Canada Student Loans Program annual report 2016 to 2017

Employment and Social Development Canada

The mission of Employment and Social Development Canada (ESDC), including the Labour Program and Service Canada, is to build a stronger and more inclusive Canada, to support Canadians in helping them live productive and rewarding lives and to improve Canadians' quality of life.

To fulfill its mission, the Department is responsible for:

• developing policies that ensure all can use their talents, skills and resources to participate in learning, work and their community;
• delivering programs that help Canadians move through life's transitions, from school to work, from one job to another, from unemployment to employment, from the workforce to retirement;
• providing income support to seniors, families with children and Employment Insurance beneficiaries;
• fostering inclusive growth by providing opportunity and assistance to Canadians with distinct needs, such as Indigenous people, people with disabilities, homeless people and recent immigrants;
• overseeing labour relations, occupational health and safety, labour standards, employment equity and workers' compensation in the federal jurisdiction; and
• delivering programs and services on behalf of other departments and agencies, such as passport services delivered on behalf of Immigration, Refugees and Citizenship Canada and services to veterans delivered on behalf of Veterans Affairs Canada.

Canada Student Loans Program

The CSLP provides non-repayable and repayable student financial assistance (grants and loans) to eligible students to help them access and afford post-secondary education. The Program also offers repayment assistance to borrowers who have difficulty repaying their student loans.

In the 2016–2017 loan year, over 627,000 post-secondary students received financial assistance from the CSLP, in the form of grants, loans or in-study interest subsidies.

Following are the key highlights of the components of the CSLP in the 2016–2017 loan year.

Canada Student Grants

• 380,000 students received financial assistance they will not have to pay back, which is 3% more than the previous year.
• The total amount of grants awarded to students in the 2016–2017 loan year was $1.0 billion; a significant increase of 41% from the previous year, as a result of increases in grant amounts.

Canada Student Loans

• In the 2016–2017 loan year, the CSLP provided over 497,000 students with $2.6 billion in loans.
• The number of students receiving Canada Student Loans in the 2016–2017 loan year increased only slightly, while the value decreased by 3%.
• A total number of 593,000 students received in-study interest subsidies from the federal government on the Canada Student Loans that they had borrowed up to 2016–2017, for which they do not pay interest on while enrolled in full- or part-time study.

Repayment Assistance Plan

• Nearly 306,000 borrowers received support under the Repayment Assistance Plan in the 2016–2017 loan year; an increase of 11% from the previous year.

Support for students with permanent disabilities

• In the 2016–2017 loan year, the CSLP disbursed $94.3 million, totalling 47,400 grants, to support students with permanent disabilities, an increase of 8% from the previous year.
• More than 22,100 individuals received support under the Repayment Assistance Plan for Students with a Permanent Disability, and a further 580 borrowers had loan obligations forgiven by means of the Severe Permanent Disability Benefit.

Loan forgiveness for doctors and nurses

In the 2016–2017 fiscal year, $20.6 million of student loans were forgiven under the forgiveness measure for family doctors, residents in family medicine, nurse practitioners and nurses who work in rural or remote communities. More than 4,600 individuals benefitted from this initiative, an increase of 22% from the previous fiscal year.

Direct government financing and portfolio growth

Since 2000, the Government of Canada has provided student financial assistance directly to borrowers, unlike earlier CSLP lending regimes that were administered by financial institutions.

Under direct lending, the Government of Canada finances and administers the CSLP, contracting with a private-sector service provider (the National Student Loans Service Centre (NSLSC)) to manage student loan accounts from disbursement to repayment.

The direct loan portfolio has grown substantially during the past decade, with increasing numbers of students receiving financial assistance to help meet the costs of their post-secondary studies. The value of direct loan portfolio almost doubled in the last decade, from $9.3 billion as of July 31, 2007 to $18.2 billion as of July 31, 2017.

Working with partners

The Government of Canada works collaboratively with participating provincial and territorial governments to deliver student financial assistance to Canadian students. Applicants in participating jurisdictions are assessed for federal and provincial grants and loans through a single application process. For students in full-time study, approximately 60% of their assessed financial need is funded by the Government of Canada, while the province or territory covers the remaining 40%.

