The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

Public Accounts -- Wed., Nov. 29, 2000

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HALIFAX, WEDNESDAY, NOVEMBER 29, 2000

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. Russell MacKinnon

MR. CHAIRMAN: Good morning, ladies and gentlemen. My name is Russell MacKinnon, the member for Cape Breton West. I will be your chairman for today. Our witnesses today will be dealing with the issue of student aid and in attendance we have our Deputy Minister of Education, Mr. Dennis Cochrane, Mr. Rick Butler - I don't have the list here in front of me.

MR. RICK BUTLER: Executive Director of the Training and Financial Assistance Branch of the department.

MR. CHAIRMAN: Right, and Ms. Kathleen Thompson.

MS. KATHLEEN THOMPSON: Director of Student Assistance.

MR. CHAIRMAN: Also, we have members from the various caucuses. We will start off with the Conservative caucus, if they would be kind enough to introduce themselves, starting with Mr. Morse.

[The committee members introduced themselves.]

MR. CHAIRMAN: Also with us from the Auditor General's office is Elaine Morash and David Perry. Generally speaking, I guess the witnesses are not new to the committee so we will start off with an opening presentation and then we will open it up for questions.

Mr. Cochrane.

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[8:12 a.m. Mr. David Morse took the Chair.]

MR. DENNIS COCHRANE: Mr. Chairman, I am pleased to be here once again to talk about, in this case, student financial aid as provided by the system that has been developed in the Province of Nova Scotia. We have also brought with us today the little video which we have had produced for use in our schools both in junior and senior high schools. It was produced by Street Cents and it is designed to talk about saving for education. It is never too early to start talking to people about the cost of education, and post-secondary education particularly, and it will actually be distributed to all of our junior and senior high schools in the province.

Also, we are predicating our visit today on the fact that for the first time we have made a major change with regard to what used to be the Nova Scotia Council on Higher Education. It is now an Advisory Board on Colleges and Universities and for the first time, student assistance comes under that particular group. So the group is asked to make recommendations to the minister on all matters that relate to post-secondary education including financial assistance. For the first time, then, students will actually be involved in discussing recommendations that will go to the minister with regard to that system. So it is a significant change. There always was a provision for students to be involved in an advisory role on financial assistance but it was never acted upon. So this is the first time that they have actually been given that mandate.

One of the things that becomes very evident, and you will see from our presentation today is, that student assistance is a rather complex matter with a number of partners. It is not just the Department of Education. It is the federal government, it is the banks, it is the institutions, it is the students and it is the parents. So there is a number of partners, obviously, involved in this whole process which adds to the complexity of the system in the way it is delivered in the province.

Kathleen is going to be our Vanna White today as well as a source of information. So if she bounces back and forth, you will know that I am in trouble and she is trying to save me.

Anyway, we wanted to talk first of all about the principles behind student assistance. It is a shared responsibility, at least, assuming the cost of post-secondary education, and that is one, I guess, we all have to remember, that it is the students, it is the parents and it is the governments, both provincial and federal, that are involved in the delivery of the program. It is not meant to finance all the education costs. It is meant to be a supplementary funding opportunity so that it opens the door and provides access to more students. All of our funding at the provincial level is based on need. There is only one element of all the government's programs that deals with the issue of merit but basically our system is funded on a process that determines the need of the students and their family. Obviously, families are expected to contribute based on their income and the number of dependants that they have. We will

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explain that a little later as to how that formula works, but that is often a contentious part of the Student Loan Program because there is a definite calculation that goes into it as far as what the parental contribution should be.

The next one we want to talk about is basically why do we have a loan program because at one time it wasn't. At one time it was strictly from the provincial government a grant system. What happened, basically, was that the amount of student assistance available hadn't been updated to keep pace with the cost of education and what really happened was that there was a recognition by government that if they made it a loan, more people could have access to it as opposed to the limited number that would be able to get it if it were a grant. So that was one of the reasons it went into a loan system. At that time, actually there hadn't been an update of the assessment criteria since 1984, so there had to be some adjustment to recognize parental contributions. The amount of funding needed to put into student assistance could really only be generated as a result of coming up with a loan program.

You can see in 1992, which was the last year of the bursary program, 7,651 students received $13.2 million in bursaries, but by 1993-94, which was the first year for the Nova Scotia Student Loan Program, 13,886 students received a total of $43.4 million in student loans, so there was a major change with regard to the way the money was put into the system.

Basically, it is a formula that determines the need and all the numbers go into the formula. Obviously, at the end of the day, out comes the award. We look at the costs, which of course are tuition, books and the living costs, and interestingly enough, it is no surprise to you, the last one is the most expensive. We pay a lot of attention to tuition but really the one that drives the cost the quickest, with the least attention, is the actual living costs associated with students attending the institutions. We look at a family/student contribution. Obviously scholarships and bursaries come into it and income from part-time employment also plays a role.

The maximum student loan you can see available is $315 per week of study. That changes, of course, depending on the program. We have $165 per week that the Canada Student Loan will contribute to and we have $150 a week that the Nova Scotia Student Loan Program contributes to. The maximum student loan available for a student taking 34 weeks at a university would be $10,710. Community college, which is a longer program, 39 weeks, is $12,285, and if you were in a 52 week program, and there are several of them, particularly in the private career colleges around the Province of Nova Scotia, you would be eligible for $16,380. One of the drivers there, obviously, is the tuition rate that is going to be associated with 52 weeks of study in a private institution.

I will just speak for a moment, as opposed to giving you the slide. When we look at the parental contribution, there is a very complex formula that works this out, it is the same for everyone everywhere because one of the things that Nova Scotia has done, we have

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harmonized our rules with the federal government although we have not signed a harmonization agreement. As a result of the debacle of, quite frankly, the way they handled the banks and the banks' relationship with the federal government and student loans, harmonization really didn't mean anything to us at that point because the players changed and the rules changed but it was harmonized getting ready to sign the agreement. There was no need to sign at this point. I think only two provinces have actually signed but we have actually harmonized our rules.

The parental contribution, what they do, and I will give you an example, if you had a student going for 34 weeks, which means that they would be available for $10,710, if you took the parents' combined income, and let's say it is $60,000 in this case, and you took all the deductions off that we are allowed to take off, which is about $11,900, and that would be EI, income tax, CPP and so on, you take their net income, which at this point would be $44,000, then there is a formula that talks about the moderate standard of living. That will be a great debate because who knows what it is. I guess there was quite a debate recently about what is wealthy, what is poor, what needs assistance and so on. Anyway, roughly, a family of three, they said a moderate standard of living would be about $32,100. So you take that off and you get $12,800, allegedly, of discretionary income. Then there is a whole formula that goes into that and they do some deductions and take percentages, all of which are determined by someone at the national level, and it works out, in that case, if there were two parents, income of $60,000, family of three, they would be expected to make $158 a week parental contribution. So during a 34 week study period they would expect that family to contribute $5,372. There is a lot of debate about those numbers and you will find many parents who will have a difficult time with that.

There are options by which students can become independent. Obviously, if they are out of high school for four years they get classified as an independent student. If they have had two 12 month consecutive periods of employment they would be considered to be an independent and judged that way in the student loan program, and if they were married they would also be judged to be an independent. So the parental contribution, obviously, is non existent in those cases, but for most of our students who aren't in those three categories the parents are given a calculation and a contribution to be expected. Again, that is a fairly controversial discussion as to the formula.

The other part now with regard to the financial arrangements, and these have changed just recently, originally CIBC and RBC were providing the money to Nova Scotia to lend to the students and in return for that they got a 5 per cent risk premium paid by the province at the time of consolidation. So if you went to university for four years and had your loans calculated - and we will give you the averages, by the way, of what people would have after four years and so on - if you went for four years, then you had six months after you finished, at which time it would be interest free and your loans would be consolidated at that time. Then the Province of Nova Scotia would give the bank 5 per cent of that total to cover the chance of someone defaulting.

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That was the situation for a length of time. CIBC got out of the business in July 1997. Then RBC was alone and we worked out a 10 per cent risk premium for them. In other words, the very same process, but now it was 10 per cent to cover the default rate and so on that might be out there. That expired on July 31, 2000 and we were scrambling, as every other jurisdiction in the country was scrambling to find a provider.

RBC agreed to continue the program until March 31, 2001, which is what we are currently operating under, but they wouldn't accept the risk premium. Now we have what we call a loan guarantee. We are going to guarantee this cohort that would have gotten loans after August 1, 2000. So in four years out, if you consolidate someone who took a four year Arts degree, six months after that, calculate what they owe, we are fine, we don't pay anything unless that person defaults. If they default, we pay 100 per cent. So, as a result, it changed the rules and every province was trying to get a package together.

Statistics indicate to us that we probably should be fine. It may not cost us much more than our 10 per cent risk premium did, but it is a risk. I am sure the people behind me will decide what amount they are going to assign to our budget to cover that risk because no one can default in this year because you couldn't get through - well, I guess if you dropped out in September but we hopefully wouldn't have given them their award quite that early - but even after six months.

