Vol. 146, No. 8 — April 11, 2012
Registration
SOR/2012-68 March 30, 2012
CANADA STUDENT FINANCIAL ASSISTANCE ACT
Regulations Amending the Canada Student Financial Assistance Regulations
P.C. 2012-348 March 29, 2012
His Excellency the Governor General in Council, on the recommendation of the Minister of Human Resources and Skills Development, pursuant to section 15 (see footnote a) of the Canada Student Financial Assistance Act (see footnote b), hereby makes the annexed Regulations Amending the Canada Student Financial Assistance Regulations.
REGULATIONS AMENDING THE CANADA STUDENT
FINANCIAL ASSISTANCE REGULATIONS
AMENDMENTS
1. (1) The definition “consolidated direct loan agreement” in subsection 2(2) of the Canada Student Financial Assistance Regulations (see footnote 1) is replaced by the following:
“consolidated direct loan agreement” means a contract in the prescribed form that is entered into between the Minister and a borrower who has ceased to be a full-time student pursuant to section 8 and who is indebted to the Minister under any full-time direct loan agreement and that includes the borrower’s social insurance number; (contrat de prêt direct consolidé)
(2) Subsection 2(2) of the Regulations is amended by adding the following in alphabetical order:
“provincial loan” means a loan issued by a province for the purpose of assisting a student in the pursuit of studies at a designated educational institution. (prêt provincial)
2. Clause 5(1)(f)(ii)(B) of the Regulations is replaced by the following:
- (B) directs the addition of the unpaid accrued interest referred to in clause (A) to the outstanding principal.
3. Clause 7(1)(c)(ii)(B) of the Regulations is replaced by the following:
- (B) directs the addition of the unpaid accrued interest referred to in clause (A) to the outstanding principal.
4. Paragraph 8(3)(b) of the Regulations is replaced by the following:
- (b) a list of their outstanding student loans, guaranteed student loans and provincial loans;
5. Clauses 15(1)(k)(i)(A) and (B) of the Regulations are replaced by the following:
- (A) in respect of the student loans or guaranteed student loans made to the borrower as a full-time student, the day on which the borrower most recently ceased to be a full-time student under section 8 or, in the case of a borrower to whom only guaranteed student loans have been made, section 4.1 of the Canada Student Loans Regulations, and
- (B) in respect of the student loans made to the borrower as a part-time student, the day on which the borrower most recently ceased to be a full-time student under section 8 or a part-time student under section 12.3, as the case may be, and
6. (1) Paragraph 19(1)(b) of the Regulations is repealed.
(2) Paragraphs 19(1)(c) and (d) of the Regulations are replaced by the following:
- (c) all of the risk-shared loan agreements and guaranteed student loan agreements are held by a lender, or, in the case where an event referred to in any of paragraphs 15(1)(c) to (g) or paragraphs 9(1)(c) to (g) of the Canada Student Loans Regulations has occurred, by the Minister or a lender;
- (d) no more than 120 months have elapsed
(i) in respect of student loans or guaranteed student loans made to the borrower as a full-time student, since the day on which the borrower most recently ceased to be a full-time student under section 8 or, in the case of a borrower to whom only guaranteed student loans have been made, section 4.1 of the Canada Student Loans Regulations, and
- (ii) in respect of student loans made to the borrower as a part-time student, since the day on which the borrower most recently ceased to be a full-time student under section 8 or a part-time student under section 12.3, as the case may be; and
(3) The description of A in paragraph 19(2)(b) of the Regulations is replaced by the following:
A is, in relation to student loans, guaranteed student loans and provincial loans, the ratio of the borrower’s outstanding principal to the sum of the borrower’s outstanding principal and the outstanding principal for which instalments are due for any spouse or common-law partner of the borrower,
(4) The portion of paragraph 19(3)(a) of the Regulations before subparagraph (i) is replaced by the following:
- (a) the outstanding principal of the student loans, guaranteed student loans and provincial loans made to the borrower as a full-time student, amortized over a period of the greater of
(5) The portion of paragraph 19(3)(b) of the Regulations before subparagraph (i) is replaced by the following:
- (b) the outstanding principal of the student loans made to the borrower as a part-time student, amortized over a period of the greater of
(6) Paragraphs 19(4)(a) and (b) of the Regulations are replaced by the following:
- (a) in respect of any student loan or guaranteed student loan made to the borrower as a full-time student, since the day referred to in subparagraph (1)(d)(i); and
- (b) in respect of any student loan made to the borrower as a part-time student, since the day referred to in subparagraph (1)(d)(ii).
7. Subsections 19.1(4) and (5) of the Regulations are replaced by the following:
(4) In this section, “federal portion” means the ratio of outstanding principal in relation to student loans and guaranteed student loans to the outstanding principal in relation to those loans and provincial loans.
(5) Payments made under this section shall be attributed in proportion to the outstanding principal of each student loan or guaranteed student loan.
