Legislative Assembly of Ontario

1999 ANNUAL REPORT, PROVINCIAL AUDITOR MINISTRY OF TRAINING, COLLEGES AND UNIVERSITIES

CONTENTS

Friday 25 February 2000

1999 Annual Report, Provincial Auditor:
Chapter 4(3.06), Ontario student assistance program

Ministry of Training, Colleges and Universities
Dr Bob Christie, deputy minister
Mr Helmut Zisser, director, student support branch
Mr David Trick, assistant deputy minister, post-secondary education division

STANDING COMMITTEE ON PUBLIC ACCOUNTS

Chair / Président
Mr John Gerretsen (Kingston and the Islands / Kingston et les îles L)

Vice-Chair / Vice-Président
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)

Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John Gerretsen (Kingston and the Islands / Kingston et les îles L)
Mr John Hastings (Etobicoke North / -Nord PC)
Ms Shelley Martel (Nickel Belt ND)
Mr Bart Maves (Niagara Falls PC)
Mrs Julia Munro (York North / -Nord PC)
Ms Marilyn Mushinski (Scarborough Centre / -Centre PC)
Mr Richard Patten (Ottawa Centre / -Centre L)

Substitutions / Membres remplaçants
Mr Frank Klees (Oak Ridges PC)
Mrs Tina R. Molinari (Thornhill PC)

Also taking part / Autres participants et participantes
Mr Erik Peters, Provincial Auditor

Clerk pro tem / Greffier par intérim
Mr Douglas Arnott

Staff / Personnel
Mr Ray McLellan, research officer,
Research and Information Services

The committee met at 1047 in room 151, following a closed session.

1999 ANNUAL REPORT, PROVINCIAL AUDITOR MINISTRY OF TRAINING, COLLEGES AND UNIVERSITIES

Consideration of chapter 4(3.06), Ontario student assistance program.

The Chair (Mr John Gerretsen): Good morning. I'd like to call to order the standing committee on public accounts to deal specifically with chapter 4, section 3.06 of the 1999 Annual Report of the Provincial Auditor, dealing with the matter of the Ontario student assistance program.

Thank you for attending this morning. We look forward to your presentation. Perhaps if you could identify yourself for the purpose of Hansard. You'll have about 15 to 20 minutes for your presentation. There will be questions from members of the committee afterwards.

Dr Bob Christie: I'm Bob Christie. I'm the Deputy Minister of Training, Colleges and Universities. To my left is David Trick, who is the assistant deputy minister for post-secondary. On my right is Helmut Zisser, who is the director of the student support branch, and on Helmut's right is Louis Lizotte, who is the senior policy adviser in the student support branch.

I will be making some brief introductory remarks and then I'll turn the floor over to Helmut for an overview of the program and the steps that the ministry has taken in response to the recommendations made in the auditor's 1997 annual report. As well, we will review the follow-up comments made in the latest report of the auditor.

We welcome this opportunity to update members of the standing committee on public accounts on the ministry's work in response to these recommendations. The recommendations in the 1997 report provided the ministry with a constructive set of recommendations-some of them challenging-and the opportunity to take needed steps to improve the integrity and accountability of OSAP administration.

We're pleased to inform committee members that the ministry has taken action on all of the auditor's recommendations. Ministry staff will be able to answer any questions you may have about the implementation status of any of the specific recommendations of the auditor.

With that brief introduction, Helmut will now provide you with an overview of the steps we've taken and are currently taking to improve the management of the program.

Mr Helmut Zisser: As the deputy indicated, we've taken action on all the recommendations made by the Provincial Auditor. In several areas not only have we implemented what was recommended but we've also moved beyond the specifics of the recommendation to further address accountability or shared responsibility issues.

In our presentation, we will go over the initiatives the ministry has taken and the process to address the issues raised by the Provincial Auditor. We will also provide information about customer service at OSAP, which is an important aspect of our accountability to the public, and conclude with future directions for improvements to student assistance in Ontario.

All of the recommendations of the Provincial Auditor with respect to establishing performance agreements with institutions, external compliance audits and setting out disciplinary measures for institutions that do not meet requirements have been addressed. Performance requirements have been signed with all private vocational schools participating in the Ontario student loan program since July 1997. The ministry finalized an accountability framework and performance guidelines for the administration of OSAP with colleges of applied arts and technology in October 1998, and an accountability framework for the administration of OSAP was concluded with Ontario universities in July 1999.