It is going to be an interesting one and it could work out to our advantage, who knows. We will make some pretty rigorous efforts to collect, obviously, but these are going to be problems for every jurisdiction across the country. What we don't know, at this point, is what kind of a deal we are going to be able to work out on March 31, 2001. This is interesting because we were partners with the federal government in this process but as a result they put out a national call for a provider and put in, in my mind, a low risk rate and the banks weren't interested. They got them to the table and discussed and the federal government walked away. So they went off on their own and left all the provincial jurisdictions scrambling to get an arrangement in place and that is where we are at this point. RBC has stuck with us and we do have an arrangement with them at least until March 31, 2001 and discussions and negotiations are ongoing at this time with the banks.

We will talk a little bit about the projected defaults of student loans because this is a major controversy. Here is what our budget has built in to carry that. We still have a risk premium to pay because students are still consolidating their loans that they got a number of years ago. In other words, a student who may have gotten a loan in 1997 hopefully will graduate in April 2001. Six months later they will consolidate their loan. We still have to pay the risk premium, for those. Let's see, 1997, we would be paying 10 per cent on that. If we had a student who was six years in the business, the first two years we would pay 5 per cent on the risk premium but for the last four years we would pay 10 per cent. So there is a bit of a complex calculation of that. So, we have a budget in there to cover the risk premium.

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The loan guarantee, we have set something in there, although we won't spend anything in this particular fiscal year because of that. Again, there will be accounting procedures that will apply to that and someone will give us some indication as to what kind of liability we may have generated by giving loans in that particular year. So that is what is in the budget to cover that particular aspect of it. You can see that will go up and down. The risk premium will drop a bit because actually, as students begin to consolidate their loans, there will be a change in the numbers of people who would be on the risk premium versus those on the loan guarantee. So as the risk premium drops, you should see a corresponding increase in the loan guarantee, which we are. That is basically what we provide at this point to cover the cost of the program that we have.

Here is the distribution of students receiving loans in the Province of Nova Scotia. You can see the number of applicants has been going up. We had 22,019 applicants for which there were 18,601 that were approved for Canada Student Loan and 10,037 for Nova Scotia Student Loans. The Canada Student Loans were issued in the area of $96 million and the Nova Scotia Student Loans was something in the area of $36 million. The number of students who apply, they are given the process and they go through it, we figure out the final cost and we apportion it between the federal and provincial government as to who provides what loan to that particular one.

I think some of this stuff is very fascinating, maybe you don't but anyway, we'll find out I guess. Interestingly enough, here is the number of applicants at the various levels. There were 8,667 applicants at university, 7,275 were found to be eligible and about 70 per cent of our student loan portfolio goes to university students and the student loan assigned there was about $24.9 million for students going to universities. You can see the community college obviously has a smaller number as their registration is smaller. There were 1,610 eligible and that represents about 15 per cent of our loan portfolio for about $5 million. The private colleges, 1,535 were eligible and it picked up in the area of $7 million as far as students getting student loans going to those organizations and so on.

The community college numbers and the private college numbers would be a little bit skewed because a number of people in those institutions are older and some would obviously have savings from employment, hopefully. The HRDC and the Employment Insurance Program would supplement some of those people and, therefore, there wouldn't be the eligibility we might have at the other levels because there is an amount of support that would go into that as well.

We do have what we call Canada study grants, and these are funded totally by the Province of Nova Scotia, these are students with permanent disabilities. These are grants not loans, but they are supplementary to the loan system. If someone had a permanent disability and needed some financial assistance in order to adjust to going to a post-secondary institution, they may need a special type of computer, a laptop, a larger screen, some type of audio unit, all these things are eligible and they would be given a formula or application. Last

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year, 170 students received about $423,000 in assistance and it would vary. The year before, if you will notice, there were two less students but a lot more money. It would depend on the nature of the disability and it would depend if they are entering for the first time, because if you are in your third year you might need an upgrade in your computer. If you are in your first year then we have the capital cost of actually buying the computer, so it does change and that will fluctuate each year depending upon the number of students, the nature of the disability and whether or not they are in their first year or second year of our process.

Now the new player on the block is the Canadian Millennium Scholarship Program. I guess it is a recognition by the federal government of responsibilities they have in post-secondary education as a result of the reductions of the CHST over the years. I have some theories on this but I won't share them with you at this time. Basically, they have set eligibility criteria across the country and our province signed an agreement on behalf of Nova Scotia to administer it. So the calculations are all done rather than, thankfully, duplicating two offices; a federal one and a provincial one. At least as far as the students are concerned it is somewhat of a single entry point and all of the calculations are done by the Province of Nova Scotia.

In the first year of the program, 3,082 Nova Scotian students were awarded $8.969 million. That is our share on the national scene as a result of our population. So for example, I think we have that money for the first three years of the program, if our population share of the country changes, then next year, at the beginning of the fourth year, there would be an adjustment with regard to that particular program. A different way, it is basically a grant given to the student based on their indebtedness and it comes in, not to the student, but it actually goes directly to the bank and therefore they reduce the amount of loan they owe at that time.

[8:30 a.m.]

One of the rules that they had - and we have had questions about this around the country actually - is that as a result of the Canadian Millennium Scholarship program provinces couldn't reduce their contribution to the student loan program. So you look up what the provincial government's budget for student assistance was in the year of signing, which is $13.9 million. The Canadian Millennium Scholarship fund came in at that point and we couldn't reduce below that and basically our program cost for this year is $22.4 million so we have gone beyond and we have not cut anything. There has been an adjustment and there has been a cut, but it wasn't as a result of the Canadian Millennium Scholarship fund and it didn't put Nova Scotia in jeopardy of the agreement as a result of doing that. What we are doing now is looking at options to assist students with regard to managing the debt load.

As you know there was a program of loan remission in the Province of Nova Scotia; it is not there for this year. All students that were in the program before are still eligible but the new applicants after August 1st aren't. We are now looking at an alternate program that

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we can find that will meet some of the needs of the students to deal with that particular debt load.

Interestingly enough, 80 per cent of students who receive Canadian Millennium Scholarships to study are actually remaining in Nova Scotia; for some reason, a large percentage of the people who are receiving it are staying here. To get a Canadian Millennium Scholarship you have to be in your second year, you are not eligible in your first year. I think that perhaps is a recognition by the federal government of the drop-out rate we may encounter in our first year, there seems to be an adjustment year. The maximum you can get under the Canadian Millennium Scholarship is $3,500 and you can get anywhere between $2,000 and $3,500 and it is your level of need that kicks it in, it just comes into the system.

The next part is rather interesting and somewhat controversial, it talks about the delinquency rates. We often talk about default rates but the delinquency rate is someone who once their loan has been consolidated, is 90 days behind in their payments. We don't necessarily kick in at this particular point but they are 90 days behind in making their payment. One of the other aspects of student loans that maybe people don't know as much as they should is, in Nova Scotia there is another program. After you have your interest paid for all of the time you are going to university on your loans, you have six months from the time you finish to when you are expected to start to pay. If you are not in a position to pay you can go up to 30 more months by which the province will pay your interest. So there is really three years after that point, which obviously is meant to deal with the adjustment period and the length of time it takes students to find employment in their field and so on.

If you look at April 1998, we had CIBC rates and we have broken it down by category. You can see some of the institutions and the delinquency rate. A lot of people read things into this that maybe shouldn't totally be read into it. Basically, CIBC have reported in April 1998, that 26 per cent of the people who had loans, who were going to university, the loans have been consolidated, 26 per cent were behind and they were delinquent in making their payments. Similarly it was 36 per cent at community colleges and the cosmetology group - and maybe it is not fair to break them down separately - was 66.7 per cent. Business and computer colleges across the system, 45 per cent and other private colleges, 45.7 per cent. RBC reported in June 1999 considerably lower numbers in all the categories.

When CIBC got into it, it was new and maybe there wasn't the pursuit of the borrower that there should have been and there were some files that were allowed to be delinquent, that obviously had the ability to pay. Obviously RBC have found a little better formula for getting that and it has come down considerably. If you look at the RBC rates in July 2000, you can see what is happening there. Now 20.8 per cent is the overall average but that doesn't mean that these would all be defaulted, that means that these are three months behind in their payments.

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This one is by the institutions and we did the lowest delinquency rates. In other words, amongst the Nova Scotia universities, in one of the universities, all of the students going there, when they consolidated their loans, six months after we pay the interest, three months after that only 10.2 per cent are found to be delinquent, which isn't bad. There is one community college out there at 10.1 per cent; in cosmetology there is one out there at 19 per cent; in the business and computer colleges similarly 11 per cent; and the private colleges 1.7 per cent. The highest delinquency rate, you can see there is some where 25.2 per cent of students are delinquent. Community College, 36 per cent, 87 per cent, it goes on. Obviously, the last one, we have 100 per cent of one of them, there were three students and I think they are gone now, but it happened.

There is some pressure on the system to start to recognize the default rate of the institution in awarding the loan. I am not sure that that in itself can be the real measure, but there is a belief that this would be a solution, or part of a solution at least, with regard to that.

The next one talks about the debt level at consolidation and, again, consolidation is after you have finished, six months later when your loan is consolidated at the bank and the bank says, now, here is your monthly payments for the rest of your life. (Interruption) Sometimes I think it might. However, I guess you are going to earn for the rest of your life. No, actually it does not take that long, but for some people there is no question, it is significant.

