Taking Notes: Eye on Education – Students from “High-Risk” institutions will not receive student loans

Taking Notes: Eye on Education – Students from “High-Risk” institutions will not receive student loans

This column focuses on a wide range of issues affecting post-secondary students. Students are encouraged to submit suggestions and educational topics they are concerned about, or personal experiences with courses or university situations they feel other students should know about.

Students from “High-risk” institutions will not receive student loans

CanWest news (The Edmonton Journal, November 20, 2003), has revealed that Ottawa and the provinces have “quietly struck a deal” to prevent students from so-called “high-risk” institutions from receiving government student loans.

This deal will be implemented in the fall, 2004, and will affect a significant number of schools offering financial aid. Schools will be de-designated if they fit within the “red zone”, a term that refers to institutions with loan repayment rates that are at least 17 points below the national average of 71 percent. Private career colleges will feel the greatest impact of this arrangement, since they show consistently higher default rates on student loans.

The government argues that this is a measure of accountability to taxpayers. However, even though one-quarter of schools fall within the “red zone”, government documents show that 34 per cent of all schools have repayment rates below the national average – the “yellow zone”. Rather than punishing students and institutions by withdrawing access to the student loan program, perhaps the government needs to start looking more closely at why loan default rates are so high within certain schools. For that matter, the overall default rate of 29 percent across Canada should be a matter of serious concern to the government (according to the Journal, Alberta’s overall default rate is 11.7 percent). In Nova Scotia, where tuition fees are the highest in Canada, program designation is already used to prevent institutions with high default rates from accessing student loan funding (SUDS Conference report to the Voice, August-September, 2003).

As Ian Boyko, Chairman of the CFS, states, “the entire notion of holding future students responsible for the default rates of the past is just a backward idea and doesn’t get at the root problem of the default rates, like high tuition fees and a bad job market”.

Athabasca University students should be particularly concerned about this new deal. Although loan delinquency rates are not made public because of privacy legislation, there have been persistent rumours that AU may be among those institutions that will be considered “high risk” and subject to the new student loan limit. Many provinces, such as Quebec and British Columbia, already refuse to provide provincial student loan funding for distance education at AU.

For more info:

Governments to limit student loans: Under new deal, “high-risk” institutions will no longer receive funding”. Sarah Schmidt, CanWest News Service. Edmonton Journal, November 20, 2003.

SUDS Conference July, 2003, D.Jabbour, The Voice, August 27-September 17, 2003 issues.

For some fascinating Canada Student Loan Plan Statistics, including default rates, see:

Evaluation of the Canada student loans programs: