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When Government Became the Sole Student-Loan Provider

When Government Became the Sole Student-Loan Provider. Dave Rogers, StudentAid BC Ministry of Advanced Education and Labour Market Development PNAIRP Conference — October 4-5, 2010. A Numerical Story after Ten Years of Government Lending in B.C. Who we are…. www.StudentAidBC.ca

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When Government Became the Sole Student-Loan Provider

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  1. When Government Became the Sole Student-Loan Provider Dave Rogers, StudentAid BC Ministry of Advanced Education and Labour Market Development PNAIRP Conference — October 4-5, 2010 A Numerical Story after Ten Years of Government Lending in B.C.

  2. Who we are… • www.StudentAidBC.ca • One-stop shop for student loans in B.C.

  3. The Situation • Our American audience is in a new era: • No more student loans from Sallie Mae, My Rich Uncle, etc. • The government now lends its money to students. • Canada is celebrating its tenth anniversary of government-direct student loans. • What are some IR aspects of a national government-lending regime?

  4. Loans Are Made • Gov’t became the lender in… 2000/01 • How many loans to FT students each year? • In Canada, for 2008/09: 350,000 • In British Columbia: 55,000 • Money loaned to B.C. students in 2009/10… • $341 million in Canada Student Loans • $223 million in B.C. Student Loans • $80 million in government grants

  5. Inst’l Research Benefit? Centralized student lending means…

  6. Loans Are Repaid Loan clients entering repayment each year: 18,000 B.C. students as they complete their studies. Average Time to Pay Off a Student Loan:5.5 years

  7. Why not repaid? 50% to 80% of these students defaulted. 5% to 8% of these students defaulted. What goes along this axis? What separates students who default from students who don’t?

  8. That’s why. 50% to 80% of these students defaulted. 5% to 8% of these students defaulted. Average Annual Income in the Three Years after finishing studies and entering repayment

  9. Where Were Highest Defaults? Highest-default programs (bars 1-7): 1. Other (at For-Profit Institutions) • 2. Admin (at For-Profit Institutions) • 3. Trades (at For-Profits; not Appr’ship) • 4. Arts/Community/Educ (at For-Profits) • 5. Arts (at Public Colleges) • 6. Health Sciences (at For-Profits) • 7. Trades (at Public Coll.; Not Appr’ship)

  10. Source “Factors Affecting the Repayment of Student Loans” • by Constantine Kapsalis, Statistics Canada, March 2006 StatsCan Catalogue no. 81-595-MIE2006039http://www.statcan.ca/bsolc/english/bsolc?catno=81-595-M2006039 • For those who started repaying Canada Student Loans in 1994-95, Kapsalis linked… • their loan repayment history for the next three years,and • their income tax records for the next three years • The only such study ever done in Canada • Can government control the default rate of student loans?

  11. Regulation 101 • Your policy must be fair to those regulated. • Your policy must be seen to be fair — no favourites, for example. • You must work with those regulated to help them meet the regulation. • You must phase it in over a few years. • You must have an appeal process in place. • MLAs must be well briefed.

  12. “Designation Framework” • Canada-wide initiative to reduce the student loan default rate. • Applies to public and private institutions in B.C. • Designation (institution’s right to offer student loans to its students) is reviewed annually. • As last resort, Ministry may not renew a designation – then students can’t use student loans at that institution. • Holds the educational institution accountable for the success of its students. • Protects prospective students • Protects the taxpayers

  13. The numbers please… • Take the last five government fiscal years (Apr. 1-Mar. 31). • Find all B.C. institutions with more than 10 B.C. Student Loans entering repayment in that five-year period. • For each institution, divide its 5-year cohort of loans into: • Number of loans in good standing or already paid in full. • Number of loans in default, at the end of those 5 years. • Define: Institutional Default Rate = • Repeat each year for four years. Consider implementing administrative action only after four years of default rates above 28%. B  A + B

  14. Some Sample Reporting NB: Default rates come from Ministry data. Nobody can game the system.

  15. Latest News • Ten B.C. for-profit institutions did not have their Student Loan Designation renewed last month. • Two closed voluntarily, before being de-designated. • Designation Framework reviews continue annually. • We will publish institutions’ default rates [ ] on the Web this year. • In other news… the BC and Canada Student Loans will become a single, integrated student loan in 2011/2012 (the way they are in Ontario). B  A + B

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