As a result of integration agreements negotiated between the Government of Canada and provinces, the borrowing experience for students has been significantly streamlined and simplified. Students in integrated provinces (British Columbia, Saskatchewan, Ontario, New Brunswick and Newfoundland and Labrador) benefit from having a single, integrated loan, and are not required to manage two separate (federal and provincial) loans.

Students in these five integrated provinces comprise more than 80% of Canada Student Loan borrowers. Both federal and provincial portions of their loans are administered under one account, with the NSLSC as their one point of contact.

Quebec, Nunavut and the Northwest Territories do not participate in the CSLP but receive alternative payments from the Government of Canada to operate their own student financial assistance programs.

The total amount of alternative payments for the 2016–2017 loan year of $338.6 million is higher than the previous year’s payment of $269.5 million. This increase reflects the impact of the 50% increase in Canada Student Grants for low- and middle-income students, as well as the increase of RAP thresholds announced in Budget 2016. As non-participating jurisdictions, the amount of alternative payments to:

• Quebec was $334.4 million – representing an increase of 25.6% from last year’s payment of $266.2 million;
• Nunavut was $1.9 million – representing an increase of 27.7% from last year’s payment of $1.5 million; and
• the Northwest Territories was $2.2 million – representing an increase of 23.3% from last year’s payment of $1.8 million.

Service delivery

The Government of Canada is dedicated to continuously streamlining and modernizing the CSLP, as well as improving services for students. In collaboration with provincial and territorial partners, the CSLP is working to implement a new electronic service delivery model aimed at providing students with simple, easy-to-manage access to financial assistance. Measures include improved online services, application and repayment processes, and communications.

The modernization initiative aims to significantly enhance the loan experience for borrowers by:

• providing more timely disbursements of financial assistance;
• reducing or eliminating, where possible, the paper-based administrative burden for borrowers;
• increasing the readability and understanding of the rights and obligations of borrowers; and
• producing greater efficiencies within the student financial assistance delivery system.

The initial focus of this work is to allow full-time students to have their identity verified, and receive and sign their student loan agreement online rather than having to authenticate and mail their documents at designated Canada Post outlets.

The Government of Canada recognizes the importance of informing Canadians in the pursuit of higher education about the availability, benefits and requirements of student financial assistance. The CSLP acts to guide students and their families in how to plan and pay for post-secondary education by undertaking outreach activities mainly through web-based communications and online materials. A key objective of the CSLP is to improve awareness of programs for students who have traditionally faced barriers in accessing post-secondary education. Another objective is to leverage the existing relationship with the Canada Revenue Agency (CRA) to raise awareness of loan rehabilitation.

Information about the CSLP is available on Canada.ca, including information to help Canadians save, plan and pay for their post-secondary education. The website includes step-by-step application instructions, financial assistance estimators and databases on academic programs and scholarships.

The Government of Canada website also links to the NSLSC website, which enables borrowers to conveniently and securely access their loan accounts, receive communications concerning their account, confirm their enrolment, customize their repayment and, if necessary, apply for repayment assistance.

A. Canada Student Grants

Canada Student Grants do not have to be repaid, which helps make student debt more manageable. Grants are targeted towards students from low- and middle-income families, with eligibility based on family income and financial circumstances. Income threshold levels are adjusted annually to reflect cost of living and family size in each jurisdiction. Eligibility is assessed at the time the student applies for Canada Student Loans.

Canada Student Grants are also available to students with dependants. Full-time students with dependants can receive up to $200 each month for every dependent child they have per year of full-time studies. Part-time students with dependants can receive up to $1,920 per school year. They may receive this grant for each year of their studies, at both the undergraduate and graduate level, as long as they qualify.

Students with a permanent disability are entitled to a grant of $2,000 per academic year. Additional funding of up to $8,000 is available for those who require special services or equipment. While the number of full-time grant recipients increased by a modest 3% in the 2016–2017 school year, the value increased by 41% as a result of increases announced in Budget 2016. The number of part-time grants increased by 10% to 19,200 and increased in value by 48% to $28.6 million.

The following table summarizes the distribution of each type of grant provided in the 2016–2017 loan year.

Diagram 1: Grants for full-time students by province and territory

The diagram below illustrates the distribution of Canada Student Grants for full-time students by province and territory in 2016–2017.

