Canada Student LoansRepayment Trends and Assistance

Canadian Association of Student Financial Aid Administrators

CASFAA Annual Conference

June 13, 2011

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Purpose

This presentation will:

– Examine changes in the Canada Student Loans portfolio, including the new Canada Student Grants Program.

– Discuss the impact of the economic downturn on students and the repayment of student loans.

– Examine the performance of the Canada Student Loan repayment portfolio and the Repayment Assistance Plan, including metrics such as:

• The Repayment Rate.• RAP Uptake• The Delinquency Rate• The Default Rate

– Discuss initiatives by the Canada Student Loans Program (CSLP) to improve the repayment of student loans.

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The Canada Student Loans Program offers loans and grants to students to attend post-secondary education

The Canada Student Loans Program (CSLP) offers loans and grants to eligible students to attend PSE.

The 2009-10 Loan Year saw the new Canada Student Grants Program (CSGP) greatly expand the non-repayable assistance offered to borrowers.

The CSLP monitors the repayment performance of the portfolio and uses portfolio management strategies to improve performance.

Strong portfolio performance is an important part of accountability and a positive repayment experience for borrowers.

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The CSLP direct-lend loan portfolio continues to grow, particularly the repayment portfolio

The repayment portfolio is expected to continue growing, driving an increase in the overall portfolio size.

4.0 4.6 5.2 5.6 6.1

5.55.25.0

4.74.5

0

2

4

6

8

10

12

14

March 2007 March 2008 March 2009 March 2010 March 2011

Po

rtfo

lio

(B

illi

on

$)

Repayment In Study & Grace

8.5

10.2 9.3

10.8 11.6

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In addition to loans, Canada Student Grants are now an important part of the CSLP’s student financial assistance

2009-10 saw the introduction of the Canada Student Grants Program (CSGP).

The CSGP provides over $500 million in grants to over 300,000 recipients.

These non-repayable grants provide assistance to low and middle-income Canadians without placing them further in debt.

Many Canada Student Loan borrowers also receive grants, allowing more students to receive assistance with lower loan amounts.

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Value of Grants Issued ($M)

$589M

$148M

$0

$100

$200

$300

$400

$500

$600

$700

2008-09 2009-10

Number of Grants Issued

84,200

363,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2008-09 2009-10

With the introduction of the CSGP, the value of grants disbursed by the CSLP more than tripled

In 2009-2010, grant disbursements increased by $441 million.

The average amount of grant per borrower increased from $406 in 2008-09 to $1465 in 2009-10, an increase of $1060.

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402

343

353

365

2,089

2,078

2,013

1,927

310

320

330

340

350

360

370

380

390

400

410

2006-07 2007-08 2008-09 2009-10Loan Year

Nu

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Tim

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(000

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1950

2000

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Dis

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Am

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($M

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No. of Full Time Borrowers (000's) Value of Loans ($M)

Along with the new grants, the CSLP is disbursing more loans which are helping more students attend PSE

More students are receiving student financial assistance, while the average federal loan has decreased by nearly 10%.

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The composition of the repayment portfolio is stable, with the majority of borrowers meeting their repayment obligations

Most Canada Student Loan borrowers repay their loans on time and remain in good standing.

70% 69% 69% 69% 71%

19% 20% 22% 21% 18%

10% 11% 9% 10% 11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

March 2007 March 2008 March 2009 March 2010 March 2011

Per

cen

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Current On IR/RAP Delinquent

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The repayment rate for Canada Student Loans remains strong

85% of borrowers are in good standing, or have repaid their loans after two years.

79%

82%

85%85%

84%

74%

76%

78%

80%

82%

84%

86%

2004-05 2005-06 2006-07 2007-08 2008-09

Repayment Cohort

Rep

aym

ent

Rat

e (%

)

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Canadian students have felt the impact of the global economic downturn

The economic downturn has had an effect on the Canadian economy and the job market.

– The Unemployment Rate for youth (aged 15-24) increased by nearly 40% from 2007-08 to 2009-10.

