Edulinx: "We’ll improve service" - 2000

2000-newspapers

OTTAWA (CP) -- Two private companies, including one that's 49 per cent American owned, will run Canada's high-risk student loan program for the federal government.

EDULINX Canada Corp. of Mississauga, Ont., and BDP Business Data Services Ltd. of Toronto have won contracts to manage loans worth about $1.8 billion a year.

EDULINX, owned 51 per cent by the Canadian Imperial Bank of Commerce and 49 per cent by USA Education Inc. -- a Virginia-based student loan provider -- will serve students attending public colleges and universities. Its contract is worth $91.6 million over three years starting March 1, Public Works announced Friday.

BDP will collect $45.7 million over the same period to serve borrowers who attend private colleges and training schools.

"We're going to improve service for students," said Wally Hill, spokesman for EDULINX. "That's the mandate of the new federal program and the whole focus of the Canada Student Loan Program."

Student advocates, who report all manner of service complaints from borrowers now dealing with banks, are wary.

"CIBC made a proposal to continue doing the student loans -- which the government just rejected because it said they were unreasonable demands," said Kieran Green, spokesman for the Canadian Alliance of Student Associations.

"And they're back in it again? We just hope they can do it better the second time around. They don't have a great track record so far."

Last winter, Ottawa offered Royal Bank, CIBC, the Bank of Nova Scotia and several credit unions sweetened risk premiums worth $160 million a year to keep running the student loan program.

A five-year deal that expired Aug. 1 saw the federal government pay the banks a five per cent risk premium -- about $50 million a year -- to disburse student loans and chase payments. About 350,000 students rely on the cash each year.

The banks agreed to keep running the program until Feb. 28 for another $69 million.

Losses were never disclosed but one bank official described student loan writeoffs as a "hemorrhage" of cash. Not enough banks accepted Ottawa's higher compensation offer, and the government announced in March it had little choice but to take the program back.

The new program will be overseen by Human Resources Development Canada -- the same department rocked last January by an audit showing $1 billion in job training and other grants were poorly tracked.

EDULINX and BDP were selected through a hiring process conducted by Public Works. It will cost taxpayers more to run student loans this way but final figures aren't yet known.