All Posts Tagged With: "Coalition for Student Loan Fairness"
Student Loans 101
They can be a wise investment. Discover how to get the most out of them.
If you’re a first-year Canadian college or university student, you’re probably not old enough to buy a drink. If you’re under 18, you can’t vote. You can’t get your own credit card. But as early as age 16, you can sign your name to a contract that offers thousands of dollars up front, and, if you read the fine print, promises years’ and even decades’ worth of financial obligations after graduation. It’s called a student loan. Forty per cent of full-time post-secondary students receive government student loans each year. Many don’t understand what they’re getting into—or how, if they’re not careful, they can end up with crippling, life-altering debts.
See also: Student Finance 101
Here’s the big picture: according to the most recent data, 350,000 students borrowed an average of $5,631 in federal loans during the 2005-2006 academic year, a jump of 17 per cent from the year before. The average newly minted bachelor’s degree-holder graduates with over $20,000 in government student loan debt, which will take her 9½ years to pay off.
For many students, attending college or university wouldn’t be possible without student loans. The Canada Student Loan Program (CSLP) offers funding to students whose expenses exceed their resources. In most provinces, when you apply for a CSLP loan, you’ll also automatically be applying for a provincial loan. There are limits on how much you can receive and under what conditions—and the system is designed to supplement your own finances, not cover the entire cost of your education.
The maximum annual amount you can receive varies by province, institution and program; the lifetime maximum limits student loan funding to 340 weeks of study up to $50,000 unless you are a doctoral student or have a permanent disability. In most cases, you will be eligible for a maximum of 60 per cent of what is called your “assessed need” from the Canada Student Loan Program; you may also be eligible for additional funds in provincial loans. To determine your assessed need the CSLP calculates the cost of your tuition, books, housing, food, and other expenses and then subtracts your resources, including savings, assets, part-time work income, parental income, and awards. You can estimate your assessed need with the online calculator at canlearn.ca.
If you’re expecting a loan, have a backup plan. Many students get a nasty surprise when they discover that they won’t be receiving as much funding as they’d hoped for. This can happen for a variety of reasons. For instance, whether or not your parents are helping to support you, parental income matters when applying during the first four years of study. Some students get caught in the middle-class gap: their parents don’t earn enough to help pay for school, but they do earn enough to reduce the size of CSLP loan.
Depending on your financial situation, you may want to consider other forms of debt. Many students get both government loans and a student line of credit from a bank. Lines of credit (LOC) are more flexible than student loans since you can borrow only what you need, when you need it. If your parents co-sign the LOC (which they will likely be required to do), the interest rate on an LOC may be lower than on your student loan.
Educating Jim
Flaherty’s Feb 26 budget promises big news on student loans, scholarships, new money for research
The Conservative government may reduce the interest rate on Canada Student Loans in the 2008 budget to be released next week, according to sources close to key decision makers.
Monte Solberg, minister of Human Resources and Social Development Canada, has said to expect major policy changes for the Canada Student Loan Program in the budget. The announcements will be the result of a year-long review of the program conducted by Solberg’s office. But the government has been very quiet on just what these changes will entail.
Be here on February 26 starting at 4pm EST for full coverage of the 2008 Budget.
However, multiple sources say that the government may reduce the interest rate on federal student loans. The budget is also expected to include major announcements about research and development funding and the future of the Canadian Millennium Scholarship Foundation.
“We’ve heard that interest rates are a key priority for the government,” said Julian Benedict, co-founder of the Coalition for Student Loan Fairness. His advocacy group has been pushing for the elimination or reduction of interest on student loans. Benedict also expects policy changes that will assist graduate students, with an emphasis on technology research.
Alberta’s Progressive Conservatives announced a plan to cut provincial student loan interest rates in their post-secondary education platform this week. Nova Scotia also recently slashed rates.
The federal student loan program has received considerable criticism in recent months stemming from media reports claiming that the system is “broken.” For instance, Maclean’s reported that two thirds of applicants are being denied the student loan disability assistance program even if they receive disability support from their provincial government.
Critics have also drawn attention to the program’s interest rates and alleged poor customer service and communication. Some borrowers have been forced to file freedom of information requests to get information about their own loans. Others brought complaints directly to their MPs after not being able to resolve them directly with the program. This has lead to critics calling for a student loan ombudsperson.
Solberg’s review was announced in the 2007 federal budget. Although critics feared that the scope was too narrow — addressing only bureaucratic efficiencies — it seems that through consultations it has heard about problems with everything from costs to ineffective programs.
“I think there is a pretty good chance that the government will reduce the interest rate on student loans,” said Ian Boyko, campaigns coordinator for the Canadian Federation of Students. While Boyko believes that reducing the interest rate would alleviate pressure on borrowers, he is hesitant to applaud the move. “We wouldn’t consider that as a significant attack on student debt.”
The CFS has been lobbying the government to launch a federal system of needs-based grants. The organization argues that it is the upfront costs of education that prevents young people from accessing post-secondary. “There is a certain sticker shock, or debt aversion, that many families experience,” said Boyko.
This sentiment is also behind the CFS’ position on the Canadian Millennium Scholarship Foundation. The mandate of the foundation that awards federal scholarships and bursaries is set to expire in 2009 and an announcement about its fate is expected on February 26.
The foundation has distributed half a million bursaries and scholarships worth about $2.2 billion since 2000. $325 million is disbursed annually.
The CFS has long opposed the foundation, accusing it of being unaccountable to taxpayers because of its status as a private foundation. They have urged the government to replace the foundation with a government-run, needs-based grant program.
Denise Savoie, NDP post-secondary education critic, called the foundation a “fundamentally flawed vehicle for delivering financial aid” in a January open letter to Minister Solberg. She explained in an interview that regardless of the fate of the foundation, it’s crucial that the funding stay in some kind of grant system.
Many other student groups have urged the government to extend the foundation’s mandate. The Canadian Association of Student Associations says students are concerned about the “looming $350 million hole in Canada’s financial aid system.” The government should commit to the future funding of the Foundation, which significantly affects accessibility to post-secondary education, according to the group.
Although the Coalition for Student Loan Fairness does not have a position regarding the Canada Millennium Foundation, Benedict cautions that rolling the program into the Canada Student Loan Program could be dangerous. “We have serious questions about the ability of the Canada Student Loan Program to even manage the programs it has effectively,” he said.
Although relief may be coming for borrowers, further increases in transfer payments to provinces to fund universities and colleges are not expected. “We know that the $800 million they announced last year is coming,” said Savoie. “There will no further announcements.”
Boyko acknowledged that the $800 million was substantial but cautioned that a framework was necessary to ensure that the transfer payments actually go to post-secondary education, not other provincial projects.
Savoie is also concerned about the possibility of changes to research and development funding. “I’ve been hearing from quite a lot of people – not just universities – that they are concerned about the way research is going,” she said. “We have to find a way to ensure that research funding doesn’t just go to an organization that happened to agree with the ideology of the government.”
