Backgrounder
Ontario Government strategy to reduce student loan defaults
TORONTO – (January 26,
2000) In 1998/99, more than 190,000 students received
financial help through the Ontario Student Assistance Program to help pay for
their postsecondary education, at a cost of $534.6 million. This represents a
33 per cent increase in government funding for OSAP over
1995/96.
The 1999 overall default rate for Ontario postsecondary
institutions is 18.2 per cent, a decrease of 3.9 percentage points from the
1998 default rate of 22.1 per cent. The following is a breakdown by sector.
|
Sector |
1999 default rate (per cent) |
1998 default rate (per cent) |
|
universities |
8.4 |
12.3 |
|
colleges |
20.1 |
25.4 |
|
private vocational schools |
31.0 |
34.5 |
|
other private and public institutions (such as hospital
education centres and Bible colleges) |
7.9 |
11.8 |
The Ontario Government has taken a number of measures to reduce
the incidence and cost of loan defaults including:
Providing Additional
Funding to Limit Student Debt
- Providing Ontario Student Opportunity Grants so that no
student will incur more than $7,000 of debt per year of study.
- Establishing the Ontario Student Opportunity Trust Fund which
provides up to $20 million a year to help students in financial need.
- Introducing the Aiming for the Top Tuition Scholarships which
every year will help 2,500 first-year students who have top marks and are in
financial need.
Increased Measures to
Recover Loan Defaults
- Accessing income tax refunds to offset amounts owed on loans
that have gone into default.
- Sharing the costs of loan defaults with institutions whose
students have high default rates. In 1998-99, institutions with a default rate
in excess of 38.5 per cent were required to share the costs of loan defaults
while in 1999-2000, institutions with a default rate in excess of 33.5 per cent
are required to share in the costs of loan defaults.
- Contacting students who have defaulted and recovering loan
defaults through private collection agencies. In 1998-99, $21.8 million was
collected on outstanding student loans. Approximately $4.3 million was
collected in 1997-98.
Preventative Measures
- Credit screening new loan applicants to ensure that loans are
not issued to students with a history of credit abuse.
- Requiring institutions to provide students with accurate
information on default rates, graduation rates, and graduate employment rates
by program thus allowing students to make a more informed choice of
studies.
The 1999 default rates are posted on the OSAP website http://osap.gov.on.ca and can be accessed
from the menu What’s New in OSAP.
See also:
|
