Education News – Senator challenges bankruptcy law to ease student debt

WINDSOR (CUP) — Quebec Senator Yoine Goldstein reintroduced Bill S-205 last October, hoping to ease the burden of graduates who can’t pay back their student loans.

Post-secondary groups from across the country have since lent their support to the bill, which was discussed in Parliament on April 3.

The bill would amend the Bankruptcy and Insolvency Act to allow post-secondary students to apply for bankruptcy within only two years of finishing school. Currently, students must wait seven years before filing for bankruptcy.

?At one extreme, a former student who can really afford to pay back the loan over time and without too much difficulty should be compelled to do so,? Goldstein said.

?At the other extreme, a former student who has no short- or medium-term prospect to be able to reimburse any part of the loan should not be compelled to remain in limbo, being unable to pay and also unable to make a fresh start.?

The Canadian Federation of Students, Canada’s largest student lobby group, has long advocated for the elimination of the wait time before a student can declare bankruptcy. Ian Boyko, government relations coordinator for CFS, is one of many student supporters of Bill S-205.

?[The Canadian Federation of Students? (CFS)] position is that there shouldn’t be any [delay] . . . but reducing the [delay] from seven to two years is a step in the right direction,? he said.

The bill will also allow former students with long-term financial constraints resulting from their loans to apply for a court order, which would relieve them from all or part of their debt.

If the court decides not to fully eliminate the debt, they could still opt to make payments more reflective of their financial situation.

According to the 2006 Canadian Undergraduate Survey Consortium (CUSC), 55 per cent of graduating students owe an average of $24,047 in loans.

The survey also indicated that undergraduate students with more debt are less likely to pursue graduate studies.

Bill S-205 has received support from The Canadian Federation of Students (CFS), The Coalition for Student Loan Fairness (CSLF), The Canadian Alliance of Student Associations (CASA), and Fédération Étudiante Universitaire du Québec (FEUQ).

?The Bill has received general support from student associations and from a number of Liberal Senators. It is opposed by the Department of Finance and by the Conservative Party Critic in the Senate, on behalf of the Government,? Goldstein said.

?It’s a great bill, and Senator Goldstein is one of the foremost experts in Canada on bankruptcy so I think it will hold considerable weight,? Boyko said.
Both Goldstein and Boyko warn, however, that filing for bankruptcy under the bill’s provisions does carry risks, and should only be used by students in the most dire situations.

Declaring bankruptcy affects an individual’s credit for several years and makes it impossible to obtain credit cards, lines of credit, and mortgages.

?The whole Bankruptcy [and Insolvency] Act is designed to provide last refuge for those who have no last option,? said Boyko. ?This is not an instrument that will be used for widespread debt relief.?

?Going into bankruptcy always affects a person’s credit record and this is the reality that a former student loan debtor will have to face if he or she goes into bankruptcy,? said Goldstein.

?Repayment of a student loan is a legal obligation. Only in exceptional circumstances should that obligation be reduced or eliminated. Those circumstances are best determined by judges and not by universities,? explained Goldstein.

Goldstein does, however, believe that universities need to educate students on how to manage debt.

?Universities and all other educational institutions should be teaching numeracy and responsible incurring and discharging of debt.?

Although the CFS is advocating for Bill S-205, it believes that student debt should be discouraged in the first place.

?What our organization is calling for in Ontario is immediate reduction in tuition fees, which will reduce the need to borrow [money]. An upfront grant is the most effective way of reducing student debt,? said Boyko.

Goldstein disagrees with that point.

?Student debt cannot, and should not, be ?prevented.? In appropriate circumstances, students have to borrow in order to be able to pursue their post-secondary education,? he said.

?However, all stakeholders have a role to play in teaching the proper use, handling and discharge of debt and that role should more properly be played by educational institutions as an educational function rather than lending institutions which necessarily have a particular point of view,? Goldstein concluded.

Boyko thinks that Ontario universities are ?grossly irresponsible? because they are using taxpayers? dollars to lobby the government to increase and deregulate student fees.

?The most efficient and fair way to deal with student debt is to deal with everything possible to make sure it doesn’t increase in the first place,? he said.

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