The impacts on student loan repayment lag behind economic slowdowns.

Considering overall economic indicators, the student loan portfolio performed well during and after the downturn.

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The economic downturn affected borrowers both financially and academically

In 2009-10 53% of student loan borrowers reported that they were affected financially by the downturn; this dropped to 44% in 2010-11.

– 50% of those affected had difficulty finding a job

CSLP Borrowers affected by the economic downturn

Financially, 53%

Financially, 44%

Academically, 24%Academically, 21%

0%

10%

20%

30%

40%

50%

60%

2009-10 2010-11

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The Repayment Assistance Plan (RAP) is the CSLP’s most effective portfolio management tool

RAP replaced Interest Relief and Debt Reduction in Repayment in the 2009-10 loan year.

RAP ensures that no borrower needs to make an unaffordable monthly payment, and is even available to those borrowers who have already missed payments.

Borrowers who are about to enter repayment and borrowers who have become delinquent are contacted by the NSLSC and encouraged to apply for RAP.

A CSLP survey shows that many of those affected by the economic downturn turned to RAP for assistance.

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RAP uptake increased in 2009-10, but has declined since

14.4%

16.3%

11.8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

2008 Ap

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2008 Oct

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2009 May

2009 Jun

2009 Jul

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2009 Dec

2010 Jan2010 F

eb2010 M

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2010 May

2010 Jun

2010 Jul

2010 Au

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2010 Dec

2011 Jan2011 F

eb2011 M

ar

RAP Uptake Youth Unemployment 6 per. Mov. Avg. (RAP Uptake)

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Increasing RAP uptake is a priority for the CSLP

RAP uptake has decreased over the past year.

While the economy has improved, delinquency rates are still higher than before the downturn.

The CSLP is working to improve RAP uptake through a number of measures:

– Enhanced communications with borrowers.

– Improved efficiencies in the RAP application process.

– Developing an online RAP application.

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Once a borrower misses a loan payment they are considered delinquent

The number of delinquent borrowers remains low, with a small increase since 2009. The delinquency rate is monitored, as it is an indicator that can predict default.

14.3%

12.4%

13.7%

15.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

March 2008 March 2009 March 2010 March 2011

De

linq

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nc

y R

ate

(%

)

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Early contact helps higher-risk borrowers to understand their repayment options and avoid missing payments

The NSLSC uses a risk-scoring model to determine borrowers who are at a high risk of missing loan payments.

These borrowers are contacted by phone before they enter repayment, through the Pre-Consolidation Contact Program.

– Telephone agents discuss borrowers’ repayment options and repayment assistance, and help them apply for RAP if necessary.

High-risk borrowers contacted through the program are 30% less likely to miss their first loan payment.

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While most borrowers repay their loans, some borrowers enter into default

When a loan is in arrears for 270 days it enters default and is sent to collections.

The three-year default rate has decreased since the implementation of direct lending, and remains low.

14%14%16%17%

19%

28%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2003-04 2004-05 2005-06 2006-07 2007-08 (P) 2008-09 (F)Cohort Year

Def

ault

Rat

e (%

)

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The CSLP is continuously monitoring and improving the repayment services offered to borrowers

The CSLP constantly monitors the performance of the portfolio, especially delinquency, default, and RAP uptake.

Communication with stakeholders such as CASFAA helps us understand the perspectives of students and borrowers.

The CSLP works with its service provider to develop new initiatives to improve the repayment performance of the portfolio.

– The service provider contract provides incentives for the service provider to lower delinquency and default.

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In addition to RAP, the CSLP has a number of initiatives to maintain and improve the repayment of Canada Student Loans

The CSLP has a number of initiatives to ensure borrowers remain in good standing and use Repayment Assistance if they needs it:

– The Designation Policy Framework

– Early Withdrawal Counselling

– Repayment Seminars

– Entrance and Exit Counselling

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The Designation Policy Framework has improved the repayment performance of many PSE institutions

Designation is the process whereby post-secondary education (PSE) institutions are deemed eligible for student financial assistance programs.