8. (1) Paragraph 20(1)(a) of the Regulations is replaced by the following:
- (a) the borrower meets the conditions set out in paragraphs 19(1)(a) and (c);
(2) Clauses 20(1)(b)(ii)(A) and (B) of the Regulations are replaced by the following:
- (A) in respect of any student loan or guaranteed student loan made to the borrower as a full-time student, since the day referred to in subparagraph 19(1)(d)(i), and
- (B) in respect of any student loan made to the borrower as a part-time student, since the day referred to in subparagraph 19(1)(d)(ii); and
(3) The description of A in subparagraph 20(2)( a )(ii) of the Regulations is replaced by the following:
A is, in relation to student loans, guaranteed student loans and provincial student loans, the ratio of the borrower’s outstanding principal to the sum of the borrower’s outstanding principal and the outstanding principal for which instalments are due for any spouse or common-law partner of the borrower,
(4) The portion of paragraph 20(3)(a) of the Regulations before subparagraph (i) is replaced by the following:
- (a) the outstanding principal of the student loans, guaranteed student loans and provincial loans made to the borrower as a full-time student, amortized over a period of the greater of six months and
(5) The portion of paragraph 20(3)(b) of the Regulations before subparagraph (i) is replaced by the following:
- (b) the outstanding principal of the student loans made to the borrower as a part-time student amortized over a period of the greater of six months and
9. (1) Subsection 20.1(2) of the Regulations is replaced by the following:
(2) The amount owing as outstanding principal and interest for a month during a repayment assistance period by a borrower shall be reduced by the lender or Minister, as the case may be, by the federal portion of the difference between the monthly required payment calculated under subsection 20(3) and the monthly affordable payment calculated under subsection 20(2). That reduction shall only be made in relation to the months for which the borrower complies with subsection (1).
(2) Subsections 20.1(4) and (5) of the Regulations are replaced by the following:
(4) In this section, “federal portion” means the ratio of outstanding principal in relation to student loans and guaranteed student loans to the outstanding principal in relation to those loans and provincial loans.
(5) Payments made under this section shall be attributed in proportion to the outstanding principal of each student loan or guaranteed student loan.
10. Paragraph 26(c) of the Regulations is replaced by the following:
- (c) in respect of the borrower’s consolidated student loan agreement or consolidated guaranteed student loan agreement, if any, the day on which the borrower again becomes a full-time student in accordance with subsection 5(3) or 7(2).
COMING INTO FORCE
11. These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Issue and objectives
The Canada Student Loans Program (CSLP) promotes access to post-secondary education through the provision of financial assistance to eligible borrowers, most notably through Canada Student Loans and Grants and through the Repayment Assistance Plan (RAP), which provides assistance to borrowers who experience difficulties in repayment.
Participating financial institutions financed federal student loans from 1964 to 1995 under a guaranteed loan regime. Between 1995 and 2000, participating financial institutions financed federal student loans under a risk-shared loan regime. Since August 1, 2000, the Government of Canada has directly financed federal student loans to borrowers.
Previously, under all three loan regimes (i.e. guaranteed loan, risk-shared loan and direct loan), a borrower was required to sign a student loan agreement for each new disbursement of student financial assistance. For most borrowers, this meant signing a new student loan agreement at the beginning of each study period. Borrowers also signed a consolidation agreement upon entering repayment. The consolidation agreement was a repayment agreement that allowed borrowers to consolidate all their direct loans into one consolidated direct loan, all their risk-shared loans into one consolidated risk-shared loan, and/or all their guaranteed loans into one consolidated guaranteed loan. The consolidation agreement also outlined the terms and conditions for Canada Student Loan (CSL) repayment. To be eligible for repayment assistance measures, a borrower must have signed a consolidation agreement for all loans received by the borrower. Consolidation agreements were also used in cases where borrowers opted to add unpaid interest to their loan principal.
In 2008, the Government of Canada announced the Service Delivery Vision, a multi-year strategy to streamline, modernize and simplify the delivery of student financial assistance. Pursuant to this commitment, a multi-year student financial assistance agreement is being implemented in place of the current single-year student loan agreement. The multi-year student financial assistance agreement is referred to as a Master Student Financial Assistance Agreement (MSFAA). The MSFAA was introduced in British Columbia for the 2011–12 loan year and will be rolled-out in other jurisdictions in 2012–13 and 2013–14. The MSFAA allows borrowers who have demonstrated financial need for each study period to access loans and grants throughout their studies without signing a new agreement each time (in contrast with the student loan agreement, which only covered a single period of study). By signing an MSFAA a borrower also agrees to repayment terms that will apply to their loans when they leave their studies. Only students who have been out of study for two years or more or who change their province of residence should be required to re-sign an MSFAA.
Previously, a borrower who had signed an MSFAA, and then subsequently signed a consolidation agreement, would be required to re-sign a new MSFAA in order to obtain further loans and grants. This was required as the Canada Student Financial Assistance Regulations (CSFAR) stipulated that a consolidation agreement automatically replaced any other CSL agreement(s). Borrowers may have found themselves in that position if they took a short break from studies or if they wished to add unpaid interest to their loan principal. The requirement to re-sign an MSFAA within two years of leaving studies contradicted the intent of a multi-year agreement.
