for a student
organization to actually represent students at private
colleges because, for the most part, they're not
allowed to have student unions. The student
movement is organized through student unions, but they're
generally not allowed at private institutions.
Ms. Carol Skelton: Good. Thank you very much.
Ms. Jennifer Orum: I would like to add to the
point we just discussed on the issue of the interest
rates. We would very much like there to be a review
for a number of the points made.
We are in fact optimistic, based on the requirements
of the contract for very proactive and user-friendly
services with students to encourage repayment. We do
believe there will be a significant reduction in
default rates in both the public and private education
systems, together with other things happening within
our financial environment and the issue of integration,
which we are optimistic will also have a positive
impact on default rates. We believe it gives a great
deal of reason to review the prime plus 2.5% and the prime
plus 5%. We would recommend a regular timing of
reviews of the interest rates that would be built into
the system to take into account these developments.
The Chair: Sandra Ferguson.
Ms. Sandra Ferguson: Madam Chair,
honourable members, EDULINX would like to
thank you for listening
to us today and thank the program officials for
allowing us to come and participate as well.
The Chair: On behalf of the committee, I
want to thank everyone who made the effort to
On a personal note, I'd be very interested in
hearing back from some of you after the January round
of loans. Perhaps, if the committee can arrange it, we
might have an opportunity when we come back after our
break to have some of you back again to see just what
progress has been made.
The meeting is adjourned.