Detailed OSAP compliance audits of private vocational schools started in the summer and fall of 1998 for the 1997-98 program year. The number of audit reports received for that year is 166, covering 228 institutions. The ministry has reviewed all reports and followed up where appropriate in asking for corrective action plans or taking further actions as warranted. For 1998-99, 361 private vocational schools and all 42 universities and colleges of applied arts and technology are being audited. The audit process is currently underway and reports are due over the next few months.

Income verification arrangements are in place with Canada Customs and Revenue Agency, formerly Revenue Canada, for income reported by students, their parents or their spouses. The ministry receives income information from the tax returns of students who receive student loans and from their parents and spouses. This information is compared with the information reported on the OSAP application form or as amended during the course of the academic year. For 1998-99, some 213,000 student files, 196,000 parent files and 22,000 spousal files were verified. As the Provincial Auditor points out in his 1999 follow-up report, the introduction of the Ontario student opportunity grants, replacing the loan forgiveness program, will reduce the risk that students receive loan forgiveness before their income is verified, as OSOG will be paid out annually and only after income verification has occurred.

Further data-sharing agreements are currently being pursued with the Ministry of Transportation for vehicle asset verification and with employment insurance.

Explanations are now required when a student reports income that is below an estimated minimum requirement to live on. In 1998-99, there were close to 40,000 OSAP applications where income clarification was required. Of those files, about 38,000 provided satisfactory responses and were processed. The other 4,000 applicants could not be processed as they either didn't respond to the request for an explanation or provided unsatisfactory responses.

The Provincial Auditor's recommendation to give due consideration to student and spousal assets when calculating loan entitlements was implemented, starting with the 1997-98 academic year. Effective for the 1997-98 academic year, federal needs-assessment criteria related to assets were implemented. Revisions have been made to Ontario student loan regulation 774 to permit consideration of student and spousal assets in determining loan entitlements. Assets include vehicles, bank accounts, other investments and RRSPs. Parental assets are not considered in the assessment.

In order to increase access funding for students with financial need, universities and colleges are now required to set aside 30% of tuition increases for student aid. These amounts are supplemented with financial aid distributed from the $600 million being raised in permanent endowments under the Ontario student opportunity trust fund initiative. These two sources of institution-based financial assistance added close to $100 million in 1998-99 and are estimated to be over $146 million for the 1999-2000 year.

After increasing in 1997, Ontario student loan default rates decreased in 1998 and 1999. In 1999, the overall rate declined by 3.9 percentage points from the 1998 rate. Overall default rates since we have calculated them are 18.6% in 1996, increasing to 23.5% in 1997, and then declining to 22.1% in 1998 and 18.2% in 1999.

The robust Ontario economy is certainly a big factor in the decline of OSAP default rates; however, we believe the combination of measures that we have put in place in recent years is also a factor and will become much more of a factor in the years to come. Reforms to OSAP will ensure that student loan defaults continue to decline.

We've taken steps to reduce the future instance of student loan defaults. Colleges, universities and private vocational schools are required to provide prospective students with accurate information about each program's graduation, placement and loan default rates, which allows students to make a more informed choice of studies. Institutions are required to share the cost of defaulted loans if the institution's overall default rate is in excess of established thresholds.

New OSAP applicants are credit screened, and those who have been 90 days in arrears on three or more personal accounts or loans totalling $1,000 or more within the past three years are not eligible for a student loan.

Student loan recipients have the status of their Canada and Ontario student loan accounts reported to credit bureaus. Private collection agencies have been collecting student loan defaults since January 1999. Effective for the 1998 taxation year, defaulted loans are recovered from income tax refunds. This has occurred in an environment where changes to federal bankruptcy legislation enacted in 1998 prohibit student loan borrowers from discharging student loans through bankruptcy until 10 years after the completion of studies.

The ministry has taken steps to ensure that OSAP is administered properly and is available to students who are entitled to assistance. The number of students put on the OSAP restricted list has increased as a result of the ministry's verification activities in recent years. In 1993-94, we had 622 restrictions, and this number has increased to 3,737 in 1998-99.

There are two kinds of restrictions we have in place:

Investigative restrictions are issued by the ministry when students or institutions fail to comply with program requirements. This can typically arise because we receive information that indicates that someone is participating in the program and has not presented complete information.