The Designation Policy Framework (Framework) was launched by the Council of Ministers of Education and the Government of Canada in the fall of 2004.

Through the Framework, the Canada Student Loan (CSL) repayment of borrowers from each designation PSE institution are monitored and assessed based on a risk-model.

– Between 2004-05 and 2008-09, the overall CSL repayment rate has increased from 70.2% in 2004 to 83.7% in 2008.

• Private PSE institutions increased by 20.6 percentage points.

• Public PSE institutions increased by 9.8 percentage points.

– Since 2008-09, the national CSL repayment rate average of PSE institutions continues to show improvement, albeit at a slower rate.

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Borrowers who withdraw from school early are at a high risk for repayment difficulties

When the NSLSC identifies borrowers who withdraw from studies early they are contacted through the Early Withdrawal Contact Campaign.

– NSLSC service agents discuss the borrower’s obligations, repayment assistance options, and how to apply for RAP.

– The Early Withdrawal pilot has shown that there is a 50% improvement in the delinquency rate between contacted and non-contacted borrowers.

– Borrowers who are contacted are more likely to apply for, and receive RAP.

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The National Student Loans Service Centre (NSLSC) hosts repayment seminars at educational institutions

The CSLP and the service provider prepare on-campus seminars for students who will soon enter repayment.

The Repayment Seminars focus on:

– The details of entering repayment, such as the Grace Period.

– How to choose repayment options such as the repayment term and interest rate.

– Repayment assistance options and how to apply for RAP.

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Online Entrance and Exit Counselling can be effective in helping borrowers understand the repayment process

Online tools can help borrowers understand the repayment process and can prevent default.

The CSLP has developed two online interactive modules to help borrowers learn more about the repayment process:

– Entrance Counselling for borrowers about to take out a Canada Student Loan.

– Exit Counselling for borrowers about to begin repayment of their student loan.

The modules help inform borrowers about student loan repayment and basic financial literacy.

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The CSLP is examining Entrance and Exit Counselling for all Canada Student Loan borrowers

For the past year the CSLP ran Entrance and Exit Counselling sessions in BC as a pilot project.

The sessions were well-received by borrowers who completed them, and completion rates were high.

The CSLP is currently examining the potential for broadening entry and exit counselling to all CSL borrowers.

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As a result of government initiatives such as RAP, the repayment performance of Canada Student Loans remains strong.

The repayment performance of Canada Student Loans has improved significantly since the implementation of direct lending.

The Repayment Assistance Plan, and the Canada Student Grants Program have provided students with much-needed help during difficult economic times.

Repayment performance, as evidenced by a stable default rate, has remained strong.

– However, both the Program and the economy have been changing rapidly over the past few years, making it difficult to isolate the impacts on the portfolio.

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Continuous improvement is the goal of the CSLP’s Portfolio Management Strategy

The CSLP is working constantly to improve the performance of the portfolio.

RAP remains the Program’s main repayment assistance measure.

– Getting borrowers who are in difficulty onto RAP improves the repayment experience for the borrower, as well as the repayment performance of the portfolio.

The CSLP is focusing on increasing usage of RAP by those borrowers who are facing repayment problems.

We will continue to use innovative pilot projects, such as Entrance & Exit Counselling, and advanced call campaigns to increase borrowers knowledge of RAP, and to test the most effective tools for reaching borrowers.

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The CSLP has a number of upcoming initiatives to focus on improving repayment of Canada Student Loans

The CSLP is developing a number of new initiatives to improve the performance of the portfolio and improve RAP usage:

– Improving borrower communication to ensure that borrowers who are facing difficulty apply for RAP.

– Provincial integration and alignment with RAP makes repayment assistance easier for borrowers to understand.

– The CSLP is investigating ways to decrease RAP processing times and get borrowers on RAP sooner.

– Through the Service Delivery Vision, the CSLP is examining ways to make it easier to apply for RAP.

Canada Student LoansRepayment Trends and Assistance

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