Education News – Senate bill relaxes student bankruptcy conditions

OTTAWA (CUP) ? Student advocates are applauding Liberal Senator Yoine Goldstein for introducing a bill that will make it easier for student-loan borrowers to declare bankruptcy. Others, however, are questioning why going to school should force students into bankruptcy in the first place.

The Canadian Federation of Students (CFS), the Canadian Alliance of Student Associations (CASA), and the Coalition for Student Loan Fairness (CSLF) all support Bill S-205, which is currently being debated at the Senate Banking, Trade and Commerce Committee.

Currently, student-loan borrowers must wait seven years before they can apply for a discharge on a loan by declaring bankruptcy, as per the federal Bankruptcy and Insolvency Act.

That number is down from the 10-year period that was mandated in 1998, and S-205 hopes to see the waiting period lowered to just two years.

?It’s really a relatively small demand of a student to be able to say they have to pay back their loan,? said Goldstein.

?What I’m worried about is the student who becomes ill, who becomes unemployed, who becomes handicapped, who has a nervous breakdown, who is unable to obtain a job in their field or any other field, and who just can’t pay back.?

S-205 was originally introduced as S-227, but it was dropped at the end of the last session of parliament.

He re-introduced the bill a few months ago, and it was the subject of two hearings at committee on March 13 and April 3.

Goldstein approached the CFS and CASA last summer when he was drafting the bill. Both groups were enthusiastic.

?Technically, our position is that there should be no prohibition [of loan discharges], but in the political landscape today, a two-year prohibition introduced by a Liberal senator is a welcome dialogue about the harm that the existing legislation is causing,? said CFS government-relations coordinator Ian Boyko.

CASA National Director Zach Churchill added his support, though with some reservation.

?It actually reflected a lot of our policy on bankruptcy issues, so we were pretty impressed with it,? he said.

?But It’s still going to make it an application-based process to be able to . . . get bankruptcy support. We would like to see one where students can automatically get it.?

Critics have said that this bill will allow students who want to get rid of their debt to do so simply by declaring bankruptcy and washing their hands of money owed.

HRSDC spokesman Murray Gross said that the government does not support S-205. He argued that the government has already addressed the issue of student-borrower relief.

“Our Bill C-12 put in place debt management measures to help borrowers for the first seven years of repayment. Most borrowers are able to make reasonable payments within five years,” he said.

Churchill disagreed with that assessment. He said that declaring bankruptcy only hurts students, but the option should be available.

?I think we need to give students the benefit of the doubt,? he said.
?They are smart people. Presumably, they just received a post-secondary education and have the ability to think critically and understand that bankruptcy isn’t a good thing for anybody. It’s a last resort for students who are suffering the most.?

For students who drop their debt irresponsibly, Goldstein offered criteria that a judge could consider when deciding whether or not to discharge either, part, or all of a borrower’s loan.

?[Criteria] would include the extent to which the student’s ability to earn a reasonable income in the foreseeable future is there, whether the student made an effort to reimburse during the course of the previous period of time, [or] whether the student took advantage of debt and interest relief provisions,? he said.

The CFS and CSLF both praised Goldstein for his commitment to student loans.
?[Goldstein] has a track record in working on these issues, and I think he’s generally regarded as one of Canada’s experts in this area of the law,? said Boyko.

?He brings a wealth of experience to this discussion that virtually most other Senators?or probably MPs?wouldn’t be able to bring . . . to the table.?

CSLF executive director Julian Benedict said that Goldstein was ?one of the first stakeholders approached? by the coalition when it formed in April 2007.
?Goldstein has been a tireless advocate for student-loan borrowers. I don’t think his party affiliation is as important as his passion for students,? said Benedict.

Benedict supports S-205, but he pointed out that it doesn’t help students avoid accumulating debt in the first place.

?It’s a step in the right direction, but we still have to deal with fundamental problems with the existing system that puts people into bankruptcy,? he said.

Benedict said that the entire student-loan repayment regime should have students and recent graduates pay less interest.

While the initial loans are hard to deal with, he said, what sends students over the edge?sometimes into bankruptcy?are the interest payments.

?Seventy-five per cent of people who default do so in the first three years of repayment,? he said. ?You pay mostly interest at the beginning of your loan, so actually It’s the interest that is causing people to default.?

Goldstein said that he has received support from a large number of senators, both in the chamber and at committee.

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