Academic restrictions are issued at the institution when the student fails to meet minimum academic progress requirements. All students are required to progress through their program of studies successfully in order to continue to receive student assistance, and financial aid offices at institutions are responsible for monitoring that.

We've also improved our linkages with lenders. The majority of Ontario student loans are held by three lenders: the Bank of Nova Scotia, CIBC, and Royal Bank. The ministry has now established procedures to improve processing of bank information with the major lenders. Facilities to permit lenders to correct their own errors on the OSAP database are in place. The ministry has established a full electronic data interchange process with one of the major lenders, and discussions are underway with the other two lenders to achieve efficiency using EDI for their transactions.

The backlog of claims identified at the time of the 1997 audit has been eliminated. Claims for loss under the government guarantee are processed expeditiously. It now takes just two weeks from the day the claim is received from a lender for the claim to be verified, processed for payment and sent to collection.

Recoveries from credit collection have also increased. In 1997-98, the year before private collection agencies assumed the collection of all student loans, only $4.3 million was collected on outstanding student loans. In 1998-99, $21.2 million was recovered. This year, up to the end of January, $35.7 million has been recovered.

Additional revenue is also generated through income tax set-offs. For the 1998 taxation year, the first year of the agreement with CCRA, formerly Revenue Canada, $1.3 million was collected from income tax refunds. This was out of a total of $26 million in claims that we forwarded, representing about 9,000 delinquent accounts. The program started in the middle of tax-filing season.

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In order to provide students and parents with a clear picture of the ability of post-secondary institutions to successfully place graduates in jobs, colleges, universities and private vocational schools are required to provide students with information on graduation rates, graduate employment rates and Ontario student loan default rates. This information is given to students to help them as they consider in which institutions and programs to invest their money, time and effort.

In the next series of slides we have extracted the Web site at Queen's University to show how that information is being made available to students. Someone going to the site can pick the item "Student Information." That presents them with a series of options, one of which is to look at performance indicators. There's then a brief description of what performance indicators are and a specific reference to the OSAP performance indicators. They can then move on and review those indicators in turn. There is information on graduation rates. Queen's was chosen to show both their own rates as an institution and the provincial average for universities. The student can get detailed information by program on those rates. Students can also look at the rates for employment and, again, the details associated with that. Universities provide both six-month and two-year employment rates. Finally, there's information on student loan default rates, and that again is available by program at this Web site.

Customer service is also a very important aspect of the program. OSAP serves about 40% of the post-secondary students in Ontario. In effect, the number of individuals the program serves is even greater because it is not only students who make inquiries about OSAP; their families, their parents and their spouses all contact the ministry. OSAP receives over 120,000 telephone calls a year, not including the 1-900 service. This includes calls from students attending institutions outside of Ontario where the ministry acts as their financial aid office for purposes of student assistance-the OSAP program-and students seeking information about their loan, loan forgiveness status, their reassessments, income verification notices, their T4As, their loan defaults, income tax set-offs, interest relief, bursaries and so on. OSAP also receives calls from financial aid administrators at post-secondary institutions and loan officers at lending institutions.

Most information requests from Ontario students are directed to the institution's financial aid office through an automated response system. The data shown in the graph represent only the number of calls where the caller required service from the ministry. OSAP services to the public are available in the consumer's choice of English or French, and a special TTY toll-free line is available for deaf and hard-of-hearing students.

OSAP customer service demand is cyclical. The peak periods occur just before and at the start of the new academic year in August and September, and at the start of the second term in January. The demand for service at these times presents a challenge to the ministry and the financial aid offices at colleges and universities. In order to provide better service to students and to assist financial aid offices at institutions, the ministry has established an Internet Web site to serve student information needs. Through this site, students can obtain comprehensive and timely program information and receive up-to-date information about their loan. The site is available 24 hours a day, seven days a week. This past August, the Web site had over 140,000 visitors and received more than seven million hits. Even during December, a period of relative quiet, the Web site served about 50,000 visitors and had about two million hits.

In addition to the free Internet service, OSAP offers a 1-900 automated line that students can use to gain access to their account information. There's a flat fee of $2 per call charged to the caller's phone number. The nominal fee is to recover the cost of providing this alternative service. The same information on application status is available on both the Web site and the 1-900 automated line. The decrease in the use of the 1-900 line between 1998-99 and 1999-2000 reflects the increasing popularity of the Internet and the increasing use of the free Web-based service.