Text description of diagram 1: Grants for full-time students by province and territory

Province of issue	Number of grants	Value of grants ($M)
Newfoundland and Labrador	4,938	12.1
Prince Edward Island	2,157	5.1
Nova Scotia	13,729	32.4
New Brunswick	8,761	19.7
Ontario	280,393	638.0
Manitoba	9,487	23.7
Saskatchewan	11,291	27.0
Alberta	50,507	120.6
British Columbia	45,471	106.6
Yukon	141	0.4
Total	426,875	985.6

Notes:

• Quebec, Nunavut and the Northwest Territories do not participate in the CSLP but receive alternative payments from the Government of Canada to operate their own student financial assistance programs.
• The number of grants in each jurisdiction includes all types of grants offered through the CSLP. The total number of grants is greater than the total number of grant recipients because some students received more than one type of grant. Due to rounding, the provincial totals do not equal the Canadian total.

B. Canada Student Loans

Canada Student Loans are available to Canadian students enrolled in degree, diploma or certificate programs at designated post-secondary educational institutions in Canada and abroad. To be eligible, a student must demonstrate financial need and reside in a province or territory that participates in the Program for at least 12 consecutive months prior to submitting their first loan application, regardless of whether their school is abroad or not. Recipients are provided with interest subsidies, whereby the Government of Canada pays the interest on their loans while they are enrolled in school. Repayment begins six months after the end of studies.

What types of institutions do borrowers attend?

In the 2016–2017 loan year:

• 59% of full-time student borrowers attended university;
• 32% attended college; and
• 9% attended a private institution.

These numbers remained virtually unchanged from the previous loan year. The average loan amount disbursed in 2016–2017 continued to be highest among borrowers attending a private institution ($7,390) and lowest among college attendees ($4,488).

The following graph illustrates a breakdown of full-time borrowers at universities, colleges and private schools for 2016–2017 and the two previous years.

Graph 1: Number of full-time borrowers by institution type

Text description of graph 1: Number of full-time borrowers by institution type

Full-time loans by institution type

Institution type	Number of borrowers 2014–2015	Number of borrowers 2015–2016	Number of borrowers 2016–2017
University	288,692	287,768	288,594
College	155,869	156,791	155,450
Private institution	44,220	45,376	46,357
Total	488,781	489,935	490,401

C. Loan repayment and repayment assistance

Unlike traditional loans, Canada Student Loans do not accrue interest while the borrower is in school. It is only once a borrower completes their studies that interest begins to accumulate.

To help with the transition from school into the labour force, borrowers are not required to make payments in the first six months upon completion of their studies. Once six months have elapsed, borrowers begin to repay their loans through monthly payments, typically over a 114-month period (9.5 years). Depending on their financial situation and income level, borrowers may revise their repayment terms to pay more quickly or to extend the payment period to reduce their monthly payments (up to a maximum of 14.5 years).

The average Canada Student Loan balance at the time of leaving school was $13,456 for the 2016–2017 loan year, which is an increase of 1.1% from the previous year ($13,306). Nearly half of Canada Student Loan borrowers (49%) had a balance of less than $10,000, and 23% of Canada Student Loan borrowers had a balance greater than $20,000. These loan balances reflect only the federal portion of the loan. Borrowers may also have had loans from a province or territory, as well as from private sources.

Differences in loan balances reflect each student’s particular situation. Loan balance is measured at the time of leaving school, which includes students who graduate, as well as those who do not complete their program of study. Among the key factors are the type and location of institution as well as the program of study. In the 2016–2017 loan year, the average loan balance of university students ($17,113) was higher than that of college students ($10,358) and of those at private institutions ($10,994). This difference is partly because university programs generally tend to take longer to complete.

Canada Student Loan balances also differ by student province or territory of residence, ranging from an average of $9,853 (Manitoba) to $17,749 (Prince Edward Island). The large variation in the average debt across jurisdictions can be attributed to a combination of factors including tuition fees, cost of living and the proportion of students studying away from home. For example, tuition fees in Manitoba are lower than those in Prince Edward Island. For students pursuing their post-secondary education outside of their province, higher travel and living costs are reflected in higher borrowing amounts.