What we show are the numbers of how many people - and this is rather interesting. If you look at less than $10,000, now we have 1998-99 figures, so at the time of consolidation, 3,755 kids had gone through the system and owed less than $10,000. They may have worked in the summer. Their parents may have been able to make larger contributions. They may have lived home, which would probably make a significant difference and also the amount of money they had to borrow over a period of time.

Similarly, 1,495 were between $10,000 and $15,000. We had 768 - I will jump ahead, you can see the numbers - 768 who were over $30,000, and we actually know who they are. You can be eligible for a student loan up to 10 years. So if you went into a pretty energetic program and got a four year science degree and then went on to med school or whatever, you could end up with $30,000 in loans and there are 768 people out there in Nova Scotia who do. I guess if you were maximum eligible at a university with $10,700 as the maximum for the year, you could come out to that or more depending on what you have been able to do.

If you see in 1994-95, the Nova Scotia contribution at that time was $105, the Canada student loan went to $165 and when you got into a bit later, you go from the period of grants to where everybody would be a loan recipient. So, obviously, you would see those numbers going up over the years and, of course, the cost of tuition and the cost of living has gone up over the years so you will see an increase in the numbers of people in those various categories as time goes on.

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Here are the aspects of our program, the six month interest free that I have mentioned, that costs us about $0.8 million to provide the interest on the students who would be in that six month time-frame. Interest relief, that is the one where if you are unemployed or underemployed and not able to pay the interest on your loans, you could apply for up to 30 more months. They do not pay on the principal. We just pay the interest on the loan and that costs about $3 million a year. Loan remission that was there, which was discontinued, it was a contribution against a portion of their student loan that went, in other words, off the top each year. That cost about $9.9 million. Interestingly enough, it was only budgeted at about $4.5 million or so. So, often other revenues in the department were spent. It was never properly funded, but the cost of that was basically about $9.9 million.

That is the program that discontinued after April 1st. Anybody who was in the program before would have been fine. They would be grandparented out, but new applicants and so on who would receive a loan in the year 2000 would not be eligible for loan remission. That is what we are looking at, trying to find an optional program to deal with that.

That is basically how our system works; it is rather complex and a little bit convoluted and, again, the complexity is added to by the number of partners that we have in the mix. Certainly the federal government, the banks, obviously the parents and the students and the Province of Nova Scotia, are all major players in this, but it is a rather convoluted system.

Mr. Chairman, we are open to questions if you have any. We have more information if you need it and we can answer now, or we will attempt to find the information and get it to members of the committee if there is information they want that we don't have.

MR. CHAIRMAN: Thank you, Mr. Cochrane, and your staff. That was a fascinating summary of the student loan program. Normally we do 20 minute rounds, but I wonder if we perhaps should do 18 minutes to allow a little bit more in the second round. So it is the Liberals' turn this week.

The honourable member for Cape Breton West.

MR. RUSSELL MACKINNON: Mr. Cochrane, how many students do we graduate a year who have student loans in these institutions, a round figure?

MR. COCHRANE: The slide that we showed, this would be six months out from graduation, so for example in 1998-99, six months before that, we would have had 3,755 students; 8,185 would really be the total of all of our people in one year who would graduate. They would have graduated six months before 1998-99.

MR. MACKINNON: So approximately 3,700, 3,800 into the market.

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MR. COCHRANE: No, about 8,000.

MR. MACKINNON: Oh, 8,000.

MR COCHRANE: Yes, 8,185.

MR. MACKINNON: Okay, 8,100 and they all have student loans?

MR. COCHRANE: They would all have student loans somewhere between zero and, yes, wherever, above $30,000.

MR. MACKINNON: What percentage of those individuals would you estimate receive employment within that first year?

MR. COCHRANE: We would have the statistics on how many would have applied for the 30 month interest relief which I guess if we did some calculation, we could probably assume that either they found employment and were under-employed and, therefore, were not at the threshold by which they could make the payments or they did not have employment. We could probably find that figure for you.

MR. MACKINNON: What percentage would you estimate applied for that relief? (Interruption)

MR. COCHRANE: There were 3,000 people on interest relief, but they could be graduates over basically a three year period because they could be in their third year of interest relief or their second year and so on. Actually if we look at 8,100 being the average per year, six months out, so we take three times that which is 24,000, we are probably talking 11 per cent to 13 per cent.

MR. MACKINNON: So approximately 87 per cent would be self-sustaining?

MR. COCHRANE: Yes.

MR. MACKINNON: Has there been any tracking done to find out the return on your investment? I mean you have laid it out so eloquently in terms of how much it is costing the Department of Education. Have you done any tracking or has the government done any tracking? Have you collaborated with the Department of Finance to find out, in fact, what the return on the investment is in terms of revenue generated because of the income sources?

MR. COCHRANE: I would think it would have to be very good.

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MR. MACKINNON: In other words, what you are saying here today is that it is a very good investment for the Government of Nova Scotia? They are making a lot more than they are paying out?

MR. COCHRANE: Over the long period of time.

MR. MACKINNON: Now, despite that there has been a shift of responsibility away from the banks and a greater responsibility on the students, am I interpreting that correctly, by the fact that CIBC and the Royal Bank have kind of started off with the 5 per cent risk premium, and then 10 per cent risk premium and then you have changed the latest process again.

MR. COCHRANE: You are correct. Banks are not charitable institutions and they are going to cover themselves. That is one of the problems we deal with in the system, that they want their interest and they want their payments. Basically the shift has come back to government first and, obviously, that is because we do not cover 100 per cent of the cost of everything. Some of the costs at least would go back to the students eventually to pay it.

MR. MACKINNON: Through the three processes or the three time-frames, one with CIBC, one with the RBC and then the latest contract to date, how much money would you calculate that the banks have actually lost? There is an auditing process, obviously.

MR. COCHRANE: I doubt there was very much that wouldn't have been covered at the time by the 5 per cent and now by the 10 per cent. Somewhere it must be a little above 10 per cent, because they weren't interested in getting back into it at 10 per cent. I think they probably would have signed on at, who knows, it could have been 13 per cent, it could have been 14 per cent. I would suspect that the risk premium at the time of the agreements during that year would almost cover the risk that they were taking. It obviously has caused some problems in recent years, because they are not interested in the risk premium again.

MR. MACKINNON: So what you are saying is the banks, with the latest agreement, they really have a sweetheart deal out of this.

MR. COCHRANE: If I were a shareholder of the bank, I would be happy.

MR. MACKINNON: It would appear to me that the government kind of caved into the banks, if the banks are getting a greater sweetheart deal now. What efforts were undertaken by the Department of Education, or whoever did the negotiations?

MR. COCHRANE: Everybody tried. The federal government led the charge, as I mentioned earlier, for a period of time, and tried to get a national proposal that would work. I think they put out a risk premium that was artificially low. The banks really weren't interested, but they started to negotiate and talk. Eventually the federal government went out

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on its own. It funds its own now. The bank lends the money to the student based on the award that our department calculates, and then the bank sends the bill to the federal government, which writes them a cheque and a fee for processing it, which causes us some concern, because, quite frankly, they are giving the bank $64.65, I think, for a processing fee, and ours works out to about $25 and we do all the work. So we have some discussions to have with the federal government eventually about that. They have done it differently.

In Nova Scotia's case, as in most of the provinces, we are still dealing with banks because there is not that pot of cash to lend out to people. Provincial governments, traditionally, aren't lending institutions, you find an institution to do it for you, and we are still into the arrangement. This is the same kind of arrangement, almost, existing certainly in the Atlantic Provinces; we talk about it as colleagues to see what situation we are in. It is somewhat similar. I think one is a little different deal, P.E.I., but their volume is significantly smaller. The banks have come forward and said, look, we are prepared to do this, we are getting in the business, but we want to make sure you cover any defaults. It is a good position for them to be in.

MR. MACKINNON: Mr. Cochrane, I am a little bit suspect because of the timing, June 1999, right into the year 2000-01. It seems like the new government caved in pretty easily to the banks. The previous administration, even under some other political stresses, still held out for a tougher deal. I wanted to leave that on the table.

MR. COCHRANE: I think the feds dropped the ball, honourable member. I watched it from a different province at the time, and it was the same problem across the country. In my mind, it took the federal government about three months to get in and mess up the deal. However, that is a bit jaundiced because, obviously, we were going to be left paying the bill in whatever jurisdiction I worked. They would take some umbrage with that, I am sure, but they also had the means to fall back in their own budgets, in their own accounts to cover it.

MR. MACKINNON: But in this particular case, it was the province that signed on the dotted line.

MR. COCHRANE: The provinces had to pick up the ball once it was dropped.

MR. MACKINNON: That is right. With regard to the Millennium Scholarship Program, I am still a little perplexed. This is going back to Mr. Butler's comments from a previous day. With the indulgence of the committee, I will just read this memo that I received from Dalhousie Student Union representative Chrystal MacAulay. I would ask for some guidance on it, because we seem to be getting two different pieces of information here, one from the Department of Education and one from their perspective. They are totally at odds with each other.

