Ottawa collecting on student loans even after borrower dies, figures show

2 days ago

TORONTO - The federal government is collecting thousands of dollars from student loans even after the borrower has died, new figures show.

Advocates of student loan reform say Ottawa should end the practice, which often results in collection agencies seeking to recoup the funds from grieving parents and family members.

"We don't believe the government should be harassing the parents and families and friends of dead student-loan borrowers for cash," said Julian Benedict, founder of the Coalition for Student Loan Fairness.

"We think it shows an indifference and a lack of respect for the dead."

A hundred accounts belonging to dead borrowers have been sent to the Canada Revenue Agency for collection since 2002, according to documents obtained by the coalition under Access to Information legislation.

The agency managed to collect $14,645.53 of the borrowed funds over the last six years, the figures show.

The practice is limited to funds borrowed under the "risk-shared" loan system between 1995 and 2000, when the government and banks jointly shared the risk of guaranteeing the loan.

That agreement ended in 2000 when the government began to directly finance all new student loans.

The government can collect on risk-shared loans if the borrower dies or becomes permanently disabled six months after the student completes their studies, according to Human Resources and Social Development Canada, which handles the student loan program.

That rule doesn't apply to funds borrowed under the current direct lending program, which forgives the loan if the borrower dies.

"This compassionate benefit helps to alleviate the financial burden on families already suffering from loss," Lesley Harmer, a spokeswoman for Monte Solberg, minister of Human Resources and Social Development Canada, wrote in an e-mail Sunday.

Between April 2003 and June 2007, 921 student loans with a total value of $6.5 million were forgiven due to the death of the borrower, she added.

But the death of a student is usually sudden and unexpected, such as in a car accident, and typically results in no estate being left behind, Benedict said.

"What they're doing, in most cases, is collecting from the grieving parents," he said.

"We have received calls at the coalition from distraught parents and family members who are receiving calls from the government's collectors, trying to collect on the debts of their dead children."

Those calls prompted the coalition to seek more information about the practice, Benedict said.

There are provisions that allow the government to collect risk-shared loans from the dead student's estate within the first year, according to Human Resources and Social Development Canada.

Once the death has been verified, the collector contacts the student's estate in writing to "determine if there are any available funds to be applied towards the debt," said Canada Revenue Agency spokeswoman Catherine Jolicoeur.

Any income tax refund the dead student would obtain through their final tax return would also be applied towards the debt, she said. If there is still some money owed, the debt is then written off and all collection activity stops.

But Benedict, who has been aggressively lobbying for changes to the federal student loan program, wants the loan to automatically be forgiven if the borrower dies or is permanently disabled.

"In the two cases that we dealt with, there had been a car accident, and so there was a young person who had died unexpectedly," Benedict said.

"The family members involved couldn't understand why the government was prepared to continue calling them. In this case, it was collection agencies from Toronto that had been hired by the government."

The coalition is also calling on Ottawa to lower interest rates, ease restrictions for interest relief and appoint an ombudsman to help resolve disputes with borrowers.

Solberg has said the governing Conservatives intend to unveil changes to the Canada Student Loan Program in the spring budget.