Repayment Assistance Plan

The Repayment Assistance Plan (RAP) allows borrowers to manage their student debt by reducing their monthly payments. Depending on their family income, family size and loan balance, borrowers may apply and be approved for a reduced monthly payment or may not have to make any monthly payments for the duration of their six-month RAP term. In the event that repayment assistance is still required, borrowers can re-apply for RAP in 6 month increments.

RAP is provided in two stages, which are seamless to the borrower. Under Stage 1, the Government of Canada covers the outstanding interest not covered by the borrower’s reduced monthly payments. Borrowers that have received 60 months of RAP, or have been out of school for more than 10 years, will begin to receive Stage 2 assistance, whereby the Government of Canada covers both the principal and interest amounts not covered by the borrower’s reduced monthly payments. This ensures that the balance of the loan is gradually paid off and that borrowers on RAP on a long term basis do not take longer than 15 years to repay their loan.

The Repayment Assistance Plan for Borrowers with a Permanent Disability (RAP-PD) is designed to assist borrowers with disabilities experiencing difficulty meeting their repayment obligations. The Government of Canada covers the principal and interest amounts not covered by the approved borrower’s reduced monthly payments. This ensures that a borrower on RAP-PD on a long term basis does not have remaining student loan debt after 10 years. In addition, RAP-PD allows borrowers to claim disability-related expenses, which are taken into consideration when the application is assessed.

Budget 2016 announced increases to the loan repayment thresholds to ensure that no student would have to repay their loan until they are earning at least $25,000 per year, up from the previous $20,210. Single borrowers who apply for RAP would be eligible to make no payments if they made under this amount and the thresholds for borrowers with larger family sizes were also increased proportionally. These new thresholds took effect in November 2016.

Diagram 2: CSLP borrowers receiving repayment assistance by province or territory

Text description of diagram 2: CSLP borrowers receiving repayment assistance by province or territory

Number of recipients and type of RAP by jurisdiction (2016–2017)

Province or territory	RAP Stage 1	RAP Stage 2	RAP-PD	Total
Newfoundland and Labrador	3,876	878	233	4,987
Prince Edward Island	1,773	xa	xa	2,174
Nova Scotia	11,289	1,871	1,161	14,321
New Brunswick	10,553	2,744	696	13,993
Ontario	151,833	21,251	15,073	188,157
Manitoba	3,667	432	256	4,355
Saskatchewan	4,141	606	610	5,357
Alberta	26,938	1,902	1,370	30,210
British Columbia	34,323	5,246	2,569	42,138
Yukon	66	xa	xa	77
Total	248,459	35,195	22,115	305,769

Table notes:

1. The “X” represents cells that are suppressed to prevent statistical disclosure of number of borrowers less than 10.

As indicated in Diagram 2, nearly 306,000 borrowers received assistance under RAP in the 2016–2017 loan year, which is an increase of 11% from those who benefitted from RAP in the previous loan year. Women represented 65% of RAP recipients. The vast majority (81%) of borrowers accessing RAP were approved under Stage 1, whereby they received Government support for the interest portion of their loan payment(s). Eighty-eight percent of all RAP recipients were not required to make any monthly payments for the duration of their RAP term.

Client satisfaction

• The CSLP is committed to ensuring that clients receive quality service. An annual client satisfaction survey is used to assess clients’ satisfaction with the services related to their Canada Student Grants and Loans.
• In the 2016–2017 loan year, 80% of clients said they were satisfied with the overall quality of service they received with regards to their Canada Student Grant or Loan. Satisfaction levels have remained high over the past number of years.

Portfolio performance

The CSLP actively manages the Canada Student Loans portfolio to ensure the health of the portfolio and to minimize the value of loans going into default. Although the vast majority of students repay their loans in full and on time, some borrowers experience difficulty in repayment. A loan is deemed in default when in arrears for more than 270 days (roughly equivalent to missing nine monthly payments). The CSLP uses a three-year default rate as a main indicator of the performance of the portfolio. This rate compares the value of the loans that enter repayment in a given loan year, and default within three years, to the value of all the loans that entered repayment in that loan year.

As noted in Table 4, the default rate has decreased significantly over the last few years. The introduction of grants and the RAP has helped a greater number of students manage their repayment obligations, leading to a lower default rate.