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"First, the Canadian Millennium Scholarship Foundation Bursary Program has been stating for months that the Nova Scotia government will save approximately $3.5 million as a result of students receiving CMSF money. The Province has denied any savings as a result of these bursaries, saying they do not know how the Foundation came up with such a figure. The DSU had the opportunity to question Ms. Thompson herself about this, (at a Student Assistance Forum we held October 25, 2000) and she would only say that she had no idea where the figure came from.

The DSU has found that the Province admitted that 'the millenium scholarships will displace $3.5 million of provincial assistance' in a June 8, 1999 press release. Therefore, the Province has known all along about these savings since they publicly announced it last year.

Now that we have established that this figure was not simply pulled out of thin air, our question is the same as before: what plans does the Province have to reinvest this $3.5 million to benefit students?"

MR. CHAIRMAN: Mr. Cochrane.

MR. COCHRANE: Plus or minus on those percentages, there is no question we saved some on the interest relief of our portion, if some of it is recognized and reduced as a result of the Millennium Scholarship program. We are looking at an option to loan remission. We have been asked to try to design another system. There were some commitments that were made, the government talked about total student loan indebtedness. We are looking at a number of options that might be something that would work with regard to loan remission, the sum of loan remission, so to speak. We are just not sure what it is going to be at this point, but it is our intention, in the budget process, to bring forward an option. Obviously, there would be a dollar sign associated with that. It will go into the hopper and, hopefully, come out funded.

MR. MACKINNON: So what you are saying is that the Dalhousie Student Union does have an issue here?

MR. COCHRANE: I think there is an issue. Any time someone gets out of a portion of support for student indebtedness, sure, there is going to be an issue in that regard. Certainly, the rules that were there, and the numbers showed we were spending $13.9 million at the time of signing and we are spending $22.4 million now, we haven't cut our budget as a result of it. Obviously, it may not have grown as much as it would have had to if we hadn't had that option, but nonetheless we are spending about $9 million more now on student assistance from the provincial government's point of view than we were at the time the Millennium Scholarship agreement was signed with the Province of Nova Scotia. That is a fact, and it is quite clear. We have to look for an option as to how we are going to try to deal with the bigger picture, of course, which is student indebtedness.

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MR. MACKINNON: At the risk of sounding a bit naive on this whole issue, the question is, where is the Millennium Scholarship money going to date? Can you lay it out in simple terms? How much has come in, how much has been disbursed and how much is still left in the kitty?

MR. COCHRANE: In the whole of the Province of Nova Scotia, in 1999-2000 we had $8.96 million that was given in Millennium Scholarship funds. Interestingly enough, 2,471 students who got it are still in Nova Scotia and, for example, three went to Saskatchewan, 30 went to Alberta, and so on, but they are our students who happen to be studying outside the province and have received Millennium Scholarships. Our whole $8.9 million is spent. Whatever Nova Scotia gets, it is just calculated out to the number of eligible people, it is divided out, and that is their reward, somewhere between $2,000 and $3,500. It is all given. There is no question to the students who are eligible to get it.

MR. MACKINNON: On the issue of default rates and designation of our institutions, I believe this is an issue I raised on a previous day, but directly put, does the government have any plans to classify schools according to the default record of graduates repaying their student loans?

MR. COCHRANE: We are looking at it. My problem is considering penalizing a student who gets a loan, who goes to an institution that has a high default rate. I don't know that you as individuals should necessarily be punished for people who went before you, who, through a whole series of circumstances in their life, defaulted on their student loan. I think one of the things that is beneficial though is to provide the information so that students will have one more indicator as to the employment opportunities of perhaps taking certain courses.

For example, if you find that 100 per cent of students taking a course can't find work and, therefore, have defaulted on their student loan or are receiving interest relief for that 30 month period, then I, as a student, would like to know that, so when I make my decision where I am going to go, not necessarily what institution but what program I am going to go into, it would be an extra tool in my toolbox to make those kind of tough decisions that students have to make. We are looking at it, it is obviously public, but whether we tie the student loan eligibility or the rate or any of those things into it, I would think we would not, but it is an information item that probably students should know.

We do graduate surveys, for example at the community college system and that report is a good thing for students to have because it gives them a sense of what success rate graduates have had in finding work as a result of taking their studies in various programs and so on.

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In my mind it would be unreasonable to charge the student more, deny them a loan because they happen to go to an institution where a lot of people have defaulted as a result of taking loans in the past. There has to be a whole number of factors, that may be one.

I think maybe we have to look at some of the institutions that are registered. It is more rigorous now than it was and actually, the private career colleges are doing a fairly good job of responding to the rigorous application process. Some of the things we are trying to protect are (a) the student; (b) the government investment; and (c) even the institution. We do have a program now by which 1 per cent of your tuition goes to a fund to allow us to purchase a program to let a student finish. But it is really protection for the student.

MR. MACKINNON: Mr. Cochrane, in fairness, you are a good political speaker, we are going around here, but it is as much a function of the economy as it is the ability of an individual to want to pay a student loan. You could have the greatest intentions to want to pay a loan, but if you do not have a job, it does not matter what institution you go to and that is my concern, that the government is going to start boxing institutions according to that without doing a full examination of the big picture.

You have mentioned about delinquency rates and you made reference to private trade schools and institutions. Have you done any tracking to monitor the success rate of those? With the high delinquency rate, obviously they are not getting jobs, or they are not in a position where they are able to pay it back, so they must be going into programs that are of little material benefit when they get into the market. In other words, there is an oversupply of them or their is little demand for their product, period.

MR. COCHRANE: Rather than deny them . . .

MR. MACKINNON: Why is the provincial government continuing to allow support for such institutions that produce a particular graduate into a particular course or training that there is no demand for?

MR. COCHRANE: I guess the opposite of that would be what we just talked about. Do you deny them from going there because there are a lot of people before . . .

MR. MACKINNON: Not at all, but you want to make sure you get value for dollar. You do not burden them with a student loan and kind of walk them into a chute and say, okay, we are going to pay $6,000 or $7,000 to a private trade school or private institution knowing full well that they have very little chance of any employment when they come out. There is poor tracking done, I would suggest, within the Department of Education in that sector of the private trade schools division. Because there is clear evidence to support that by your own figures.

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MR. COCHRANE: And there are some institutions where there are not many people getting employment opportunities as a result of going there. We think that they should know that information when they go. Whether or not we deny the student the right to have a loan to go there is a very difficult and harsh question. But, certainly, we think that one of the tools that they should have at their fingertips when they are making their decision is, what kind of opportunity am I going to have as a result of going here and getting this particular course? I think that is reasonable. Whether we say, no, you cannot go there is another question. That is a little bit more controlling perhaps than what we think we should be.

MR. CHAIRMAN: Thank you. We are now going to pass to the NDP.

Ms. Maureen MacDonald.

[9:00 a.m. Mr. Russell MacKinnon resumed the Chair.]

MS. MAUREEN MACDONALD: I really welcome this opportunity to talk about this program because it is so important to our future and to our kids and to our economy.

I want to start first by talking about the relationship of the province to the banks and I see that the current agreement will be expiring in August and I know you spoke to this briefly with the previous speaker, but I am wondering if there is any alternative to dealing with the banks. What have you looked at? Have you looked at the feasibility of going it alone without a big financial institution? Because it really does seem like we are assuming all of the risk and doing a lot of the administrative work. So why are we in this arrangement? Is there no other alternative?

MR. COCHRANE: Certainly, we have to look at the options because we do not have a great number of them dealing with the banks. We are still talking about the risk premium aspect of it and what is the number, the threshold, that they would look at.

One of the problems I think we have had is that there was not a great incentive for the bank to collect as a result of someone coming up and paying the bill when they did not. That was an issue along the way. We have to look at the whole structure and the big cost, of course, is, do you get into it as a province and virtually become a lending institution? Certainly we have to look at that question as to whether or not we would be the best ones to go out and borrow the money, keep it in a fund and distribute it to the students, the cost. Then we would have to get into the collection business, which is a difficult one and not one that we would want to subject to any kind of a process by which we use some tactics that other institutions perhaps use.

So, there are a lot of questions like that that we have to deal with. We are having discussions amongst the players in the country. Obviously, places like Alberta have a different set of circumstances than we do, so it has not been determined, but we do know we

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have to find a way. Once we determine what we have been paying - and we know what we have been paying in risk premium - then we have to say, could we create a structure to do this? Would that carry what our portfolio would be and give us an option to collect it and so on? We could get into it probably without a great deal more cost, perhaps, but whether or not we should be in that business is the other question.

MS. MAUREEN MACDONALD: I would hope that in that process we will do some cost-benefit analyses and not be driven just by an ideological perspective on whether or not it meets a set of values, but that we actually look at financially if we can have a program.

I will just quickly crunch some numbers around the Canadian Millennium Scholarship and students in the province. It would appear to me that for every 100 students, about 21 Nova Scotian students have access to the Canadian Millennium Scholarship. It has been a criticism I have heard from students, for sure, that there is great inequity in this program and not very many students actually get access to the Canadian Millennium Scholarship. If those numbers are accurate, then that is less than one-quarter of our students.

