Okay, so maybe not loan sharking, but disturbing none the less.
Recent grads losing millions in post-secondary tax credits: group
Last Updated: Thursday, September 27, 2007 | 8:34 PM ET
The Canadian Press
Advocates for student loan reform are crying foul over $240 million Ottawa has collected in the past four years from graduates who neglected to pay interest during a so-called "grace period" on their repayments.
Figures obtained by the Coalition for Student Loan Fairness under Access to Information legislation show just one borrower paid the full amount of interest accumulated over the period, which exempts students from payments for six months after graduation.
That means just one out of an average of 144,000 students who go into repayment annually was able to benefit fully from the tax credits offered by the federal government, said coalition founder Julian Benedict.
Under the federal loan system, students have a six-month grace period after leaving school before their loans are consolidated and they're required to start paying them back.
According to the figures from Human Resources and Social Development Canada, the government has doled out just $37,000 in tax credits for partial grace-period repayments made since 2003.
Had all the borrowers paid the interest in full when they were supposed to, the government would have been on the hook for credits totalling an additional $36.5 million.
For a student with a $36,000 loan, six months interest amounts to about $1,450, resulting in a tax credit of about $221, if paid on time, said Benedict.
"I guess the thing that I find most remarkable about this information is that so few people were able to make payments on their loans during those first six months," he said.
"[It] suggests that students need more help with their loans and less interest to be able to pay them off."
Students' ability to pay back loans decreasing
The figures indicate the government makes more money off students each year, while the ability of students to make repayments is dwindling. In 2003-04, the government pocketed nearly $48 million; that number soared to more than $80 million in 2006-07.
Meanwhile, borrowers were able to make partial payments totalling $164,130 in 2003-04, compared with $27,371 last year. Payments hit a record low in 2005-06 when the government received only $7,993.
"These numbers are shocking," Benedict said. "This is money from students who have just graduated, and many don't have jobs yet and aren't able to pay their loans."
Benedict said many students aren't even aware of the 30-day deadline for interest payments, which he said isn’t mentioned anywhere in their contracts. Even those who receive a tax credit for interest paid on the principal during the rest of the calendar year likely don't realize they're getting "far less" than they could have, he added.
"This is a wilful omission by the government, and it's swindling millions from borrowers."
Benedict also cited the government’s own recent customer satisfaction survey, which found 64 per cent of borrowers didn't know they were being charged interest during the "grace period" — a misleading term that leads borrowers to believe they're not being charged, he said.
In addition, unpaid interest is added to the loan principal, requiring borrowers to pay interest on their interest, he added.
Government spokesman Murray Gross denied that students aren't being told about the grace period interest, and defended the practice of adding unpaid interest to the principal as common banking-industry practice.
"Borrowers are sent a package six weeks prior to the time that they are required to start repayment of the their student loan," Gross said in an e-mail.
"They are given the option to either make a lump-sum payment of interest accumulated on their student loan during the grace period, or have the unpaid interest added to the loan principal."
Citing "operational reasons" for why the government must make a decision on what to do with the interest within 30 days, Gross said there are people who don't immediately sign the consolidation agreement outlining their choice.
When no such instructions are received, the interest accumulated during the grace period is automatically tacked onto the principal, he said.
"Since the amount is no longer interest, but principal, it no longer qualifies for the tax credit."
'Serious challenges' face graduates: Manitoba minister
Manitoba, Nova Scotia and Prince Edward Island all waive interest charges during six-month grace periods on provincial student loans. Such is not the case in other provinces or the federal student loan program.
"We recognize when students graduate from university, if they have debts, they are facing serious challenges," said Diane McGifford, Manitoba's advanced education minister.
"We think a grace period without interest is an important time for the students to find employment, get themselves set up and be in a position to begin paying their student loans back."
Kevin Finch, a spokesman for the Nova Scotia department of education, said the interest-free grace period has existed there since 1994. Last year, he said, 13,000 students qualified for it at a cost of $2.5 million.
"It's not a lot of money, [but it's] just to give students, or graduates, a little more headroom after they graduate to get on their feet and get established," he said.
"We see it as an investment in our students."
http://www.cbc.ca/canada/story/2007/09/27/students-tax.html
The part I bolded and italicized I can tell you is BULL-SH.IT. I switched schools a couple years back, and was actually out of school for a little better than 6 months. I applied for my new loan, got my new loan, then recieved a notice in the mail telling me I had to begin making payments. I had already processed the loan, and the letter was dated after the date of my loan processing.
For anyone who hasn't dealt with student assistance, lets just say I prefer dealing with banks8O At least they have the courtesy to tell you up front how they're gonna fist you up the @ss.
