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Student debt gains interest
By Colleen Ross
An old idea to alleviate student debt is making a new appearance in this year's federal election.
Under the Income Contingent Repayment plan, students would pay back their student loans as a percentage of the income earned after graduation.
"ICRs will be helpful," said Joe Fontana, incumbent Liberal Member of Parliament for London North Centre.
He said the Liberals would combine the ICR plan with a program including Millennium Scholarships, doubled tax credits for students and an increase in the interest-free loan repayment period from one and a half to four years.
Lorie Johnson, Progressive Conservative MP candidate, said she also supports ICR loan plans. She said implementation of the plan would would probably be accompanied by a rise in tuition, as has been the case in other countries where the ICR loan plan has taken effect.
She explained universities would have little choice but to raise tuition. "If the funding isn't there, what else can a university do?"
Erin George, Ontario chairperson for the Canadian Federation of Students, said she disapproved of the plan.
"It's an outdated and regressive policy," she said, explaining the ICR was first introduced in 1955 by US economist Milton Friedman, as a way to reduce the role of the state in financing education.
When the Liberals tried to implement ICR in 1995, bankers said it did not make good fiscal sense because students with debt could not take out mortgages or other loans, George said.
With an ICR loan plan, interest begins to accrue on the first day of the loan, whereas with the Ontario Student Assistance Plan, interest accrues six months after graduation, George added. The lower the income, the longer a student pays and the more interest is accrued.
George said the federal government should instead restore transfer payments to the provinces and establish a national system of needs-based grants. "The money is there, it's just a matter of where our priorities lie," George said.
Canadian Alliance MP candidate, Nancy Branscombe, said her party is behind the ICR plan. "We would link the ICR loan program with the income tax system. It would become a national program," she said.
The ICR loan scheme sounds wonderful, said Colleen Redmond, NDP MP candidate. "But in time, you compound the interest and it is very, very hard on the students who can afford it the least," she said.
Glen Tigert, director of Student Financial Services at Western, said he thought the ICR loan plan was beneficial. "It has a place with students who graduate with a large amount of debt. There is some responsibility on the part of universities and government to provide temporary relief for those people."