Students can also apply for OSAP over the Web. Introduced as a pilot project in 1998-99, it generated 45,000 applications. This year, at the end of January, the number of Web-based applications is over 60,000, a jump of more than 30%. Last year, there were about three booklet applications for every Web-based one; this year, for every Web application, there are about one and a half booklet applications. We expect the number of Web applications to continue to increase.

Applying for OSAP through the Web site doesn't entail any cost on the part of the student. Returning students receive a pre-printed application requiring them to update existing information. Again, there is no charge when using this application.

Future directions for OSAP. In November 1999, the government announced three actions to make OSAP a more efficient and fairer program: An improved income verification system will be introduced so that individuals who under-report income on their student loan applications do not receive more assistance than they're entitled to; tighter credit screening criteria will be applied to new loan applicants to better ensure that students with a history of credit abuse are not issued student loans; and the default rate threshold at which institutions must begin to share the cost of student loan defaults will be lowered to encourage institutions to take further steps to reduce defaults.

The Minister of Finance announced in the 1999 budget a new Aiming for the Top tuition scholarship, which will help students who earn top marks and require financial assistance to attend college or university. Starting in September 2000, these scholarships, with a value of up to $3,000 per year, will be awarded annually. Students can receive a scholarship for up to four years.

In May 1999, the province signed an agreement with the government of Canada to replace the Canada and Ontario student loans with a single loan, starting in August 2000. This single loan will simplify arrangements for student borrowers and streamline the administration of OSAP. It will also allow Ontario to introduce improved interest relief and debt reduction programs to help students who have trouble repaying their loans. The harmonization agreement provides Ontario with access to the same terms and conditions for a risk-sharing agreement with lenders as is currently being negotiated by the federal government.

The Chair: Thank you very much. That was an excellent presentation. I'll turn it over to the government side, but I've just got one question that I'm sure everybody is dying to know. When you say that all calls are answered within three rings, are we talking about by voice mail or by a human being?

Dr Christie: Both.

Mr Richard Patten (Ottawa Centre): Mainly by message machine.

The Chair: We've got about 17 minutes for each caucus. We'll start today with the government side.

Mrs Tina R. Molinari (Thornhill): Thank you very much for your presentation. It's very informative, and it's good to see that a number of the recommendations that were made are in fact being implemented. There's one question I have with respect to accountability, and of course this is the time of accountability, where everyone needs to take some ownership and responsibility. How are the colleges, universities and private vocational schools required to share some of the accountability and the cost in the default loans?

Dr Christie: Typically, as Helmut noted earlier, there are default rate thresholds determined for these institutions. Those institutions with default rates above the threshold begin to experience a financial sharing of costs above that threshold. Helmut will provide the details.

Mr Zisser: Prior to 1998-99, there was no sharing of default costs with institutions. The province paid 100% of default costs. There was also no designation of programs with high default rates. Since then, institutions with overall high default rates in excess of the default threshold are responsible for reimbursing the ministry for the cost of program defaults in excess of the threshold. Default thresholds are determined on an annual basis. In the first year the program was put in place, the default threshold was set at 38.5%. That was 15% above the average default rate in the province. The following year, the threshold was lowered by 5%, to 33.5%; that is in 1999-2000. For the 2000-01 year, post-secondary institutions whose 1999 loan default rates are above 28.5% are required to share the cost of defaults for their high-default programs on loans issued after August 1, 2000.

Institutions can become exempt from sharing the costs of loan defaults if they elect to drop one or more high default programs from OSAP eligibility; then their recalculated institutional default rate will fall below that threshold.

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In the following year, this policy will also apply to schools whose 2000 loan default rate is above 25%. So there has been a gradual process of bringing that down to 25%. The goal is to reduce default rates below 10% by 2003.

Mrs Molinari: Thank you and just a follow-up. So it has been going down in the last number of years. Do you have any idea of predictions on the effects of that? Will institutions actually be taking some ownership, or are they going to be more conscious of what they're doing? I guess the bottom line would be that they don't want their grants to be affected, so they are going to be more aware that this is in fact an area. Are you finding that there is co-operation there, that there's a willingness to participate?

Mr Zisser: There's certainly evidence that institutions are taking default seriously and, as a result of receiving default information, are looking at that information in terms of the programs they're offering to try to determine what value students are receiving from those programs, what practices they have as institutions that might contribute to high default, what they could be doing as institutions to better educate students in terms of their obligations with respect to loan repayment and also whether student loans make sense in all cases. I think there's a pretty good indication that institutions have started to put in place processes to address default.

