Banking on loans
By Sandra Dimitrakopoulos
Students who declare bankruptcy will still have to pay back their student loans, due to a new amendment to the Bankruptcy and Insolvency Act put forth by the federal government.
Karina Fauteux, in charge of senior policy at the office of the superintendant of bankruptcy for Industrie Canada, said anyone can declare bankruptcy at any time, yet all loans are not automatically discharged.
Students currently in school or those who have graduated within the last two years can declare bankruptcy but will still be responsible for paying loans incurred under the Canada Student Loans Act or the Canada Student Financial Assistance Act.
After the two-year post-graduate period, individuals can appeal the Act in court by proving they have tried to find a job without results and will absolutely not be able to pay back the loan, Fauteux explained.
Don Allen, director of financial and special services at the accounting firm of Deloitte and Touche, said this amendment provides an avenue for people to start fresh.
In the past, Allen said the percentage of student loan bankruptcy they have dealt with were 20 to 30 per cent of the total bankruptcies, which he believes displays an abuse of the system.
"There will be a definite decrease because now people can not just go and declare bankruptcy," he said.
Hoops Harrison, national director of the Canadian Alliance of Student Associations, said he does not think these amendments will negatively affect students because the focus is mainly on bankruptcy.
"Studies have shown a full transition into the workplace by students takes a few years and the government wants to give students this time to pay back the loan," Harrison said.
He said he is confused as to why the period is limited to two years but added the government does have an interest-free period of 30 months for graduates who have trouble finding employment which should ease the burden.
Roma Harris, administrative assistant to the vice-provost and registrar at Western, said compared to university students, those registered in community colleges have slightly higher default rates with private institutions taking the lead in loan defaults.
Despite this, Harris said they have tried to raise awareness through discussion as to the responsibilities involved with handling finances. "We try to provide an assistance that goes beyond processing loan applications."
Lucy Pinheiro, VP-finance for the University Students' Council, said this act is overlooking a problem caused by students who want an education but don't have the money to go to school.
"This act is only fixing a small portion of the problem and ignoring the fact that students are still incurring large debts," Pinheiro said.