Loan rehabilitation

The CSLP offers loan rehabilitation as a way for borrowers to bring their defaulted loans back into good standing. Borrowers can rehabilitate their defaulted loans by paying their outstanding interest, plus two regular monthly payments. The CSLP works closely with the CRA to raise awareness of loan rehabilitation.

A targeted communication campaign was implemented in June 2016, and used behavioural insights to nudge borrowers who are most likely to be eligible for rehabilitation. As a result, the CSLP has seen an increase in the number of approved cases since the rehabilitation promotion was implemented. From July 2016 to June 2017, 6,699 borrowers rehabilitated $63 million in student loans. This represents a 73% increase in borrowers who rehabilitated their loans than before the campaign.

Loan write-off

As per standard accounting practice, the Government of Canada must write-off Canada Student Loans that have been deemed unrecoverable after all reasonable collection efforts have been made. The majority of the write-off value is comprised of loans that have not received payment or acknowledgement of debt for six years. Other reasons for write-off include bankruptcy, extreme financial hardship, and compromise settlements.

The value of loans written-off in 2017 was $174.8 million, approximately 1% of the overall value of the directly financed Canada Student Loan portfolio, consistent with the 2016 write-off ($172 million). Borrowers who have had their loans written-off are restricted from further student financial assistance until they are able to bring their loan back into good standing by paying all outstanding interest, plus two regular monthly payments.

Program integrity

The CSLP strives to safeguard the integrity of the Program and protect the investments made by borrowers in their post-secondary education. Safeguarding integrity means ensuring that all aspects of the Program are operating within the legal framework of the Canada Student Financial Assistance Act and the Canada Student Loans Act. The CSLP is also a responsible steward of taxpayer dollars.

The Program has in place a number of policies and activities designed to ensure its integrity and to enhance governance and accountability:

• Administrative measures may be taken when individuals knowingly misrepresent themselves to obtain student financial assistance; including being restricted from receiving student financial assistance for a specified period, being required to immediately repay any money obtained as a result of false information and having their grants converted to repayable loans. If warranted, further action may be taken such as criminal investigation or civil litigation. In the 2016–2017 school year, 27 cases of misrepresentation were confirmed as abuse.
• In keeping with provisions of the Canada Student Financial Assistance Act, the Office of the Chief Actuary conducts a statutory actuarial review of the Program in order to provide a long term forecast of the portfolio and program costs. The most recent Actuarial Report (2017) (PDF format) is available on the website of the Office of the Superintendent of Financial Institutions.
• The Designation Policy Framework establishes Canada-wide criteria for designation—the process whereby post-secondary educational institutions are deemed eligible for student financial assistance programs. The Framework ensures that federal and provincial and territorial student financial assistance portfolios operate within the principles and practices of reasonable financial stewardship. As a part of this framework, the CSLP calculates and tracks the repayment rates of Canada Student Loans for designated Canadian institutions. The 2017 repayment rate for borrowers who entered repayment in 2015–2016 was 91%, which is higher than the previous year, and the highest it has been over the past 13 years.

Program evaluation

As a standard practice, evaluations are conducted periodically and are available on the ESDC website. A summative evaluation of the CSLP took place from 2006 to 2010 and covered loan years 2000–2001 to 2007–2008. The evaluation found the CSLP to be achieving desired program results and included minor recommendations for improvement.

A summative evaluation of the Budget 2008 CSLP enhancements was completed in May 2016, which examined the effectiveness of the enhancements introduced in Budget 2008. Overall, the enhancements were perceived as positive changes to the CSLP.

ESDC is committed to ensuring that the CSLP is fully responsive to the needs of Canada’s post-secondary students, and it continues to explore ways to improve and enhance the design and delivery of the Program in collaboration with partners and stakeholders. The findings and recommendations of these evaluations inform and support that work.

Support for apprentices

The Canada Apprentice Loan (CAL) was launched in January 2015 to provide additional financial support to apprentices registered in trades designated under the Red Seal Program during periods of block release technical training. CAL is designed to help these apprentices complete their apprenticeship training and to encourage more Canadians to consider a career in the skilled trades.

Apprentices in skilled trades complete up to 85% of their learning during on-the-job paid employment. However, they are also required to participate in technical training for short periods of time, generally ranging from six to eight weeks each year. Apprentices can face significant costs to complete these periods of technical training, including educational fees, tools and equipment, living expenses and forgone wages.

