Private College debt eyed

Private College Debt Eyed

Federal officials, as part of the government’s latest efforts to crack down on bad debts, are trying to figure out why graduates from private career colleges are more likely to have problems repaying their student loans.

Roughly nine per cent of the almost half-million students who receive federal assistance each year through the Canada Student Loans program go to private schools, including career colleges.

A federal research proposal from last year says these students are at a “higher risk of defaulting on their student loans” and face more problems making payments on time.

The most recent statistical report on the loan program shows default rates for private college graduates were three times higher than for university graduates, even though private college graduates had on average about $5,000 less in debt.

Explaining why that might be will be the focus of a project expected to start this summer that will create a detailed view of private career college students and feed into federal efforts to collect more of the billions in outstanding loans and avoid writing off debts that can’t be collected.

Serge Buy, CEO of the National Association of Career Colleges, said career college students are usually older than community college and university graduates, more likely to have children, be newcomers, or face other “barriers to employment.” They may also be saddled with debt from previous schooling, he said.

His association and the schools it represents want students to be equipped with the financial tools needed to repay loans, but privacy issues mean schools never know who is having repayment problems.

“For us to try to help them, which we would love to, we can’t because we have no way to find out who is in default and who is facing challenges,” he said.

The research proposal is among pages of documents obtained by The Canadian Press under the access-to-information law that outline efforts over the last two years to reduce write-offs of loans like the recently announced $203.5 million from 34,240 students in this fiscal year.

Officials have put a particular emphasis on projects designed to see what does and doesn’t work when prodding, or nudging, borrowers to get on top of their repayments.

For instance, Employment and Social Development Canada found career college graduates were more likely to use a repayment assistance program if they received a letter with a graphic outlining some repayment decisions. Another project found harshly worded, “more consequence-based” letters worked better than a gentler message at pushing borrowers to get their loans back into good standing.

A third test yielded a 73 per cent, year-over-year, bump in on-time payments from a small group of borrowers simply by having Canada Revenue Agency collection agents mention the availability of a repayment assistance program on the phone.

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