I am pleased to hear you are looking at a new Loan Remission Program, but I would like to know, why was the Loan Remission Program terminated in the first place if we are now looking at a replacement for it? The debt load of students is pretty significant. I also wonder whether the termination of the Loan Remission Program will just contribute to greater risk on the part of the province in the future. Can you elaborate on this a little bit?

MR. COCHRANE: The first part of the question, the criteria for the Canadian Millennium Scholarship fund is set by the federal government and the Canadian Millennium Scholarship Foundation. So, they have come up with the rules. We were not particularly happy with some aspects of it either.

Bottom line, the whole thing is a game. The federal government when they were giving the proper contribution to CHST and if provinces did the proper thing with their money and gave a lot of it to the universities, it relieves some of the pressures. That got cut significantly, so therefore the province has less to give to the universities which creates pressure in tuition increasing and so on. This is all about recognition which, quite frankly, annoys me, because you get a letter and it says, here is your cheque, love, the minister.

Before the federal government was making, I think, a rightful contribution through the CHST transfer system into the universities so that tuition was kept down, but nobody really recognized it and this was a shift of the way it was being done now so that someone gets credit. The sad thing is that we go through all this paper process so someone gets credit, when that money could really go into the hands of the students and reduce their indebtedness. Anyway, maybe that is not fair, but from someone trying to administer the system and seeing what has happened, we have governments playing games, in this case being led by the federal government, and the student at the end of the day is the one who gets the least benefit from

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it. I would rather spend the money, any day, giving it to a student than giving the bank $65 to process it or even giving us $25 to process it. So that is where that comes from and I was going to say I guess they have to answer for that, but I guess they have.

On the loan remission side, there is no question that any program you have that goes directly toward reducing a debt load that is not there, is going to have an impact on that debt load. Obviously, that comes into people's thought processes as far as am I going to go or am I not, or can I afford to or whatever, and any program that diminishes the amount of money available to help, whether it be CHST from the federal government or loan remission from the provincial government, has an impact.

How significant that is and whether it breaches the threshold at which the student says I am not going or I cannot afford to go is another question, but certainly the government is concerned about that and we are asked to take a look at what we could do. Is there another kind of program? Is there something more innovative? Is there a better way to do that kind of thing? We could give a huge increase to the universities if we had a guarantee they would not raise the tuition but, again, tuition is only part of the cost of going and the sleeper out there is the residence fees and the cost of living.

MS. MAUREEN MACDONALD: I would like to ask a few questions specifically about problems that people experience in the bureaucratic process of trying to access student aid, and particularly I would like to talk about a situation I experienced where a student had not been on speaking terms with a parent for a considerable period of time and actually, although quite young, had been living out on their own. When they applied for student aid, they had all of these requirements that they get access to the parent's income tax information and all of this kind of stuff; the parent would not cooperate because of the estrangement that had occurred. These situations, I suppose, do not occur often, but they do occur in the system.

MR. COCHRANE: Yes.

MS. MAUREEN MACDONALD: The process was not all that flexible; the lack of flexibility, I guess, in being able to respond to particular situations is a concern that has certainly been raised with me by constituents. Are you attempting to deal with this in any way? Are you aware of these situations?

MR. COCHRANE: There is certainly some sensitivity to some circumstances in life where it does not fit the formula. The biggest one we see is a question of the relationship between parents and students and that does happen. We do have some general criteria, as I mentioned earlier, by which you can become independent and that relieves some of the difficulty, but certainly there are some situations where the parents just are not able to make the contribution or they feel they cannot and the relationship with the child is such that they may be able to justify a different consideration.

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There are two appeal processes and really it is meant to check the system. I think it brings a little bit more humanity into it than a formula because the formula is vast processing and with the thousands of people who are going through it, it brings out an award. In 95 per cent of the cases it may not be as much as they want, but it is fair. At least everybody is judged, but the other 5 per cent I think on the appeal process gives a chance for the student to come in and talk about that difficulty and the situation that exists with their parents. I have seen, over the years, students who were in abusive situations and left the home to avoid it and, therefore, technically on the criteria, they would be expected to be at home and you would not put anybody through that process. So the appeal process I think allows some consideration of those kinds of circumstances.

I know it is frustrating to the student because they have to go through that process, but otherwise it would be a judgement that is outside a formula that probably someone processing it could not make. Hopefully we can do it as quickly as possible and I think we have to work on that and the turnaround time. I think it has been fairly good, but when you are waiting for your loan and making decisions based on it, it is never quick enough.

MS. MAUREEN MACDONALD: It has also been brought to my attention on several occasions that married students sometimes have difficulty getting through the process when both of the persons are students. I do not know if you can tell us who has a tendency to have to appeal in the system, if you track whether or not it is married students who most often have to access the appeal process? I certainly have been told that that might be the case, that it is commonplace for married couples to have to appeal and, quite often, they are successful through that process, but if that is the case, then perhaps to avoid the process of having to put people through appeals, there could be some action taken or some steps taken at the front end. Do you have any comment on that? Can you elaborate on that?

MR. COCHRANE: On the breakdown, the greatest number of appeals would be based on the parental contribution. That would be number one. A fair number of married students, the criteria is quite rigid and it causes a number of appeals and a number have been very successful in appealing it, but the criteria is somewhat rigid and, therefore, it causes more difficulty.

The federal contribution, obviously, comes through first. So we get a fair number of appeals based on the amount of money that they do not get awarded based on the criteria that has been set by that level. It would be an area that we would have a fair number of appeals, but the number one appeal area is certainly parental contributions.

MS. MAUREEN MACDONALD: Also I find it curious sometimes when I am approached by constituents, students often do not know that there is an appeal process and I am wondering what your department does to alert people to this process that is available to them?

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MR. COCHRANE: Certainly we try to publicize it and make sure that when people get their awards, the documentation that comes with the award would make reference to, should you not accept this, or should you not feel that it was done fairly or you have not been treated fairly, there is a process by which you can appeal. We try to encourage it in that regard. Certainly university registrars and people in the university system are well aware and encourage students to approach the appeal process if they feel that what they have gotten isn't adequate. I do not know what percentage we would get who would do that, what percentage would appeal, but certainly the guide itself when you apply for your student loan, the documentation you get when you get the loan and the website for the student loan process, very clearly says this is how you appeal and this is the process through which you have to go.

MS. MAUREEN MACDONALD: One of the other things that has concerned me is that it would appear that the educational institutions are all over the map with respect to their requirements around when tuition is payable.

MR. COCHRANE: Yes.

MS. MAUREEN MACDONALD: This can create difficulties for students. Some institutions require 100 per cent of the tuition up front and, generally speaking, students get their loans in two instalments, for example, or in some of the private training programs that may be four instalments and at different rates. Will there be any attempt to standardize these practices in the training institutions so that the way the student receives the money more appropriately reflects what they will have to pay out and will not leave them in a situation where they literally do not have that important portion of their loan for living expenses which you point out is such a large proportion of what it is that they need?

MR. COCHRANE: Your point is a very good one. When we do the calculation, we base it on 34 weeks - here is what you need to live for 34 weeks and here is what your tuition is. We give them the award in two instalments. If they do charge 100 per cent of the tuition up front, we see students in December having run out of money and yet come the new semester they have all kinds. I don't know if those peaks and valleys are good for people who don't budget - I am not saying students don't but for one person who may not. We don't have the power to dictate that but one of the things we should certainly look at is our new Nova Scotia Advisory Board on Colleges and Universities. I think we can use some of our influence with the institutions to make sure that doesn't happen.

I think universities are pretty balanced, I think it is 60/40 and they do an arrangement, quite frankly from two points of view: the student's point of view, if they pay 100 per cent up front, obviously they are left with less money to live on and so on as they get to the end of the first semester; and from the second point of view, where we are guaranteeing through either the bond or the 1 per cent, that we are going to guarantee we will purchase out their service if something happens. I would be very upset if I found an institution that collected

[Page 22]

100 per cent up front that went out of business, which means, obviously, the fund is going to have to pay the full amount because we have nothing left in the kitty for not having paid the tuition in the first semester. So, it is a very good point and one that hopefully our advisory board will take a look at. Right now we don't have the power to dictate it but certainly, upon recommendation from the advisory board, we should use some of our persuasive abilities.

MS. MAUREEN MACDONALD: The last thing I would like to raise is the default versus the delinquency rate because I have often found this quite curious. I have sat on boards of credit unions and the banks have said quite often in their information that there is a very high default rate when, in fact, it often seemed to me that what it really is is a delinquency rate in that people have fallen behind in their payments but they haven't stopped paying, necessarily. I am wondering, has the department considered doing any consumer education or providing assistance to student groups, for example, in terms of doing consumer education with students around financial planning and credit processes, so that students would be more capable of doing some planning if they get into a situation where they are becoming delinquent in a student loan?

MR. COCHRANE: Certainly, I think the universities and the community colleges are fairly aggressive in that regard with registering, and student services- it is interesting, if you look at a growth industry within the post-secondary sector, it is probably student services. At one time we probably walked in the door, someone took your cheque and allegedly you had a faculty advisor. I know there is certainly a lot of expansion at the community colleges with regard to student services so they are doing much more of this, which is a good thing.