Eligible apprentices may apply for loans of up to $4,000 per period of technical training, for a maximum of five periods. Given the timing of technical training requirements in their province, apprentices in Quebec do not qualify for CAL. The province of Quebec is compensated with an annual special payment.

In the 2016–2017 loan year, nearly 17,000 CALs, amounting to $65.6 million, were disbursed to 15,300 apprentices. Approximately 79% of disbursed loans went to apprentices from three provinces: Alberta (48%), British Columbia (19%) and Ontario (12%).

The CAL complements other Government of Canada supports to assist apprentices in completing their apprenticeship training, including the tradesperson’s tools deduction, the tuition tax credit, and Employment Insurance, which is available to eligible apprentices while attending block release technical training. The Government of Canada also provides the Apprenticeship Incentive Grant and Apprenticeship Completion Grant to apprentices registered in trades designated under the Red Seal Program.

Government funding

Although the CSLP is the largest program offering student financial assistance to Canadians, other funding sources exist at the federal, provincial and territorial levels.

Supports offered by ESDC include the following:

• The Canada Education Savings Grant encourages Canadians to save for their children’s post-secondary education by awarding grants to beneficiaries of the Registered Education Savings Plan (RESP).
• The Canada Learning Bond provides a grant to low-income families to begin an RESP and encourages parents to save for their children’s post-secondary education.
• Individuals who receive Employment Insurance benefits can be eligible for courses, training programs or other support to make it easier for them to return to the labour market, while still receiving income support during that period. This service is either co-managed with the provinces and territories, or provided by the provinces and territories through federal transfer payments.
• Provinces and territories may choose not to participate in the CSLP. These provinces and territories receive an alternative payment to assist in the cost of delivering a similar student financial assistance program.

Other federal programs and initiatives related to post-secondary education include the following:

• The Canada Social Transfer is a federal transfer of funds to provinces and territories in support of post-secondary education, social assistance and social services.
• Indigenous Services Canada assists Indigenous students with the costs of tuition, books and travel, and provides living allowances through the Post-Secondary Student Support Program.
• The University College Entrance Preparation Program provides financial assistance to Indigenous students enrolled in university or college entrance programs. The purpose of the Program is to help them obtain the grades they require to enter a degree or diploma program.
• Post-secondary institutions also receive support through the Post-Secondary Partnerships Program to develop and deliver special programs for Indigenous people.
• Tax relief is available to all individuals with federal or provincial and territorial student loans through a federal tax credit on the annual interest paid on these loans.
• The tuition tax credit provides tax relief for students’ expenditures towards tuition fees.
• The Education and Textbook Tax Credits provided non-refundable tax credits for post-secondary students. As announced in Budget 2016, these tax credits were sunset on January 1, 2017, to reallocate funding to targeted supports for students through the CSLP. Unused credits prior to 2017 can be carried forward to be claimed in future years.
• The Official Languages Support Program helps provinces and territories fund minority-language education and second-language instruction.
• Innovation, Science and Economic Development Canada offers scholarships and fellowships under the Natural Sciences and Engineering Research Council of Canada and the Social Sciences and Humanities Research Council of Canada.

Provincial, territorial and other funding:

• Provincial and territorial governments offer grants, loan scholarships, tax credits and repayment assistance measures; and
• Students may also apply for scholarships and bursaries from their educational institutions, financial institutions and community groups.

Consolidated report on the Canada Student Loans Program

In August 2000, the CSLP moved from the risk-shared financing arrangements in place with financial institutions between 1995 and July 2000 to a direct student loan financing plan. The Government of Canada provides funding to students, and a private-sector service provider administers the loans.

Reporting entity

The entity detailed in this report is the CSLP only and does not include departmental operations related to the delivery of the CSLP. Expenditure figures are primarily statutory in nature, made under the authority of the Canada Student Financial Assistance Act and the Canada Student Loans Act.

Basis of accounting

The financial figures are prepared in accordance with generally accepted accounting principles and as reflected in the Public Sector Accounting Handbook of the Canadian Institute of Chartered Accountants.

Table 5: Consolidated Canada Student Loans Programs – Combined programs

Legend:

• DL = Direct loans
• RS = Risk-shared loans
• GL = Guaranteed loans