Recent grads losing millions in post-secondary tax credits: group
Last Updated: Thursday, September 27, 2007 | 8:34 PM ET
The Canadian Press
Advocates for student loan reform are crying foul over $240 million Ottawa has collected in the past four years from graduates who neglected to pay interest during a so-called "grace period" on their repayments.
Figures obtained by the Coalition for Student Loan Fairness under Access to Information legislation show just one borrower paid the full amount of interest accumulated over the period, which exempts students from payments for six months after graduation.
That means just one out of an average of 144,000 students who go into repayment annually was able to benefit fully from the tax credits offered by the federal government, said coalition founder Julian Benedict.
Under the federal loan system, students have a six-month grace period after leaving school before their loans are consolidated and they're required to start paying them back.
According to the figures from Human Resources and Social Development Canada, the government has doled out just $37,000 in tax credits for partial grace-period repayments made since 2003.
Had all the borrowers paid the interest in full when they were supposed to, the government would have been on the hook for credits totalling an additional $36.5 million.
For a student with a $36,000 loan, six months interest amounts to about $1,450, resulting in a tax credit of about $221, if paid on time, said Benedict.
"I guess the thing that I find most remarkable about this information is that so few people were able to make payments on their loans during those first six months," he said.
"[It] suggests that students need more help with their loans and less interest to be able to pay them off."
Students' ability to pay back loans decreasing
The figures indicate the government makes more money off students each year, while the ability of students to make repayments is dwindling. In 2003-04, the government pocketed nearly $48 million; that number soared to more than $80 million in 2006-07.
Meanwhile, borrowers were able to make partial payments totalling $164,130 in 2003-04, compared with $27,371 last year. Payments hit a record low in 2005-06 when the government received only $7,993.
"These numbers are shocking," Benedict said. "This is money from students who have just graduated, and many don't have jobs yet and aren't able to pay their loans."
Benedict said many students aren't even aware of the 30-day deadline for interest payments, which he said isn’t mentioned anywhere in their contracts. Even those who receive a tax credit for interest paid on the principal during the rest of the calendar year likely don't realize they're getting "far less" than they could have, he added.
"This is a wilful omission by the government, and it's swindling millions from borrowers."
Benedict also cited the government’s own recent customer satisfaction survey, which found 64 per cent of borrowers didn't know they were being charged interest during the "grace period" — a misleading term that leads borrowers to believe they're not being charged, he said.
In addition, unpaid interest is added to the loan principal, requiring borrowers to pay interest on their interest, he added.
Government spokesman Murray Gross denied that students aren't being told about the grace period interest, and defended the practice of adding unpaid interest to the principal as common banking-industry practice.
"Borrowers are sent a package six weeks prior to the time that they are required to start repayment of the their student loan," Gross said in an e-mail.
"They are given the option to either make a lump-sum payment of interest accumulated on their student loan during the grace period, or have the unpaid interest added to the loan principal."
Citing "operational reasons" for why the government must make a decision on what to do with the interest within 30 days, Gross said there are people who don't immediately sign the consolidation agreement outlining their choice.
When no such instructions are received, the interest accumulated during the grace period is automatically tacked onto the principal, he said.
"Since the amount is no longer interest, but principal, it no longer qualifies for the tax credit."
'Serious challenges' face graduates: Manitoba minister
Manitoba, Nova Scotia and Prince Edward Island all waive interest charges during six-month grace periods on provincial student loans. Such is not the case in other provinces or the federal student loan program.
"We recognize when students graduate from university, if they have debts, they are facing serious challenges," said Diane McGifford, Manitoba's advanced education minister.
"We think a grace period without interest is an important time for the students to find employment, get themselves set up and be in a position to begin paying their student loans back."
Kevin Finch, a spokesman for the Nova Scotia department of education, said the interest-free grace period has existed there since 1994. Last year, he said, 13,000 students qualified for it at a cost of $2.5 million.
"It's not a lot of money, [but it's] just to give students, or graduates, a little more headroom after they graduate to get on their feet and get established," he said.
"We see it as an investment in our students."
http://www.cbc.ca/canada/story/2007/09/27/students-tax.html
The part I bolded and italicized I can tell you is BULL-SH.IT. I switched schools a couple years back, and was actually out of school for a little better than 6 months. I applied for my new loan, got my new loan, then recieved a notice in the mail telling me I had to begin making payments. I had already processed the loan, and the letter was dated after the date of my loan processing.
For anyone who hasn't dealt with student assistance, lets just say I prefer dealing with banks8O At least they have the courtesy to tell you up front how they're gonna fist you up the @ss.
