NO INTEREST? I’M INTERESTED

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By Olivia Collings and Lane Wade

Last Wednesday, the Canadian Federation of Students unveiled a digital debt clock atop Parliament Hill showing the accumulated debt load of Canadian students, an amount which exceeds $10.7 billion.

On Canadastudentdebt.ca, an excerpt from a Canadian student loan horror story reads: “I had to drop out of school due to the extremely high costs of university in the beginning of my fourth year…Three hundred kilometres away from my parents, I was broke, depressed, frustrated and just wanted to focus on the basics; shelter and food.”

Outside of Canada, students from Australia and Britain have a financial advantage: They don’t have to worry about their debt loads until after they graduate, and then, only when they make an annual income over a certain threshold.

Their governments sponsor a system called Income-Contingent Repayment plans, a large-scale payment support plan offered to all post-secondary students. The movement toward an ICR system for Ontario has been gaining momentum in the past few months, with 17 touring town hall meetings of the Rae Review, which has travelled across the province to discuss current problems with the design and funding of post-secondary education in Ontario.

Final submissions will be made to the premier and minister for training, colleges and universities in early 2005. During a recent town hall meeting in Mississauga, former Ontario premier Bob Rae said that higher education is a significant social and public good, and that study-now pay-later plans may be beneficial for those in Ontario.

“The income contingent repayment plan is one method where your repayments are based on your ability to pay-if you don’t have the money, you don’t have to pay,” said Rae.

According to the Canadian Federation of Students, who recently received a background document from HRDC through an Access to Information Request, the government of Canada may be close to testing an ICR system in Ontario. The document examines the pros and cons of a system in the Canadian context. CFS chairperson George Soule is wary of the ICR plan, and said that it would allow institutions to offload their funding problems onto students and governments.

“It’s not considered a student assistance strategy, it is a strategy for funding colleges and universities,” said Soule. “You would end up paying more through the compound interest payments.” Australia has been using a repayment system since 1989 (prior to this, post-secondary education was free).

The Higher Education Contribution Scheme requires students to contribute 25 per cent of the cost of their education, while the Commonwealth contributes the rest. All students regardless of family income can nominate to pay their tuition once they have completed their degree. The accumulated debt is indexed to maintain its real value but is otherwise interest-free.

According to a 2001 study called Paying Their Way: A Survey of Australian Undergraduate Student Finances, the HECS system helps those who are unable to afford the rising cost of post-secondary education.

“HECS received considerable support among students as an alternative to the payment of upfront fees…The students who were most likely to make use of the deferred HECS option were those with relatively disadvantaged financial circumstances.”

The U.K. offers another example of a form of Income Repayment, in the form of non-repayable government grants. For Manchester University student Sarah Cusworth, the advantage of not having to pay for university now means that she can attend university while only working minimal hours a week, allowing her more time to focus on her course work.

“I think it’s fair that we pay back our loans as long as it stays at a good rate and doesn’t increase,” said Cusworth. Implementing an ICR system across Ontario has its advantages, especially for Ryerson students who face the daunting task of paying exorbitant, up-front fees at the beginning of the term.

With the Ontario Student Assistant Program, students start repaying their tuition fees six months after graduation regardless of income (although some with low income can appeal for 3-year deferral under the Interest Relief Program).

A major critique of an ICR system is the time line involved with paying off the debt, even if it was catered to income or circumstances. According to Rebecca Rose, RyeSAC vice president education, those who have a lower income after graduation would be disadvantaged.

“The plan would disproportionately affect women and minority groups who received lower incomes in the workforce, and would affect the amount of time they would be repaying their student debt.”

Income-Contingent Repayment in the U.K. Australia and the Higher Education Contribution Scheme
United Kingdom instituted an ICR program in 1998. Government provides grants of up to $6,000 for the lowest income students from households earning $34,109 or less. In addition, any institution charging tuition fees of $6,700 must provide bursaries of at least $6,700. Some students who qualify will receive almost $15,700 in non-repayable support each year. Payments begin when students reach a $33,500 income threshold after graduation. HECS was established in 1989 by the Australian Commonwealth Government to reform the universities and those disadvantaged by the system. Some universities before HECS were charging $28,500. HECS is banded, according to expected earning power after graduation. Band 1 includes social science courses; Band 2 includes math and engineering courses; Band 3 includes law, medicine and dentistry course. Minimum income for repayment: $32,000

Ryerson President Claude Lajeunesse is more optimistic. “In principle, it is a very good way of providing support to institutions and doing it in a way that does not penalize students, nor does it penalize those who cannot afford to pay the full fees at the start,” said Lajeunesse, who feels that strong co-operation at all levels is key.

“If it was well done, well administered, and if issues were dealt with in the right way, it could work…the problem is not really on the university, it’s on the government who would have to provide the support.”

Lajeunesse was involved with the ICR issue in 1995 when he was president of the Association of Universities and Colleges Canada.

“In the end, the devil is in the details, and some of those details are so enormous that 10 or 12 years ago, the last time this was seriously looked at, people felt that they didn’t have the solutions,” said Lajeunesse.

“Maybe now, we will be able to work those details out.”

Provinces across Ontario will be looking to 2005 for the results of the Rae Review.

By that time according to CFS calculations, with Canadian student debt accruing at $1,000 a minute… you do the math.

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