Ottawa eliminates credit checks on Canadian student loan borrowers
The federal government will end all credit checks on Canadian student loan borrowers effective Aug. 1, according to Employment and Social Development Canada, which says most applicants were previously approved regardless of their check results.
“In reality, it only creates a barrier for new financial aid applicants for students 22 or older who must pass the credit screening or handle the administrative burden associated with filing appeals,” the department wrote. a regulatory impact analysis rackas first reported by Blacklock’s Reporter.
The statement said that since 1999, the Canada Student Financial Assistance (CSFA) program has required new applicants aged 22 and over to undergo a credit screening.
It said that under the existing Financial Assistance Scheme for Students in CanadaAbout 80,000 applicants undergo credit checks annually, with the loan year running from August 1 to July 31, according to regulations.
Of those screened, only less than 1 percent are “initially rejected” due to poor credit, and about 85 percent of rejected applicants who appeal the decision are “ultimately approved,” the statement said.
It explained that the federal government only targeted students age 22 and older for credit checks “because they were more likely to have been out of the education system for an extended period of time and to access credit earlier than younger applicants.”
Ottawa’s update on federal student loan credit checks comes just over four months after Parliamentary Budget Officer (PBO) Yves Giroux said in a February report that the amount of Canadian student loans considered irrecoverable by the federal government for fiscal year 2022- 23 was $57 million more than the prior fiscal year figure.
The report, published Feb. 23 was the PBO’s detailed analysis of the government’s third supplementary estimates for fiscal year 2022-23.
Non-performing loans
The PBO wrote in its report that in its supplemental estimates, Ottawa sought approval for $227 million in fiscal year 2022-23 to write off more than 23,000 debts it deemed irrecoverable.
Each year, Ottawa seeks parliamentary approval to write off student loans it deems irrecoverable.
The increase in unpayable loans also comes several months after the Liberal government announced in its Fall 2022 Economic Statement that it would remove interest on the federal portion of all Canadian student and student loans starting this year, putting a policy previously in place as a temporary pandemic in place. response measure.
Ottawa’s first investment in its decision to waive interest on federal student loans will cost taxpayers $2.7 billion over the next five years, “but there are also ongoing costs of $556.3 million a year,” CSFA-told. program policy director Erin Hetherington to the Standing Senate National Finance Committee on November 22, 2022.
“The purpose of this measure is to provide assistance to borrowers under long-term pressure to remain affordable and to help recent graduates of post-secondary education better manage their student and pupil loan repayments,” she said.
