The overall 2011 default rate for Ontario postsecondary institutions is 7.9%, an increase of 0.3 percentage points from the 2010 default rate of 7.6%. The 2011 default rates for each sector range from 3.6% for universities, to 10.5% for colleges of applied arts and technology, to 15.2% for private career colleges and 4.0% for other private and publicly funded institutions.
To date, the Ministry has taken a number of measures to reduce the incidence and cost of loan defaults. These include but are not limited to:
Sharing the Cost of Loan Defaults
The sharing of loan default costs first applied to loans issued in 1998-1999. For these loans, institutions with a 1997 default rate 15 percentage points or more above the 1997 provincial average of 23.5% were required to share the cost of defaults.
For loans issued in 1999-2000, the policy applied to institutions with a 1997 default rate 10 percentage points or more above 23.5%.
For loans issued in 2000-2001, the policy applied to institutions with a 1999 default rate above 28.5%.
For loans issued from 2001-2002 to 2011-2012, the policy applied to institutions with annual default rates above 25.0%.
For loans issued in 2012-2013, the default cost sharing policy will apply to institutions with a 2011 default rate above 25.0%.
Reporting Program Outcomes
Institutions are required to provide students with accurate information on default rates, graduation rates, and graduate employment rates by program so that students can make a more informed choice of studies.
Ontario Student Opportunity Grant
Students who borrow more than $7,300 for the year (a year is considered two terms) receive a grant for the amount above $7,300, provided they complete their academic year.
Access Grants
Introduced in 2005-2006, the Ontario Government now provides the Ontario Access Grant (OAG) to first-year and second-year students from low-income and modest middle-income families (generally those earning under $84,000 in income per year, net of deductions) who attend postsecondary studies for the first time. The value of the OAG is equal to the lesser of: 50% of actual tuition; $3,000; or the student's Ontario Student Loan entitlement.
The New 30% Off Ontario Tuition Grant
The Ontario Government launched the online application for the New 30% Off Ontario Tuition Grant on January 5, 2012. About 200,000 college and university students have seen their tuition costs reduced by 30 per cent for the 2012 winter term. In 2012-2013, students in a university or college degree program will save $1,680 on tuition, while students in college diploma or certificate programs will save $770.
Credit Screening
New loan applicants who are aged 22 and older and who have been in arrears for 90 days or more on three or more personal loans or credit accounts in the past three years, each with a value of $1,000 or more, will be ineligible for student loans. Students may still become eligible if they appeal and can demonstrate exceptional circumstances and a strong likelihood of repayment.
Interest Relief
From 2001-2002 to November 1, 2010, students were eligible to receive up to 54 months of interest relief compared to the maximum 30 months of interest relief previously available for Ontario Student Loans. This program was replaced by the Repayment Assistance Plan on November 1, 2010.
Ontario Debt Reduction in Repayment
From November 2004 to November 1, 2010, borrowers who exhaust interest relief and were still unable to meet their Ontario Student Loan repayment obligations could qualify for three separate loan remission payments spaced one year apart and valued at up to $4,300, $2,200, $2,200 respectively. This program was replaced by the Repayment Assistance Plan on November 1, 2010.
Repayment Assistance Program
On November 1, 2010, the Ontario Government joined the federal Repayment Assistance Program (RAP) to provide students with more help in repaying their Ontario student loan. Under the program, no graduate experiencing financial difficulties is asked to pay more than 20 per cent of their family income towards their loans. After 15 years, any remaining student loan debt is forgiven. For students with disabilities, any remaining debt is forgiven after 10 years. RAP replaced previous Interest Relief and Debt Reduction in Repayment Programs.
Interest Free Grace Period
For students who complete their full-time studies on or after August 1, 2010, the government will pay the interest charges during the first six months after graduation, in addition to the six months of no payments currently offered. This makes the Ontario portion of all OSAP loans interest free and payment free for the first six months for all graduates. In addition, graduates who work in the non-profit sector will have their grace period extended to one year, starting in September 2012.
Income Verification
The Ministry verifies income information that students, their parents or spouses provide to OSAP with taxpayer information from Canada Revenue Agency. When income is under-reported, students are notified and overpayments are deducted from future loans or grants for which the student may be eligible.
Closing the Bankruptcy Loophole
Federal legislation exempts federal and provincial student loans from being included in bankruptcy proceedings for a 7-year period following students’ completion of their studies.
Collections
The province recovers monies owed on student loans through contracted private collection agencies and set-offs against defaulters’ personal income tax refunds.
Postsecondary institutions have an important role to play in reducing loan defaults. Improving program quality and relevance, ensuring adequate recruitment, testing and admissions practices, providing support to students to complete their studies and providing assistance with job placement are examples of measures institutions can take to reduce student loan defaults.
