How 2010 Default Rates Work

The 2010 default rates reflect the repayment status of students who were issued Ontario Student Loans in the 2007-2008 academic year and completed or exited their studies by 2008-2009. For purpose of calculating institutional default rates, student loan recipients/defaulters are assigned to the last institution/program they attended in 2007-2008. The status of these loans was assessed as of July 2010 or about two years after the student was expected to begin repayment.

An Ontario Student Loan granted after July 31, 2001 is in default when the National Student Loans Service Centre submits a claim to the Province of Ontario for default that satisfies the conditions as set out in O. Regulation 268/01 under the Ministry of Colleges and Universities Act. Default claims that have been submitted by the National Student Loans Service Centre in accordance with the Act and regulations thereunder are paid by the Province.

The Ontario government calculates default rates on the basis of incidence (i.e., the number of loans in default expressed as a percentage of the number of loans issued.)

To maintain student confidentiality in keeping with the Freedom of Information and Protection of Privacy Act, default information has not been shown in instances where the number of loans issued to students attending institutions or programs is four or less.

The overall 2010 default rate for Ontario postsecondary institutions is 7.6%, a decrease of 0.4 percentage points from the 2009 default rate of 8.0%. The 2010 default rates for each sector range from 3.7% for universities, to 10.6% for colleges of applied arts and technology, to 13.0% for private career colleges and 3.0% 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 2010-2011, the policy applied to institutions with annual default rates above 25.0%.
  • For loans issued in 2011-2012, the default cost sharing policy will apply to institutions with a 2010 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 with loans issued prior to 2010-2011 who borrow more than $7,000 for the year (a year is considered two terms) receive a grant for the amount above $7,000, provided they complete their academic year. Starting in the 2010-2011 loan year, students will have their student loan repayable debt capped at $7,300 for a two-term 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 families 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.

Credit Screening

Beginning 2011-2012, new loan applicants who are 22 or older and who have been in arrears for 90 days or more on three or more personal accounts/loans 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

Beginning 2001-2002, students became 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

Beginning November 2004, borrowers who exhaust interest relief and are still unable to meet their Ontario Student Loan repayment obligations may be eligible 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.

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.

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.