Senate Committee Testimony on Student Loans and Bankruptcy
In my opening remarks, I said the following:
I’m sure this Committee is well aware of the plight of college and university students. The cost of tuition and fees for a school year has increased from just over $1,000 in 1988 to well over $5,000 today, and that doesn’t include living expenses. That’s a 500% increase during a time when the minimum wage in Ontario has increased by 60%.
Back in 1988 a student could work for 16 weeks in the summer at minimum wage and easily earn enough to cover their tuition; that is almost impossible today, so an ever-increasing number of students must resort to student loans to fund their education.
We analyzed the data in our database of debtors we have helped over the last year and a half, and we discovered that the average insolvent debtor with student loans is a female, aged 37 years old, with over $8,000 in student loan debt. That number may not sound like a lot, but when you consider that many of these people have been paying their loans for over 10 years when they go bankrupt in Canada, it is a significant burden.
We also found that for debtors where their student loans represent more than 50% of their debts, their income is 12% less than the average bankrupt, and 56% less than the average Canadian.
Our research proves that people who file bankruptcy because of student loans are younger than the average bankrupt, disproportionately female, and have lower incomes than the average bankrupt.
Tragically the bankruptcy process has become a band-aid solution for the real problem of funding for higher education not keeping pace with the cost of that education over the years.
Our data proves that the average bankrupt with student loans is truly the honest but unfortunate debtor that the bankruptcy process was designed to help.
They need help, so we recommend that the rules be amended to allow for student loans to be automatically discharged after two years, not the 7-year rule proposed in the most recent amendments.
These debtors need a fresh start, and we believe the bankruptcy process should give them that fresh start.
Will my plea on behalf of students have any impact? I’m not naïve; I don’t expect that because I went to Ottawa the rules will change. However, I believe the Senators have a better understanding of the plight of the average student, and over time the balance may shift in favour of students.
Next week I will post some links to the videos of our appearance, and of course I will also post any further information on when the new rules will come into force when it becomes available, so stay tuned to this site.
