Transcript PowerPoint Template (English Version)

Canada Student Loans
Repayment Trends and Assistance
Canadian Association of Student Financial Aid Administrators
CASFAA Annual Conference
June 13, 2011
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.
2
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.
3
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.
14
11.6
12
10.2
10
Portfolio (Billion $)
8.5
10.8
9.3
8
6
4.5
5.2
5.5
5.6
6.1
4.6
5.2
March 2008
March 2009
March 2010
March 2011
4.7
5.0
4
2
4.0
0
March 2007
Repayment
In Study & Grace
4
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.
5
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 $1060.
Number of Grants Issued
400,000
Value of Grants Issued ($M)
363,000
$700
350,000
$500
250,000
200,000
$400
150,000
$300
100,000
$589M
$600
300,000
84,200
$200
50,000
$148M
$100
0
$0
2008-09
2009-10
2008-09
2009-10
6
Along with the new grants, the CSLP is disbursing more loans
which are helping more students attend PSE
 More students are receiving student financial assistance, while the average federal loan
has decreased by nearly 10%.
410
2,089
2150
400
2100
390
402
380
370
2000
360
350
340
2050
2,013
365
1,927
1950
353
1900
343
Disbursement Amount ($M)
Nunumber of Full Time Borrowers (000's)
2,078
330
1850
320
310
1800
2006-07
2007-08
2008-09
2009-10
Loan Year
No. of Full Time Borrowers (000's)
Value of Loans ($M)
7
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.
100%
90%
Percent of Portfolio (%)
80%
10%
11%
9%
10%
11%
19%
20%
22%
21%
18%
70%
69%
69%
69%
71%
March 2007
March 2008
March 2009
March 2010
March 2011
70%
60%
50%
40%
30%
20%
10%
0%
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.
86%
84%
85%
85%
Repayment Rate (%)
84%
82%
82%
80%
78%
79%
76%
Repayment Cohort
74%
2004-05
2005-06
2006-07
2007-08
2008-09
9
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
60%
Financially, 53%
50%
Financially, 44%
40%
30%
Academically, 24%
Academically, 21%
20%
10%
0%
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
28%
26%
24%
22%
20%
16.3%
18%
14.4%
16%
14%
12%
11.8%
10%
2011
2011
2011
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2008
2008
2008
2008
2008
2008
2008
2008
2008
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
6 per. Mov. Avg. (RAP Uptake)
Youth Unemployment
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.
16.0%
15.0%
14.3%
Delinquency Rate (%)
14.0%
13.7%
12.4%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
March 2008
March 2009
March 2010
March 2011
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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.
30.0%
28%
Default Rate (%)
25.0%
19%
20.0%
17%
16%
14%
15.0%
14%
10.0%
5.0%
0.0%
2003-04
2004-05
2005-06
2006-07
Cohort Year
2007-08 (P) 2008-09 (F)
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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.
20
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.
21
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.
22
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.
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Canada Student Loans
Repayment Trends and Assistance
Questions?