Coalition responds to CSLP attempt to discredit it

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   17 November 2007 - BORROWERS:
YOU'RE WINNING THE FIGHT FOR FAIRNESS! 

The Canada Student Loans Program is getting worried that your collective voices demanding loan reform are having an impact.  
In its most recent attempt to indirectly discredit the Coalition, the CSLP posted an article in its "What's New" section of the Canlearn.ca website (on 17 November 2007) claiming to offer 'the facts' 
on its interest policy.  The link is here:
http://www.canlearn.ca/cgi-bin/gateway/canlearn/en/home.asp

Of course, the CSLP's presentation is intellectually dishonest -- here's what they say, as well as what they 'forget' to say about student loan interest:

CSLP STATEMENT: The CSLP charges no interest on loans when students are in school. (The insinuation here is that borrowers should be happy to pay between 8.75 and 11.25 percent in interest when in repayment because they didn't pay any interest when in school.)

COALITION RESPONSE: 
(1) Many developed countries charge no interest on student loans when borrowers are in school AND when they are in repayment.  
(2) For those countries that do charge interest on loans when in school, many charge a far less in interest than Canada -- often less than half the rate we are currently billed.
(3) The government forgets to mention that its current interest rate on loans repayment is about 4.50% HIGHER than what it pays to borrow the funds from the Bank of Canada.       

CSLP STATMENT: Its interest rate on student loans is actually 1% to 1.5% less than 8.75 (floating) or 11.25 (fixed) because the government offers non-refundable tax credits on a portion of the interest paid annually. 

COALITION RESPONSE: 
(a) Tax credits only help those who have a high enough income to pay taxes
(b) Both the Millennium Scholarship Foundation and the Educational Policy Institute have said that these tax credits are ineffective and often benefit those that are least in need.
(c) The tax credit is only 15.5% of the total interest paid annually.
(d) If you consolidate your government student loan into another debt to lower your interest rate, you lose the tax credit.
(e) The government avoided giving 36 million dollars in tax credits on loan interest in the past few years by converting interest paid into principal so borrowers no longer qualified for a tax credit. (See Canadian Press article on issue of interest charged during the six-month grace period).

CSLP STATEMENT: Borrowers who need help can apply for Interest Relief and Debt Reduction.

COALITION RESPONSE:
(a) Almost 85,000 people were turned down for Interest Relief in the past four years--20,000 of those borrowers ended up in default.  The fact is that Interest Relief is very difficult to get.
(b) Debt Reduction in Repayment is only available if you exhaust all Interest Relief, which we've already shown is difficult to get.  Only 36 million was awarded in DRR in 2004/05--which is, of course, virtually nothing out of a 1.9 billion dollar annual student loan budget.

CSLP STATEMENT: Borrowers who can't pay their loans can extend their repayment period--18% of direct-lend borrowers have since 2000.  The CSLP default rate has also reduced in recent years.

COALITION RESPONSE: According to an Access to Information request we completed this year, the feds have pocketed an additional $400 million in interest as a result of borrowers extending their loans repayment periods. In other words, extending your loan repayment period will cost you thousands more in interest--this is not really a benefit to borrowers!  Extending contracts has lowered defaults slightly; the government, in effect, is taking credit for reducing loan defaults while at the same time pocketing millions more in interest each year on the backs of those who can least afford to pay!  

FACT: Minister Monte Solberg refuses to meet with the Coalition and has never responded to our repeated requests for an interview.