Banks pulling out of loan programs
Katherine Harding

The banks are beginning to lose their patience with students defaulting on their student loans.

In December the Royal Bank withdrew from the Prince Edward Island and New Brunswick student loan programs and CIBC pulled out of their commitment to the student loan program in Manitoba.

The Royal Bank also threatened to withdraw from the Nova Scotia program unless they received greater compensation. The Royal Bank has since re-negotiated a settlement to stay in that province's program.

This move by the banks to withdrawal financial support has angered the Canadian Federation of Students (CFS), a lobbying group that represents more than 60 colleges and universities nationally.

"Banks are more interested in making student loans lucrative to their shareholders than they are in making education accessible to students," said Jennifer Storey, the CFS's National Deputy Chairperson. "Banks are simply not working for the people who need their services the most. The Royal Bank's decision is clear example of this."

The CFS argues banks are making money from the exorbitant interest they collect on student loans, in addition to the five to 10 per cent they are receiving through risk-sharing agreements (the percentage varies by province - In Ontario the split is 60% for the banks; 40% for the province).

"These agreements are short-sighted and wasteful," said Storey. "We strongly urge the federal officials to cancel the risk-sharing agreements instead of re-negotiating them."

"The Canada Student Loan Program should be publicly funded and publicly administered," Storey said. "It certainly should not be a subsidy to the banks."

The federal risk-sharing agreements are set to expire on December 31, 1999.

Students' Union Vice President: University Affairs Scott Harris doesn't think students should start worrying about the banks recent move to withdraw support for student loan programs.

"Because the risk-sharing agreement is up, the banks decisions will probably reverse when the agreement is re-negotiated," said Harris, who is also a member of the Ontario Undergraduate Students Alliance's (OUSA) steering committee (WLUSU has belonged to this provincial student lobby organization since 1993).

Harris is confident the Ontario student loan program will not be affected by the banks pulling their support because of the current structure of the banks and province's risk-sharing ratio.

"In Ontario, if there is a default by a student, it is not a big hit on the banks," said Harris.