Private loans rejected by UBC

Student groups voice concerns over increasing debt

VANCOUVER (CUP) — The University of British Columbia’s discussions with a fledgling private student loan company based in Ontario have ended after the administration decided more information on student debt was needed. Formed a year ago, FirstStudentLoan was hoping to act as a third-party source of loans for UBC students, a proposition that had some student groups up in arms over the program’s potential to cause devastating increases in student debt.

The program would have been detrimental to students at the university due to the accessibility of funds and a less stringent approval process, said Holly Foxcroft, UBC student union vice president. “I know that if it had been implemented, I definitely would have taken action to dissuade students from using it, and tried to inform people about what it was,” she said. “Every student that I had spoken with thought it was a bad idea. It didn’t seem like it would solve any problems.”

FirstStudentLoan would operate by borrowing money from the capital market, much like a bank, said Elian Terner, the company’s founder and CEO. The program would be beneficial because it would not require students to have a co-signer on their loans, unlike those from the government or banks, he said. “We believe in students’ ability to repay. For some reason, students have been given a bad reputation,” said Terner, adding that a given student and the university would each put up a premium to guarantee the loan will be paid back. “This is something [universities] see as another tool in their tool box to help students pay for school.” In addition to the premium, students would be charged a higher than prime interest rate, a factor that could lead to future financial burdens for many people, said Foxcroft.

“We worked it out that if you had a $20,000 government loan, for example, with interest you’d pay about $28,000 back. With FirstStudentLoan it would work out to be about $35,000,” the student union executive said. “It was a substantial amount of money.”

The student union, along with the university’s graduate student union, actively opposed a deal between the university and the loan company, a move that influenced the decision to halt discussion with the company, said Foxcroft. Earlier this year, Simon Fraser University abandoned a similar agreement with FirstStudentLoan after members of its student union expressed concern over the student debt that could result. According to UBC officials, a deal with the loan company would have been one way of upholding the university’s guarantee not to deny access to any eligible domestic student based solely on financial needs. A private loan company would offer students another avenue of financing their education, said Brian Sullivan, UBC vice president.

“We thought it would be positive to look at it as an option,” said Sullivan, adding that the university is specifically looking for solutions to help students who, for many reasons, don’t qualify for government or bank loans. “I think there are a lot of people out there like that. But before we can seriously entertain any option, we need more information about our students.”

The university’s discussions with the loan company were met with a strongly negative response from the student council, which voted unanimously to oppose any agreement between UBC and the company. The student union’s reaction was a factor in the decision to end talks, said Sullivan. “I don’t think very many universities want to be seen as doing something that students don’t want,” he said. The university will continue to look at the financial needs of students and review the student debt experience at UBC before considering “tying themselves to a company,” according to Sullivan.

While a deal with FirstStudentLoan is no longer being pursued, Foxcroft emphasized that the student union’s motion extends to any third-party loan program. However, she remains optimistic about working with the university on a solution. “The university has been responsive,” said Foxcroft. “Students said ‘No.’ That is essentially the reason they couldn’t go through with it.”