The federal government will eliminate all credit screening on Canada 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 first-time student financial assistance applicants aged 22 or older who have to pass the credit screening or deal with the administrative burden associated with submitting appeals,” the department wrote in a regulatory impact analysis
statement, as first reported by Blacklock’s Reporter.
The statement said that the Canada Student Financial Assistance (CSFA) program has required first-time applicants 22 years and older to undergo credit screening since 1999.
Among 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 noted.
It explained that the federal government only targeted students aged 22 and older for credit checks “because they were more likely to have been out of the education system for significant lengths of time and to have previously accessed credit than younger applicants.”
Ottawa’s update to 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 Canada Student Loans deemed by the federal government to be uncollectible for the 2022-23 fiscal year was $57 million more than the figure for the previous fiscal year.
The
report,
published Feb. 23, was the PBO’s detailed analysis of the government’s third supplementary estimates for the 2022-23 fiscal year.
Unrecoverable Loans
The PBO wrote in his report that Ottawa in its supplementary estimates was seeking approval for $227 million in the 2022-23 fiscal year to write off more than 23,000 debts it deemed unrecoverable.
Each year, Ottawa seeks Parliament’s approval to write off student loans it deems uncollectible.
The increase in unpayable loans also comes several months after the Liberal government
announced in its 2022 Fall Economic Statement that it would be eliminating interest on the federal portion of all Canada Student Loans and Canada Apprentice Loans starting this year—making permanent a policy that had previously been in place as a temporary pandemic-response measure.
Ottawa’s first investment in its decision to waive federal student loan interest will
cost taxpayers $2.7 billion over the next five years, “but there is an ongoing cost as well of $556.3 million per year ongoing,” CSFA program policy director Erin Hetherington told the Standing Senate Committee on National Finance on Nov. 22, 2022.
“The
purpose behind this measure is to provide relief to borrowers who are experiencing long-term affordability pressures and to help recent post-secondary education graduates better manage their student and apprentice loan repayments,” she said.
