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.
How the 2015 OSAP Default Rates Work
The 2015 default rates reflect the repayment status of students who were issued Canada-Ontario Integrated Student Loans in the 2012-13 academic year and completed or exited their studies by 2013-14. For purpose of calculating institutional default rates, student loan recipients/defaulters are assigned to the last institution/program they attended in 2012-13 for which they received Canada-Ontario Integrated Student Loan. The status of these loans was assessed as of July 2015 or about two years after the 2012-13 OSAP Academic Year which started August 1, 2012 and ended July 31, 2013.
When is a Loan in Default?
What are the Overall Default Rates?
The overall 2015 default rate for Ontario postsecondary institutions is 8.1%. The 2015 default rates for each sector range from 3.6% for publicly-assisted universities, to 10.8% for publicly-assisted colleges, to 17.0% for private career colleges, and 3.4% for other private and publicly-funded institutions.
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.
How does the Repayment Assistance Plan impact Default Rates?
Eligibility for the Repayment Assistance Plan (RAP) is based on post-study family income and family size. Applicants with very low post-study family income qualify for zero payment. Above that level, approved applicants qualify for a reduced monthly payment. Approximately 90% of approvals are for zero payment. Each term of approval is for 6 months and you can reapply at any point provided you are not in default.
An institution or program with a low default rate may have a high RAP usage rate. A high RAP usage indicates that a large proportion of borrowers had very low post-study income for 6 or more months after entering repayment.
To obtain a fuller picture of financial risk; prospective students are encouraged to also review the repayment assistance plan usage rates, graduation rates and graduate employment outcomes for programs and institutions they are considering.
Where are the Repayment Assistance Plan Usage Rates located?
The 2015 Repayment Assistance Plan Usage Rates of borrowers included in the 2015 Default Rates are posted by institution and program on the Ontario Open Data website at: https://www.ontario.ca/data/osap-repayment-assistance-plan-usage
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:
Performance Standards for Retaining OSAP Approval
On January 20, 2014, the Government of Ontario announced that to retain OSAP approval, OSAP Approved private institutions in Ontario must achieve:
- In at least one of every three years, both an overall graduation rate and an overall graduate employment rate of at least 80% of the overall average rate for Ontario Public Colleges. The first year of graduation and graduate employment rates of private institutions included in this standard are the 2014 rates.
- In at least one of every four years, an overall default rate that is at or below the default rate threshold. The first year of default rates included in this standard are the 2016 default rates of 2013-14 borrowers.
Repayment Assistance Plan
On November 1, 2010, the Ontario Government joined the federal Repayment Assistance Plan (RAP) to provide students with more help in repaying their Ontario student loan. Eligibility for RAP is tested based on the applicant’s post-study family income, family size and student loan debt. While participating in the Plan, either no payment is required, or the borrower qualifies for a reduced payment. Each term of repayment assistance is for 6 months. To remain eligible to apply, borrowers must keep their loans in good standing. After 15 years since full-time studies loans are reduced to zero. For students with disabilities, any remaining loan is forgiven after 10 years.
Sharing the Cost of Loan Defaults
The sharing of loan default costs first applied to loans issued in 1998-99. 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 1999-00, the policy applied to institutions with a 1997 default rate 10 percentage points or more above 23.5%.
For loans issued in 2000-01, the policy applied to institutions with a 1999 default rate above 28.5%.
For loans issued from 2001-02 to 2013-14, the policy applied to institutions with annual default rates above 25.0%.
For loans issued in 2014-15, the default cost sharing policy will apply to institutions with a 2013 default rate above 22.5%.
For loans issued in 2015-16, the default cost sharing policy will apply to institutions with a 2014 default rate above 20.0%.
For loans issued in 2016-17, the default cost sharing policy will apply to institutions with a 2015 default rate above 20.0%.
Reporting Program Outcomes
Institutions are required to provide students with accurate information on default rates and a link to the repayment assistance plan usage rates, graduation rates, and graduate employment rates of their programs so that students can make a more informed choice of studies.
Ontario Student Opportunity Grant
Students who borrow more than the two- or three-term debt threshold for an academic year (e.g. more than $7,400 for two terms in 2015-16) receive a grant for the eligible loan above the threshold. The eligible amount is determined after verification of reported income with the Canada Revenue Agency. To qualify for the grant, students must also complete their school year and keep loans in good standing while eligibility is assessed.
30% Off Ontario Tuition Grant
The Government of Ontario launched the 30% Off Ontario Tuition grant in January 2012. In 2015-16, students in a university or college degree program saved $1,830 on tuition, while students in college diploma or certificate programs saved $850. About 230,000 college and university students saw their tuition costs reduced in 2014-15.
Ontario Access Grants
Introduced in 2005-06, the Government of Ontario 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 $90,000 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 Ontario Student Loan entitlement.
New loan applicants aged 22 and older 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, are ineligible for student loans. Students may still become eligible if they appeal and can demonstrate exceptional circumstances and a strong likelihood of repayment.
Interest Free Grace Period
The government pays the interest charges on the Ontario portion of student loans during the first six months after full-time studies, and no payments are required. This makes the Ontario portion of all OSAP loans interest free and payment free for the first six months for all borrowers. In addition, borrowers who work in the non-profit sector or start their own business can apply to have their grace period extended to one year.
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 remain repayable. These may be deducted from future amounts of loan or grant that the student may have received otherwise.
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 income tax refunds.
Postsecondary institutions have an important role to play in reducing loan defaults. Improving program quality and relevance, ensuring adequate testing and admissions practices, informing borrowers of loan repayment and repayment assistance, providing support to students to complete their studies, and assisting with job searches are examples of measures institutions may take to reduce student loan defaults.