HRDC backtracks on non-existent rule.

Newspapers - July 2002

OTTAWA -- Federal bureaucrats were wrong to refuse help to debtors who couldn't repay their student loans after becoming disabled.

For years, disabled debtors who missed payments or declared bankruptcy have been automatically shut out of debt forgiveness programs.

Justice Department lawyers have confirmed the government's own policy didn't justify the exclusions, Dave Cogliati, director general of the Canada Student Loans Program, said in an interview.

Dozens, perhaps hundreds, of cases weren't considered because of a policy misinterpretation, he said.

Those who meet strict qualifications may be relieved of all or part of their debt.

"We've given the direction to the program to go back, search for any students who may have been in that situation, and to contact them," Cogliati said.

He doesn't want to raise false hopes, "but by the same token, we want to give people a fair shake.

"We're trying to do the right thing here."

While 85 per cent of students repay their loans, critics point out that tuition hikes and grant cuts mean graduates leave school with more debt than ever -- about $20,000 after four years, on average.

Those who get sick or fall on hard times can no longer shake student debts through bankruptcy. The government toughened laws in 1998 so that student loans can't be discharged until 10 years after studies cease.

And since 1995, the government will only consider giving a break to newly disabled debtors who incurred a permanent disability within six months of leaving school.

Before 1995, there was no time limit.

For able-bodied borrowers, the government offers a range of interest and debt relief -- but only to those who've kept up with payments and haven't declared bankruptcy.

That restriction was wrongly applied to those who develop disabilities, Cogliati said.