Unrecoverable Federal Student Loans Up 34% This Fiscal Year: PBO

Students gather at an outdoor university commencement ceremony in this file photo. Dreamstime

The amount of Canada Student Loans deemed by the federal government to be uncollectible this year is up by over $57 million more than last fiscal year, says a report from the Parliamentary Budget Office.

The increase represents a 34 percent increase from last year and is “over $50 million more than what was originally projected in the Chief Actuary’s report,” writes the Budget Office, as first reported by Blacklock’s Reporter.

The government seeks approval from Parliament each year to write off student loans it believes are uncollectible.

This year the government is requesting approval for $227 million in write-offs over 23,000 debts it deems unrecoverable, says the report “Supplementary Estimates,” published on Feb. 23.

It adds that “some volatility” is to be expected in the actual amounts that get written off each year because decisions around which loans to write off is “a multi-step process.”

The Canada Student Loans Program provides federal loans and grants to post-secondary students who request assistance in financing their education beyond high school.

The increase in expected unrecoverable loans from the program comes several months after the Liberal government announced in its Fall Economic Statement 2022 that it would be cutting interest on the federal portion of all Canada Student Loans and Canada Apprentice Loans beginning in April 2023.

The policy had previously been put in place by the Liberal government as a temporary pandemic-response measure in April 2020.

Although the policy is set to become permanent this April, the PBO writes that its impact on write-offs will not be felt until the fiscal year 2026-2027, because most loans are not written off until the borrowers have been in default for seven years or longer.

Waiving Interest

The government’s measure to waive interest on all federal student loans is estimated to cost Ottawa upwards of $556 million every year ongoing, according to Erin Hetherington, policy director for the Canada Student Financial Assistance Program.

Hetherington told the Senate National Finance Committee in November 2022 that the government’s first investment into repealing the student loan interest will be about $2.7 billion over the next five years.

“We’re estimating that it will positively impact 1.2 million borrowers each year,” she told the committee.

“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.”

Also in November, Conservative MP Adam Chambers asked witnesses appearing before the House of Commons Standing Committee on Finance about how many new students the federal government estimates will be able to pursue post-secondary education because of the new policy.

“It is difficult to say,” said Atiq Rahman, assistant deputy minister of the Employment and Social Development Department’s learning branch, while testifying before the committee on Nov. 21.

“I do not have the number of how many students might go to post-secondary because of this measure.”