Feds poised to write off $300 M in student loans

OTTAWA — The federal government is writing off more than $300 million in student loans this budget year from more than 98,000 different cases, as it searches for what could be billions of dollars in spending cuts.

The massive student loan writeoff is buried within supplementary spending estimates tabled this week in the House of Commons. It's also highlighted in a report released Friday by the Parliamentary Budget Officer that examined government expenditures and a flurry of new spending approvals with only a month to go in the fiscal year.

The PBO report also notes total authorized spending in the 2011-12 fiscal year ending in March is approximately $260 billion, about three per cent less than the same period last year. However, the approved expenditures are still 15 per cent more than before the economic downturn and stimulus spending of 2008-09.

The government is finalizing its program spending review in an attempt to rein in expenditures and balance the books, but it's having to swallow a huge financial loss on unpaid student loan debt.

Ottawa is being forced to write off nearly $312 million in unpaid Canada Student Loans from 98,448 debts dating back more than a decade because the government says "all reasonable efforts to collect the amount owed have been exhausted."

"The loans referenced have not received payment in six years," Alyson Queen, spokeswoman for Human Resources and Skills Development Minister Diane Finley, said Friday in an email.

"The loans were deemed unrecoverable and as such have been written off."

More than 98 per cent of the loans written off by the government are dropped because of the expiry of a six-year limitation period between when the borrower last acknowledged a loan and any legal activity by the Crown to recoup that debt, according to the department.

Once this period has expired, the Crown no longer has the authority to collect the debt.

In an attempt to snare the dollars before the government is legally barred from doing so, the Canada Revenue Agency will send monthly statements and collection letters, recoup income tax refunds and refer accounts to the Attorney General of Canada, which could potentially garnish wages or seize assets.

Approximately 87 per cent of all Canada Student Loans are repaid, according to the department.

In 2010-2011, HRSDC paid out more than $2.7 billion in loans and grants to more than 400,000 post-secondary students.

While the government is having difficulty collecting student loan revenue, it's still spending additional cash on other fronts.

The government's planned supplementary expenditures would increase personnel spending by another $240 million, or an overall increase of $2.3 billion (six per cent) from the previous fiscal year, the PBO notes.

"This growth has occurred notwithstanding initiatives announced in Budget 2010 to restrain the growth of direct program expenses, including freezing approximately two-thirds of operating spending," the PBO says in its report.

Federal spending has also soared over the past few years on Atomic Energy of Canada Ltd., including $285 million in 2011-12 on divestiture costs for the nuclear reactor division that the government sold for just $15 million plus royalties to SNC-Lavalin.

Parliament's spending watchdog also noted that despite Treasury Board President Tony Clement's recent calls for public servants to forgo a "March Madness" spending bonanza at the end of the fiscal year, the government appears to be doing just that in some departments and agencies.

As the government promotes its tough-on-crime agenda, the Correctional Service of Canada is expecting to spend 70 per cent more this fiscal year on capital projects (more than $200 million in additional spending) to house a projected increase in the offender population, among other things.

jfekete@postmedia.com

"The loans were deemed unrecoverable and as such have been written off." 

That sounds like good news if you haven't heard from them in over six years........Should I celebrate?

Yes and no.  The onus is always on the borrower to prove it, of course. The government is NOT going to be sending out congratulatory letters to borrowers. also, just because you haven't heard from them in 6 years doesn't mean the debt is ststute barred. a lot of poeple are finding out the hard way and I am cautioning everyone NOT to assume it. It is not as easy as that.

If you are referring to a limitation issue, you have to get in there and be able to examine it to conclude whether or not it is. That requires tools, communication and other skills. and a LOT of knowledge. It is something I do for people who are in crisis and need that sort of relief. You just have to know how to do it. It is like a form of surgery in my opinion.