On the two that are more directly controlled by government, certainly the universities and community colleges, I think we are seeing some progress in that regard. The private institutions, probably not as much, although some of them take their students under their wing and nurture them through it. Obviously, at the time the bank gets involved and the consolidation and so on, they should be giving some advice, as any financial institution should.

The pressure becomes greater on us, obviously as we get into the cohort that is going to have a loan guarantee and we will have to take a look at that because it is just new to us and none of those people would have consolidated their loans yet and we are probably three and one-half years to four years away from most of them. Certainly the pressure is on us to do more of that because it is in our interest because obviously, before when it was a flat 5 per cent or 10 per cent, that is all you paid. That is not just because we want to collect back, it enables us to continue to fund the system so that more students get the advantage of it.

So, the pressure is on, that is a good point and we will certainly have to look at what we are going to do, in addition to what the universities, the community colleges and the private colleges are doing in that regard.

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MR. CHAIRMAN: We have gone a little bit over the time here. I allowed that for a good, even flow so maybe we will take a minute off the next, to the advantage of the Progressive Conservative caucus, if that is okay.

The honourable member for Kings South.

MR. DAVID MORSE: Welcome, Mr. Deputy Minister, and your staff from the department. You made an interesting comment earlier in your presentation when you talked about the correlation between the rising tuition and the cuts to the CHST back in the early part of the 1990's. Specifically, it was about that time, according to this briefing we had from your department, that we went from a bursary program to the Student Loan Program, and there was a dramatic increase in the amount of money that was made available to students to fund these higher tuitions. Since that time - that time being the cuts to the CHST - what is going on with the average student debt load? You have showed us a table that showed a variation and some were graduating with less than $10,000 and some with more than $30,000. Is there an average number that you could give us today?

MR. COCHRANE: I just would assume it has raised up some levels. There are probably more now at $10,000 to $15,000 whereas before they were under $10,000. Tuition increases have been fairly consistent across the board and obviously that would increase the student debt load at the end of the day. To some students, of course, it would create more eligibility because before they may not have even been able to get a loan. Now they can get one because it takes them above the threshold, those kinds of things. So there are whole numbers of factors but I would guess, generally, you would find that as a result of the last seven, eight or nine years, inflation, tuition, books, registration, cost of living, have all gone up in such a way that it would increase the debt load.

MR. MORSE: Okay, but you are not prepared to give a rough answer as to what it would be today?

MR. COCHRANE: We don't really have that. I could get you this same list maybe five years ago, the list that shows how many students are under $10,000, et cetera. I could probably get that for the years since four or five years ago. We probably could do it. In fact, we have it - I guess we do have a bit more of that. For example, in 1994-95, we had 1,970 students at consolidation that owed less than $10,000; now we have 3,755 - or a year ago. So obviously we saw almost a doubling of that. If I pick another one . . .

MR. MORSE: But that is a happy story because those are the ones that are less than $10,000. Let's look at the ones that are over $30,000. What has happened there since the cuts to the CHST?

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MR. COCHRANE: Yes, that has gone up significantly. There were 25, for example, in 1994-95 and now there are 768. That would be a combination, obviously, of tuition and cost of living. What we don't know is how long some of them have stayed in the program. Do we have more seats now in the medical school at Dal filled than we did in 1994-95? I doubt it but provinces are buying more seats, for example, so therefore there would be more students that would get in that situation where they could owe more money. We would have to go back and look at a number of those things but obviously, as a general statement, yes, the level of indebtedness would be higher and more students would come out with higher loans now than they would have before.

MR. MORSE: You have not given me a specific answer but I do note that from the information you passed out, over a five year period there are 30 times as many people who are graduating with over $30,000 in debt. This just happens to coincide with cuts to the CHST which you mentioned earlier was a major cost driver in downloading the cost directly onto the students.

MR. COCHRANE: The withdrawal of the federal government in CHST to the degree that they were before, would definitely have an impact on tuition and costs and total indebtedness, no doubt about that.

MR. MORSE: This takes into account all students, not only university but community colleges, private institutions.

MR. COCHRANE: Yes.

MR. MORSE: So again the province adapted its criteria so it could make more money available to lever the actual out-of-pocket costs to the province to allow the students to take out more than twice as many loans, according to what we have here in our briefing binder, and also larger loans.

MR. COCHRANE: Yes.

MR. MORSE: So now we have established a major download onto the student population and the federal government may argue, user pay, that may be their answer. So we are seeing an increase in the size of the loans taken out by students, we are seeing more students taking out loans. Are you seeing a trend where more people, including perhaps people who have been out in the workforce, mature students, are going back to upgrade their skills, perhaps move to a different career, take another degree, and taking out loans?

MR. COCHRANE: Certainly if you look at the community college enrolment, yes. The average age of their student would be significantly higher than it may have been a number of years ago in the sense that people are coming back and upgrading their skills and taking opportunities as well. A lot of those are supported through one program or another.

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They wouldn't all show up, necessarily, on the student loan numbers because some would be HRDC and some would be EI eligible.

MR. MORSE: We now have a situation where students are taking on fairly substantial debt loads. Is there any help to assist them in preparing for this upon graduation in terms of counselling them, how they are going to pay it back? Could you talk on that subject? That, to me, is the big concern.

MR. COCHRANE: Certainly, the universities and the community colleges are doing more of that now. Some of the private ones would be into it but it is incumbent upon us, I think, as well, to do some counselling in that regard. There have been some changes in the federal rules. At one time we saw a fair number of students who had large debt loads and declared bankruptcy. The federal government has not allowed that to continue. So it does cause some people who originally had maybe a solution in mind to sit down and say, okay, now what am I going to do? Certainly, on our interest relief, when they apply for the 30 month one, I think there is an opportunity there to talk a bit about the load and what you are going to do in the repayment schedule and so on.

As our economy gets a little better, obviously we are going to see more people in a financial situation by which they could make their payments. Hopefully that will continue to increase and we will see more people who don't have to access the interest relief.

MR. MORSE: For the record, could you just clarify what the changes were in the bankruptcy laws, because I think that everybody has heard of people who have gone through university, acquired a fairly significant debt load and then declared bankruptcy.

MR. COCHRANE: Basically the federal government, I think, has taken out student loan as a reason by which you can declare (Interruption) They have treated the student loan differently than other costs and other things. In other words, you can't just declare bankruptcy and walk away from your student loan. There is a 10 year period by which you are eligible and expected to pay. You could still declare bankruptcy as an individual, but one of the liabilities that doesn't come off your list is your student loan.

MR. MORSE: Okay, so now we have a situation where provision has been made to, shall we say, encourage graduates to deal with the debt they have incurred to acquire their education by taking away that option. With that being taken away, would that not put extra pressure on the delinquency rate experienced by the banks and the provinces? Would that not show up in higher delinquencies?

MR. COCHRANE: If they went into bankruptcy, they would default, so the risk premium would have covered it whether they did it through the bankruptcy process or just didn't make their payments. So, from our point of view, with a flat fee paid to the bank, it really wasn't going to change it a great deal. It wouldn't have affected us too much in that

[Page 26]

regard. I think it really deals with the question of responsibility and payment and the question you were asking about counselling and so on. It is just not the easy way out that some people used to use and I don't think people used it lightly but at the same time, it doesn't present itself as an option like it used to.

MR. MORSE: I would be curious when the federal government made the change to the bankruptcy laws.

MR. COCHRANE: About three years ago, I believe.

MR. MORSE: When did the banks' risk premiums start to go through the roof and they walked away from the table?

MR. COCHRANE: That would have been in the spring of 1999, I think, when the federal government got into it, and we had to change our rules going from risk premium to a loan guarantee arrangement.

[9:30 a.m.]

MR. MORSE: I note there is a correlation, that it is a couple of years afterward that the banks no longer wanted to get involved in this. Anyway, it is just interesting. There is only so much money that we can actually pay out in interest relief and defaults, and I guess I would ask whether you see a better way of trying to make those monies more accessible again, to help costs with the downloading through the cuts in the CHST.

MR. COCHRANE: The easiest way is to restore the CHST. Obviously, if you restore your level of funding to universities to a reasonable amount, the tuition increases wouldn't be as great. We don't have a lot of control over the cost of living, although it has levelled out some. It is a question of the value we put on the training and the education at that level and what the people determine the threshold of the taxpayer is to pay for it or to assist in it. More student loans, higher thresholds would let people have greater loans, make their life a little easier while they are going there, but it still has to be paid back and there has to be interest relief paid on it and so on. There is a whole number of factors that we have to look at. Bottom line, if we control some of the costs associated with going, obviously it makes a difference as far as the indebtedness of the people who do go.

MR. MORSE: But you can't see any better way to lever the dollars that we actually have to expend, to spin it into more support for students, at this time?

MR. COCHRANE: Certainly there are different ways of doing it, but whether we borrow it ourselves and lend it to them, or whether we go to the bank and borrow it and lend it to them, bottom line is if you add a benefit and reduce the cost, it is going to cost government more.

[Page 27]

MR. CHAIRMAN: Mr. Langille.

