Banks reject indecent loan proposal
By Sara Marett
The chance of having a new student loan program in place by September has been dismissed due to bank lenders refusing a program proposed by the provincial government.
The government sent out a proposed program to the banks in February in hopes of an agreement on an income-contingent plan by July, to be implemented by September of this year. Last week, the Royal Bank of Canada, the Canadian Imperial Bank of Commerce and Scotiabank the three banks in the student loan business responded with a definite "no" to the proposed plan. Enormous student debt levels, the desire to implement a harmonized program with the federal government and a lack of time were cited as reasons.
The Ministry of Education was both surprised and disappointed with the banks' response. "We really want the banks as partners in this we need them to provide the capital and administer the loans," said ministry spokesperson Daniele Gauvin.
The government's proposed income-contingent program included extending the repayment period from nine to 15 years, lower payments during the first few years and having interest-only payments for up to 12 months.
For the CIBC, refusing the proposal was an issue of wanting to see a plan that reflected a more balanced approach to the problems surrounding student debt, said manager of corporate communication Wally Hill. "We wanted to see better debt management tools and a harmonization between the federal and provincial program and this proposal did not measure up," he said.
The Royal Bank had the same visions for an improved system. "We are committed to providing an improved [loan] program and the harmonization between the [two] governments is critical to this happening," said Tom Lumsden, national manager of student loans for the bank. He added Royal Bank is continuing to meet with both levels of government with hopes to have a harmonized program in place by the year 2000.
Gauvin admitted however, that the government does not want to wait longer than September to see their plan put in place. "We are currently discussing the possibility of implementing some details of our program by September without the cooperation of the banks."
Students were less shocked that the banks refused the proposed program. "Although it is unprecedented for the banks to give such a clear disapproval of the government's plans, there is no reason why we should be surprised they did so," said Rick Martin, executive director for the Ontario Undergraduate Student Alliance.
He expressed his disappointment that the government has allowed tuition levels to rise this year without a new student aid program in place.
Sam Castiglione, VP-student issues for Western's University Students' Council, said he is glad the banks refused the government's proposal. "They've recognized that the provincial government is unrealistic in their expectations of what kind of debt levels students can bear."