CSD calls for audit of CSLP Program

Canada Student Debt has requested the Auditor General to investigate the Canada Student Loan Program.

The reasons for requesting an audit is as follows:

- Is HRDC aware of and following its own regulations? No.
- Is HRDC being financially responsible with this program? No.
- Are the clients being served properly by this program? No.
- Is the program meeting the needs of borrowers? No.
- Are debtors able to make payments? No.


In summary, the Canada Student Loan program has seen major changes in the last 5 years. First it was handed over to the banks. They backed out. Then it was privatized and now the company that won the contract (Edulinx) is in the process of backing out. (Even though they are required to provide service, they have let go almost all of their middle management, have only temporary workers being hired, and still have an acknowledged problem of lost forms) The basis of the complaint is as follows:


There is a fundamental problem with the contracts that HRDC negotiates with the service provider that leaves the debtors vulnerable. The contracts with the banks, and with Edulinx make if favorable and more profitable to default the borrower than to continue working with them. The costs of administering a loan are low while the student is in school. The costs to the service provider rise after graduation. If the loan can be defaulted, the loan is sent back to HRDC who must pay the collection costs. There is absolutely no incentive for the service provider to work with the debtor.

HRDC negotiated the Edulinx contract on a “payment per call” basis. As a result, Edulinx employees tell debtors to call back thus generating more revenue rather than resolving the problem. Call centre employees are given quotas of calls to fulfill. Newspaper articles have shown that Edulinx has not provided the service required.

According to HRDC’s own figure, 2% of files per month are mismanaged. This means that 24% of files are mismanaged each year. This is an unacceptably high number . It is likely much higher that reported.

HRDC has lost control of its collection activities resulting in extra costs to the government and blocking debtors from making payments. Collection agencies refuse to accept payments even though they are required by HRDC directives. HRDC has been ineffective in managing its collection resources.

It is suspected that the banks over billed HRDC for millions of dollars. The over billing is clearly stated in the 2001 Actuarial Report on page 51 “Using the information from the banks on portfolio, the risk premium for the loan year 2000-01 should be $78.1 million. The banks invoiced for $83.6 million for the same loan year.

The purpose of this program is to help individuals attain an education. Due to mismanagement and errors, people are being forced out of school, their credit ratings are destroyed. There is no policy or procedure in place for reversing errors.

The National Student Loan Centre has a serious document tracking problem, repeatedly loses forms resulting in incorrect defaults, forcing people out of school and destroying credit ratings.

The reporting of student loan information to credit bureaus should be stopped due to the lack of benefit to anyone other than the financial institutions. Due to the high error rate, this process should be stopped immediately. This matter is being investigated as a class action suit against the service providers and the federal government. Recent case law points to very high liability for service providers and the federal government.

HRDC refuses to negotiate payment terms as required by the legislation, thus increasing the cost of the program. Inflexibility is harming both the program and borrowers.

CSLP borrowers do not receive any statement of payments, interest, or outstanding balance. Requests for statements are ignored.

Finally, from the information I have gathered, the cost of defaults is being borne by borrowers who can pay their loans. HRDC is trying to offset the cost of defaults through a high interest rate.

HRDC states that there is no provision for loan forgiveness in cases of disability or extenuating circumstances of exceptional expenses. Even those who qualify under the disability program are denied loan forgiveness, despite legislation and regulations that state this is possible. At one time HRDC was denying disability forms to debtors on the basis of a regulation that did not exist. It took 8 months of lobbying and the intervention of the Canadian Press to get the appropriate forms for some clients. The government actuarial report uses the term “loan forgiveness” and clearly states that the minister has the right to provide this option.


Based on the above concerns, I believe an audit of this program is necessary. The program is out of control and is harming people. The stress on people’s mental health is another cost to this program that can not be measured, but is clearly evident in the correspondence I receive on a regular basis.

Clearly, the Canada Student Loan program has been mis-administered and is a mess. The contacting out of this program needs to be evaluated and the damage done reversed.



Your suggestion to write to the minister has been the subject of previous efforts. Unfortunately, most of our letters go unanswered and I am unaware of any effort by HRDC to fix this problem. Our request to have the problem of lost forms fixed has been ignored, even though there have been numerous newspaper articles on the subject.



Thank you for your time and consideration of this matter and passing on this information to your audit inspectors for review.