MR. WILLIAM LANGILLE: Mr. Chairman, I just have a couple of questions for the deputy. During the slides, I noticed that there were 170 students on permanent disability receiving loans. I wonder, could you expand on what a permanent disability is?

MR. COCHRANE: That one would be 170 are receiving what we call the Canada Study Grant, which is a provincial program. A number of those would have student loans, but there would be a huge number of other students who may be disabled, going to universities, who don't get the grant. This is basically an opportunity for students to apply for some assistance in adapting to the university scene. If I used, perhaps, a student who was blind, they would need, maybe, a braille computer. If they were not totally blind, a different kind of lighting, a different sized screen, and so on. A student who may be going to university applied for a student loan, got one, then also, if they meet those criteria, can come to us and say, in addition to that I have these extra costs as a result of going, and there is a program there to help them. In the last year, 170 are actually receiving some kind of assistance in that regard.

MR. LANGILLE: These are people with an actual physical disability? I guess where I am going with this is in Grade 12 a student was identified with a reading capacity of Grade 6, who is now going to university. My understanding is she is being provided with a laptop. Would this be considered a permanent learning disability?

MR. COCHRANE: If it was diagnosed as a learning disability, yes, and if there was something that we could do that would help that, then they would be eligible and given consideration. It wouldn't just be a cash pay-out, it would be some cash to use to either buy a computer or adjust something for them, as opposed to just money to reduce the cost of going to university. It would have to be associated with a disability. In that case, that would be a recognized one. If there was something that we could do that would facilitate their success at university, then that is the kind of thing that they would be eligible for under this program.

[9:34 a.m. Mr. David Morse took the Chair.]

MR. LANGILLE: I guess that is where I am going, because it is not just physical, it could be a learning disability, something like that. Okay, thank you.

In Nova Scotia, we have more universities and colleges per capita than any other place in Canada, is that correct?

MR. COCHRANE: Universities, we do, yes.

[Page 28]

MR. LANGILLE: Okay. Would I be able to assume that we have more students on loans per capita than any other province? Or would you have that information?

MR. COCHRANE: We do not know that because we have a lot of universities that have a lot of students who are not from here and therefore would be on a loan from Ontario or Alberta or somewhere. In fact, we have more - as a percentage - students from outside Nova Scotia than most provinces would have. We have a net immigration of university students and they would be on loans from other provinces because you take your loan from the province in which you live.

MR. LANGILLE: I guess that is not where I was going, but I hope we are not responsible for their loans here in Nova Scotia.

MR. COCHRANE: No, the loans come from where they live. If our students go to Alberta, they get their loan from Nova Scotia and take it with them. Unlike most provinces we have less students that do that than others. We have more coming in.

MR. LANGILLE: Okay, I thank you very much.

MR. CHAIRMAN: Mr. Hendsbee.

MR. DAVID HENDSBEE: A couple of quick questions and hopefully, I will get a full answer on them. Currently, in regard to student loans and tuitions et cetera, what is currently being treated as tax deductible items for students and/or parents who provide aid? Tuition fees and books, I assume, tuition fees are tax deductible. In regard to residential fees on campus, are those considered tax deductible?

MR. COCHRANE: There is a certain calculation which they can use for a student going to university that comes as a deduction on their income tax.

MR. HENDSBEE: And also book costs?

MR. COCHRANE: I think it all comes into the monthly fee, the monthly amount that they can deduct per month.

MR. HENDSBEE: As in regard to the amount of the loan or the amount that can be declared?

MR. COCHRANE: Cost.

MR. HENDSBEE: Okay, I have some other questions relating to that line of questioning, but I don't know if I have time or not.

[Page 29]

MR. CHAIRMAN: You have about half a minute.

MR. HENDSBEE: No. I will pass for now.

MR. CHAIRMAN: There will be a second round. The honourable member for Cape Breton West, Mr. MacKinnon, for the Liberals. We have seven minutes.

MR. MACKINNON: Seven minutes? Thank you. My question is for Mr. Butler. On October 18th, Mr. Butler, when you appeared here before the Public Accounts Committee, you gave an undertaking that you would supply myself with some written detail on the Canadian Millennium Scholarship fund. I notice I have not received that yet - is there any particular reason?

MR. RICK BUTLER: No.

MR. MACKINNON: When will I receive it?

MR. BUTLER: Well, I will check the Hansard and have . . .

MR. MACKINNON: I can provide you with a copy of it. Right here, right now. It should be in your booklet. Does that refresh your memory?

MR. BUTLER: Yes.

MR. MACKINNON: So, is there any particular reason you are not sending me that information?

MR. CHAIRMAN: Perhaps if we could have Mr. Butler's undertaking that he would provide it within a certain period of time? Maybe he could give us an indication of when he could have that to the honourable member.

MR. MACKINNON: Would you give an undertaking that you will provide that before the day is out?

MR. BUTLER: Well, I am not sure. It says that I would provide written detail on that topic and I assume the topic is the Millennium Scholarship and . . .

MR. MACKINNON: That is correct, and the details of it.

MR. BUTLER: . . . certainly it all reflects around the $3.5 million and as I said in my remarks, that is a figure that the Canadian Millennium Scholarship Foundation have indicated that we should be reinvesting as a result of a saving. We have asked for their analysis, they have not provided that analysis, but I can give it in written detail and I can

[Page 30]

provide you with the press release you mentioned earlier during the discussion, that it was in the press release. It was in the press release in the context that the Foundation estimated $3.5 million worth of reinvestment.

MR. MACKINNON: Well, you heard the deputy minister's answer a little earlier which seemed to indicate that there may be some credence to that particular issue. Do you still stand by your statement that it is absolutely incorrect?

MR. BUTLER: Absolutely. Yes, I stand by the statement I made.

MR. MACKINNON: So, in other words, you are disagreeing with the deputy minister.

MR. BUTLER: No, I am not disagreeing with the . . .

MR. MACKINNON: Well, only one of the two of you can be correct. If you are saying that they are incorrect and the deputy minister is saying there is some credence to what they are saying, only one of the two of you can be correct.

MR. BUTLER: The question that you asked me was around $3.5 million and whether we had broken any commitment to the Canadian Millennium Scholarship Foundation and I said, absolutely untrue. Whatever commitment we made when we signed and when the honourable Wayne Gaudet signed the agreement, we have honoured that commitment. There is a debate around the $3.5 million worth of savings. We have asked the Foundation for the analysis so that we can be assured that we are living within our obligations.

In fact, we wrote the Canadian Millennium Scholarship Foundation and said that we will not spend any less than $13.8 million on student assistance. We have assumed that has satisfied the Foundation. We have asked them on the $3.5 million to ensure if that is the figure that we have reinvested. In fact, we have spent more on student assistance since the agreement was signed than before, number one. Number two, benefits reinvestment to students does not mean directly to students, it can mean as some provinces have, grants to universities. We provided $4 million more of grant funding to the university sector this past fiscal year and $2.5 million to the college system in the province. And the Foundation may indeed, as they have in Manitoba, Prince Edward Island and a couple of other provinces, accepted those as the government's commitment of the day to do that reinvestment.

But, from our point of view, we do not like this number of $3.5 million out there because we want it clear for ourselves, for the Foundation and for student bodies.

MR. MACKINNON: Mr. Butler, perhaps you could just supply the written detail on this entire issue so we can put it to rest and put an end to this confusion and the conflict that seems to be coming from two divisions within your department. Is that okay?

[Page 31]

MR. BUTLER: There is no conflict between two divisions in our department, but you will get the information . . .

MR. MACKINNON: When?

MR. BUTLER: Well, presumably, according to my schedule, I should be able to provide it to you this afternoon. It is not a big problem.

MR. MACKINNON: That is great. Thank you.

MR. CHAIRMAN: We thank Mr. Butler for that undertaking. I would like to recognize the member for Dartmouth East.

DR. SMITH: What time is left?

MR. CHAIRMAN: Two minutes.

DR. SMITH: On the student issue that Mr. Langille brought up, that had caught my attention as well and the Canada Study Grant. With the commitment in the social services Act, the new Act that is passing in the Legislature, have there been discussions and deliberations between your department and Community Services relative to persons with disabilities in education, this transition from social assistance to work? Have there been formal negotiations with that within the Act?

MR. COCHRANE: I do not know. I presume at a departmental level there have been some discussions. We administer this part of it through the Canada Study Grant, obviously they have a process that they go through as well, but we are meant to complement. Ours is not necessarily attached to income assistance, it is a question of what kind of disability they have and what kind of support. It is really to reduce barriers.

DR. SMITH: Some of that grant went through Community Services, I remember it, particularly Saint Mary's.

MR. CHAIRMAN: It is now 9:45 a.m. Your time has expired. We will pass to the NDP, I see Mr. Dexter is signalling to be recognized. You have four minutes, because of the adjustment from the earlier session.

Mr. Dexter.

MR. DARRELL DEXTER: I am not going to waste my time objecting to that, but I do. I would like to go right to the debt level at consolidation, the number of students. You have here your list. What I am wondering is fairly straightforward, is this total debt including Canada Student Loan or just Nova Scotia Student Loan?

[Page 32]

MR. COCHRANE: Total student debt.

[9:46 a.m. Mr. Russell MacKinnon resumed the Chair.]

