Feds renegotiate student loan agreement

Will Ottawa shovel another $100 million of taxpayers’ money into the three student loan-granting banks? On Jan. 25, the Globe and Mail reported the Federal Liberals would be paying $100 million to compensate the banks for losses incurred over the past five years from student loan defaults. According to a government press release, the story is inaccurate, but the real story, say student leaders, is just as contentious.

"The government has no intention of making retroactive payments for losses incurred by the financial institutions over the past five years," said Human Resources and Development Canada spokesperson Gino Trifiro. "The past losses are the banks’ losses. What we are doing is negotiating a new agreement with the banks because the old agreement expires July [31, 2000]."

Under the old agreement, the federal government paid $75-100 million per year to the banks as insurance premiums for students loans. HRDC estimates 25 per cent of students default on their loans. This, the banks claim, translates into significant losses. The government agrees, and is trying to come to what it sees as a fairer agreement for the next five years.

"We put an offer on the table," said Trifiro. "It is no done deal, but it is a fair offer."

The proposed deal would see an increase in the premiums the government would pay out.

"The contract that is being negotiated would be altering the risk premiums; there would be two separate risk premiums for public and private institutions," said Canadian Alliance of Student Associations official Kieran Green.

What these percentages translate into in dollar terms depends on the number of defaults, but estimates suggest as much as $200 million per year, approximately $100 million more annually than under the current agreement.

"We are not going to make any predictions at this point; it could be around $150-175 million," said Trifiro.

The government claims banks simply won’t sign a new agreement without the increases. However, student groups and opposition MP’s insist this money would be wasted, and fail to address the root of the problem.

"The high default rate is a direct result of the government’s cuts to transfer payments which are supposed to fund education," said national chair of the Canadian Federation of Students Michael Conlon.
"From 1990 onwards, about $7 billion in cuts have been made to post-secondary education, and these have been passed directly on to students in tuition fee increases. As a result, the average student debt load increased from $8,000 in 1990 to $25,000 in 1998."

"Raising risk premiums helps the banks but doesn’t help students," said Green. "If the government was properly funding education in the first place, students wouldn’t have such high debt loads and would be better able to pay back the loans."

Student groups have also expressed concerns about the increasing control private financial institutions are being given over a public student loan program.

"It’s a kind of natural progression since 1995," said Conlon. "The banks are now in a very strong position; they are essentially blackmailing the government into paying them more money."

University of Calgary Students’ Union Vice-president External Nassr Awada echoed this sentiment.

"Students warned the government in 1995 that giving the banks control over the student loan process would result in a loss of control; now we are seeing the first signs of this," said Awada.

Ottawa remains unconvinced, pointing out that under the new proposal, the cost will still be less than the $225 million it cost to run the student loan system in its last publicly-administered year.

"This is still the best cost alternative; it is the most efficient way to deliver student loans," said Trifiro.

"There’s also two cabarets planned," said RSA Student Representative Stephanie Sanden. "This Friday there will be Dinos vs. Bears in [Men’s] hockey. They’re giving us some free pizza and we’ll hold the cabaret at Max’s."

The event is held so for purely enjoyable reasons, said Enyedy.

"It’s getting to meet new people from our own community and also from the U of A," she said. "It’s just another unique activity you don’t see often in the other universities. Returning students always look forward to it, which gets the first-years pumped, too."

Last year, U of C residence students traveled to Edmonton for Rez Wars. It was a success, with the U of C winning the competition.

"It was a total experience seeing how other universities run their rez," said Enyedy. "We had it the last week of January last year."
This is the third year Rez Wars have been held since it resumed.

"It got cancelled for 4-5 years because of destruction of residences," said Rivett. "The residence kind of got trashed. The last two years, though, it hasn’t been bad."

There are over 200 participants in Rez Wars each year, with students from all residences at the U of C and U of A participating.

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