Another key component of the Service Delivery Version is the shift to online application for RAP. Previous regulations required that a borrower sign a consolidation agreement prior to being eligible for RAP. The requirement to sign a consolidation agreement for access to RAP would have imposed a paper-based step in an otherwise online application process.
Prior to the shift to direct lending by the federal government in 2000, the consolidation agreement served an important purpose as it allowed borrowers to consolidate multiple loans into one repayable loan. Today, Canada Student Loans and Grants are provided directly to students and repayment terms are captured in the terms and conditions of the student loan agreement, thereby making the need for the consolidation agreement obsolete. Removing the regulatory requirements related to consolidation agreements, however, enables the full and effective implementation of a multi-year student loan agreement, assists the transition to online delivery of the RAP, and eases the administrative burden for the client, participating provinces and territories, and the Government of Canada.
Consequently, in order to ensure the full and effective implementation of the Government of Canada’s commitment to modernize and streamline the delivery of student financial assistance in Canada, regulatory amendments were necessary to remove the regulatory requirement that borrowers sign a consolidation agreement from the CSFAR.
Description and rationale
The regulatory amendments eliminated the requirements related to consolidation agreements in two situations. Firstly, consolidation agreements no longer replace previous agreements and borrowers will not be required to sign a direct loan consolidation agreement if they decide to add outstanding interest to principal (they will continue to have the choice of adding interest to their principal or paying interest). Secondly, signed consolidation agreements are no longer a requirement for the RAP for all CSLs issued under all loan regimes (direct loans issued by the Government of Canada, and risk-shared or guaranteed loans that were issued by financial institutions).
Formerly, the consolidation agreement reminded borrowers of previously agreed-to repayment terms and was a vehicle by which borrowers could revise repayment terms (e.g. extend the amortization period, change to a fixed interest rate or add any outstanding interest to principal under certain circumstances). In the future, a repayment letter will be sent to borrowers, providing all of the same information that was provided in the consolidation agreement, including their CSL balance, repayment options, and available repayment assistance measures. Also, a borrower will be able to alter repayment terms via a revision of terms form. These regulatory amendments will have no effect on repayment terms or borrowers’ repayment options.
Consequently, as the consolidation agreement no longer replaces all previous direct loan agreements, and as borrowers are allowed to capitalize interest onto their direct loan principal, these Regulations allow for the full and effective implementation of the MSFAA. CSLP clients who sign an MSFAA will now be able to take short breaks of less than two years from their studies, and add outstanding interest to their loan principal, without having to re-sign an MSFAA upon their return to studies. Removing the requirement that borrowers sign a consolidation agreement in order to access the RAP also facilitates the move toward a more streamlined, modern online delivery of services.
Transitioning away from the consolidation agreement will involve minor costs for the Government of Canada as well as systems changes for the private-sector service provider that administers CSLs on behalf of the Government of Canada. These regulatory amendments will reduce administrative burden for the Government of Canada and for student loan recipients.
Consultation
Participating provinces and territories were consulted through the Intergovernmental Consultative Committee on Student Financial Assistance (ICCSFA). Provinces and territories are supportive of the elimination of mandatory consolidation agreements, particularly since some provinces do not use consolidation agreements for provincial loans, and the provinces generally favour the complete elimination of consolidation agreements.
Repealing the requirement that direct loan borrowers sign a consolidation agreement, and allowing direct, risk-shared borrowers and/or guaranteed borrowers to access the RAP without signing a consolidation agreement, supports the Government of Canada’s broader Service Delivery Vision. The Service Delivery Vision is the result of a 2007 CSLP review of the student financial assistance system. Stakeholders also participated in the 2007 review through meetings of the National Advisory Group on Student Financial Assistance (NAGSFA), a group of stakeholders made up of post-secondary education students’ associations, educational organizations, student financial aid administrators, and members of the academic community. Stakeholders were supportive of initiatives that simplify service delivery. The Canadian Association of Student Financial Aid Administrators, in a subsequent discussion, stated that sources of repayment information other than the consolidation agreement will be necessary. As outlined above, repayment information will continue to be provided to students through a repayment letter.
Implementation, enforcement and service standards
The National Student Loans Service Centre will be instructed to stop requiring borrowers to sign a consolidation agreement before being eligible to receive RAP. To remind borrowers of their repayment obligations upon leaving studies, a new repayment letter will be sent, providing all of the same information that was provided in the consolidation agreement, including their CSL balance, repayment options, and repayment assistance measures that they can access.
Contact
Atiq Rahman
Director
Operational Policy and Research
Canada Student Loans Program
Learning Branch
Human Resources and Skills Development Canada
200 Montcalm Street, Tower II, 1st Floor
Gatineau, Quebec
K1A 0J9
Telephone: 819-994-4518
Fax: 819-997-6037
Email: atiqur.rahman@hrsdc-rhdcc.gc.ca
Footnote a
S.C. 2011, c. 24, s. 155
Footnote b
S.C. 1994, c. 28
Footnote 1
SOR/95-329