MR. DEXTER: Your risk premium is paid on what basis, on just the Nova Scotia Student Loan or on the Canada Student Loan as well?

MR. COCHRANE: Just the provincial contribution.

MR. DEXTER: One of the other concerns that I have here - this is more of a comment really, and I am not sure if you could respond to it, because it is essentially a political decision. You said, as you were going through your presentation on this program, that what happened between 1992-93 and 1993-94 was an expansion of the program, and that although the bursaries went away, the new loan program meant that more people were going to be eligible.

MR. COCHRANE: Yes, but they would carry the debt load.

MR. DEXTER: The fact of the matter is that starting in 1993-94, you had a direct download of $43 million of debt, right onto the backs of students in this province. That is what happened, isn't that right?

MR. COCHRANE: I am told that there was a switch from a grant program to a bursary, so that the province's investments would enable more students to have access to university, but yes, they would come out and receive responsibility for paying the debt.

MR. DEXTER: It was $43 million a year added on to the debt load of students as a minimum every year since 1993-94.

MR. COCHRANE: There were a number of programs, obviously, in the province that reduced that; interest relief, the extension, loan remission, all those things, but yes, in the end, it went from a straight gift to a loan.

MR. DEXTER: That doesn't reduce the loan. Interest relief reduces your interest, but it doesn't reduce the loan. It only puts it off, you have to pay it at some point in time and they pay interest, after the Interest Relief Program comes to an end. I think if anybody takes any solace from the idea that this went from a bursary program to a loan program, it certainly isn't me. I think it was a classic kind of mistake that has, in the long term, injured the prospects of students as they go through their lives.

The other thing - I know I have a very short amount of time - I will tell you an interesting statistic I would like to know. I would like to know how many people going through universities on student loans marry other people from universities on student loans.

[Page 33]

I am betting that you would find it is a lot. So what happens is you end up with people who come out with sometimes $30,000 or $40,000 worth of student loans, marrying people who have $30,000 or $40,000 worth of student loans, and what you end up with is a family that starts out somewhere between $60,000 and $80,000 in debt as they walk out the door of the university. That is a terrible thing to do to young people at that stage in their lives. Those are all the questions I have.

MR. CHAIRMAN: Unfortunately, we are out of time for the NDP caucus. We will turn the next line of questioning over to the PC caucus.

MR. JAMES DEWOLFE: Good morning, ladies and gentlemen. The Opposition, and I guess in particular my friend, the honourable member for Cape Breton West, would like to paint a picture where the banks have the province over a barrel, and in order for us to partner with them in providing student loan programs, we pretty much have to listen to their terms and their conditions. Perhaps to a certain extent, there is some validity to this. I would imagine that it is more difficult for a small province, like Nova Scotia, to negotiate with these large banks than it would be for the federal government, yet the federal government has withdrawn from dealing with the national banks.

Deputy, would you agree that the federal government's decision to withdraw from negotiating with the national banks on the Canada Student Loan Program will make it more difficult for Nova Scotia to foster a negotiated partnership with these large banks on a provincial Student Loan Program?

MR. COCHRANE: Certainly, there is benefit in having the federal government and all the players in line, it makes it more difficult for sure.

MR. DEWOLFE: It would. Is there an attempt to lure the federal government back into this? What attempt is being made to do that? Do you know of any?

MR. COCHRANE: I think most of the attention of the First Ministers has been to get the federal government more significantly involved in CHST where they used to be. Obviously, that reduces some of the costs associated with going to post-secondary institutions and so on. I do not know that there has been a concentrated effort to get the federal government back to the table in dealing with the banks. They seem to be relatively comfortable with the structure that they have put in place. There may be, some day, an extension of the structure they have put in place to deal with provincial portions, but we have not gotten to that point at this juncture.

MR. DEWOLFE: So, in your opinion, did the federal government pull out of the student loan program too quickly?

[Page 34]

MR. COCHRANE: Certainly when I looked at what they asked for, a risk premium and so on, I mean they were trying to play hardball and trying to get the best deal for the money. That is fair but, unfortunately, as a result of whatever process, they were not into the business with the banks and left us with trying to find a mechanism to deal with it. Our option at this point was to go to the banks and in fairness to the banks, they are not going to lend money unless they are covered. That is the business they are in. We are in the covering business obviously at this point, but I do not criticize a business for saying, this is my cost and for me to do this I expect to get it recouped. That is fair, but it makes it more difficult certainly as individual provinces to deal with the individual banks.

The banks have formed some kind of conclusions in their own business plans. CIBC was in it and now they are not. RBC is in it. I understand that they do not want to be in and maybe CIBC wants back in. So there is a whole number of players who are changing all the time and we are looking for the best deal we can get so that the maximum amount of money that we have can go to the hands of the students to reduce the cost of going to university and post-secondary colleges.

MR. DEWOLFE: Do you think the banks are interested in fostering long-term relationships with students for down the road or have they grown so big now that the little person does not really matter anymore?

MR. COCHRANE: Certainly some of them have made it clear that this is a population they want to serve and have a relationship with. I do not think they are prepared to have many loss leaders to do that, but I guess what they feel is they will do it through the kind of service and the consumer service and support they provide. That always was the philosophy, if we could get a student at university, they will stay with us for their banking career.

MR. CHAIRMAN: Mr. Hendsbee, I believe has some questions.

MR. HENDSBEE: A quick question to follow up on my previous question in regard to income taxes and deductibles and stuff. They say that education is an investment and whereas the tax policies and tax laws allow, for instance, interest on investment property to be tax deductible, could you consider then perhaps education as intellectual property and, keeping that in mind, could you comment whether or not student loan repayments, or at least the interest on a student loan, should be treated as a tax deductible item?

MR. COCHRANE: Currently 17 per cent of interest paid on student loans is deductible.

MR. HENDSBEE: Currently?

MR. COCHRANE: Yes.

[Page 35]

MR. HENDSBEE: Is that against federal or provincial income tax?

MR. COCHRANE: It would be both because we are a percentage of the federal.

MR. HENDSBEE: I would like to have, if possible, just a summary sheet in regard to the application of the tax laws of what can be deductible on various things. I was trying to go through the book here and I cannot find it that quickly. I was wondering . . .

MR. COCHRANE: It would not be our domain. It is a provincial deduction, I guess we could get the tax guide.

MR. HENDSBEE: Yes. It would be kind of helpful to have a quick summary in regard to the implication of tax policies on education deductions. I would like to pass the floor now to Mr. Langille for a couple of questions.

MR. CHAIRMAN: You have one minute and 15 seconds, Mr. Langille.

MR. LANGILLE: A constituent of mine - I was going to ask this after, but since I have a minute left - was working and then went on unemployment and she has a medical problem. With this medical problem, she accumulated a lot of bills but she paid them off and she is having a problem convincing the Department of Education that she did not claim this through insurance. The doctors can only say that she paid the bill but can't say if she claimed or not. Now what would it take to convince the Department of Education that she paid these bills herself?

MR. COCHRANE: If you would share with us later the individual case and the name, we will research it and see if we can figure out what consideration was given in that case.

MR. LANGILLE: As I say, I was going to ask this later anyway. Okay, thank you very much.

MR. CHAIRMAN: Okay, that pretty well concludes our questioning. Perhaps, Mr. Deputy Minister, if you have one final statement or just wrap up.

MR. COCHRANE: Certainly it is a complex issue that everyone is concerned about the level of indebtedness of students. As I mentioned before, there are a lot of partners and we are trying to get the right relationship among the partners to get the best arrangement we can for the students. It is a concern to everyone and we are certainly anxious to see some kind of program that we can put in place that may help reduce that, given the general fiscal pressures on the province and we have been asked by the government to look at options in that regard. We are looking at some and the Department of Finance is also looking at some. I think an innovation and a good change is that students are now at the table where they are discussing the structure of the student financial program in the province along with the other

[Page 36]

people who are discussing universities and colleges. In fact, one of your namesakes, I think, has a role to play in that regard although everybody seems to be named that.

Anyway, as a result, students are being involved for the first time in looking at student assistance programs and what they can do and the changes that they may be able to recommend to the minister which I think is a very positive thing. I guess the message is that everyone wants to try to work together to try to resolve the problem and reduce the financial indebtedness of students at the time of graduation. That is a goal and we will take all the help we can with all the players to try to solve that.

MR. CHAIRMAN: I would like to thank Mr. Cochrane, Mr. Butler and Ms. Thompson for appearing today and answering our questions. It has been most helpful.

Forwarding on for next week, we have review of our annual report, the preliminary issues that Mora is tabulating. It will be a round-table discussion for all three caucuses at the Committees Office. I believe Mora has sent that out to all three caucuses for some comments and so on. Next Wednesday morning it may last the full two hours, it may last only an hour, depending on how the discussions go. I don't think it will be anything too extensive.

MR. DEWOLFE: Why don't we make it 8:30 a.m.?

MR. CHAIRMAN: Well, if it is agreeable with members, we could start at 8:30 a.m. It would give some members a little more time.

Is it agreed?

Okay, 8:30 a.m. it is.

Thank you very kindly and have a good day.

[The committee adjourned at 9:58 a.m.]