Student Financial Assistance

Opening Statement to the Standing Committee on Public Accounts

Student Financial Assistance

(Report 2—2020 Spring Reports of the Auditor General of Canada)

1 December 2020

Karen Hogan, Chartered Professional AccountantCPA, Chartered AccountantCA
Auditor General of Canada

Madam Chair, thank you for this opportunity to discuss our report on student financial assistance, which was tabled in Parliament in July 2020. Joining me today are Philippe Le Goff, who was the principal responsible for the audit, and Mathieu Lequain, who led the audit team.

At the time of our audit, the federal government had 2 programs to help students obtain financial assistance to attend college or university. These are the Canada Student Loans Program and the Canada Education Savings Program. The government considers this type of assistance to be an essential investment in Canada’s labour force and economic growth.

This audit is important because there is a significant cost to the government when student loans are not repaid. In the 2018–19 fiscal year, that cost reached $500 million, and the Chief Actuary of Canada predicted that the value of unpaid student loans will continue to grow.

Our report does not cover any assistance to students related to the pandemic as it was completed in December 2019. However, the pandemic is a compounding factor that has come into play since we issued our report. It may well cause labour market conditions to worsen, thereby limiting prospects for young adults. This might jeopardize their ability to repay their federal student loans, and the value of unpaid and defaulted student loans reported earlier in the year would increase.

Overall, we found a number of areas in which Employment and Social Development Canada could improve how it manages student financial assistance.

On the loan side of student financial assistance programs, we found that the department did not properly check that information on applications to the Repayment Assistance Plan was accurate, such as income. The department has known about this integrity problem and about the resulting risk that ineligible students might participate in the plan since 2015. At the time of our audit, the department did not have access to the Canada Revenue Agency’s tax information to verify applicants’ income, a practice that is used at the provincial level and that the department recognizes to be valuable.

As of 31 July 2018, 24% of borrowers whose student loans were due were participating in the Repayment Assistance Plan. That translates into more than 200,000 borrowers who were struggling to repay their student loans, with a total loan value of $3.6 billion. Almost 9 out of 10 participants in the Repayment Assistance Plan were making no repayments. We found that Employment and Social Development Canada did not offer enough tools to help students understand their financial obligations under the Canada Student Loans Program, despite recommendations from the Financial Consumer Agency of Canada to make this sort of information available. Financial literacy is important as for some students this is the first large financial commitment of their lives.

We also found that the Canada Revenue Agency did not have the tools it needed to maximize recovery once borrowers defaulted and student loans were transferred to the agency for collection. For example, the agency was using Employment and Social Development Canada’s information system, which made it impossible for the agency to know exactly how much money was recovered by its own different activities and collection methods.

Finally, on the savings side of student financial assistance programs, we found that the government invested $1.1 billion in the Canada Education Savings Program in 2018, but low-income families did not fully participate in the program. For example, even though the Canada Learning Bond is paid by the government without any contribution from families, about 62% of eligible children did not receive it as of 2018 because no account had been opened for them.

In our view, it is important that Employment and Social Development Canada undertake an evaluation that considers both the loans and the savings components of federal student financial assistance. This type of comprehensive review would work to ensure that the system is consistent and effective in achieving the objective of promoting access to and completion of post-secondary education.

We made 5 recommendations to Employment and Social Development Canada, and the department has agreed with all of them. The committee may wish to ask the department what progress it has made to address our recommendations.

Madam Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have. Thank you.