The Chair: Mr Maves.

Mr Maves: Go ahead, Julia.

Mrs Julia Munro (York North): I have a couple of questions. In the last sheet you presented, you talked about future directions. It seems to me that obviously one of the areas that is important here is making students, that is, the current students in our secondary schools, more aware of what is I think a fairly important process for them when they're making decisions with regard to post-secondary education. I wondered what ideas have been put forward to provide those students, who are now required to have an education plan from grade 7 onwards, what steps are being taken to have them aware of the kinds of detail and understanding of the processes with regard to student loans.

Mr Zisser: We've drawn attention to the requirement for institutions to provide this information to students as part of the OSAP application process, and we currently publish the student loan default rates on the OSAP Web site. We're certainly making sure that institutions provide information on graduation and placement rates through their own means to students so that the information is available. Certainly one of the issues that has arisen is how we can better focus our communications to students, parents and others. In this respect, the minister has recently put together an advisory committee on student financial assistance that will look at the question of communications and how we better target these messages to the appropriate audience.

Mrs Munro: My second question has to do again with page 23 of your slides. I wondered if you could give us a little more detail on the way in which you anticipate this loan harmonization with the federal government. It seems to me that this has been one that has created a great deal of confusion in the minds of recipients and the general public as a whole.

Mr Zisser: Ontario is one of the two provinces which at this stage have signed agreements with the government of Canada to harmonize student loans. My understanding is that this process is also well advanced with other provinces, but we were one of the first to sign, in May 1999.

The harmonization has as its goal to produce a loan product that is simpler for students to understand, simpler for students to deal with and easier for everyone to administer, including government but also the lenders. Right now there is a complete duplication because there are two separate loans, two separate terms and conditions, two separate sets of repayment arrangements and two separate sets of measures if a student runs into difficulty with repayment.

One of the issues that students face is having to educate themselves about the complexity of this product and then doing everything twice. So the goal of the harmonization is to create for the student a single loan document, a single set of terms and conditions, a single set of repayment and, in the event that a student needs assistance during repayment, that there's a single set of instruments that can benefit them.

Mrs Munro: Is there, as part of that negotiation, consideration being given in terms of the provincial situation as I understand it exists now, where the province is the guarantor of the student loans but the federal government is not for its portion?

Mr Zisser: One of the features of the agreement is that it would make available to the province the type of risk-sharing arrangement that the federal government and the other provinces have with lenders. That was certainly one of the features that is there and that we would hope will be in place for the 2000-01 loan year in Ontario.

Mrs Munro: Does this suggest, then, that the studies done by the ministry place the way in which the federal government manages its student loan risk to be advantageous for Ontario?

Mr Zisser: I think most of our analyses would indicate that the guaranteed loan arrangement that Ontario has is one of the more expensive ways of delivering a loan product. Certainly, a risk-sharing arrangement would see some efficiencies and a reduction in costs to the province, costs which really don't benefit students or taxpayers.

Mrs Munro: Can you give us some idea in terms of the way in which other provinces have dealt with that? You did say that some have gone into a relationship with the federal government such as you are now entertaining, but I just wondered what the ratio is. Is it everybody but us or somewhere in between?

Mr Zisser: Quebec does not participate in the Canada student loan program. Other than Quebec, Ontario is the only province that is not part of the risk-sharing arrangements.

Mrs Munro: I think Mr Maves has a question.

Mr Maves: How much time do I have, Chair?

The Chair: You have about five minutes.

Mr Maves: OK. Thank you, gentlemen, for your presentation. I did note that from the auditor's 1997 report and his subsequent 1999 report, he concluded that you had indeed followed through in several areas on some of his recommendations for 1997. So I commend you on those areas. I want to walk through this for a second, though. Let me just ask, at what point do you write off a loan as being defaulted?

Mr Zisser: Under the current arrangements with lenders, we act as the guarantor to the loan, so we expect the lender to make efforts to achieve repayment. But if a lender has issued a 30-, 60-, 90-day notice to the student and the student still has not responded and the loan is no longer in good standing, then the lender can return that to the province. They have to provide us with documentation of the efforts they have made, and then, based on that, we will pay the claim.

Mr Maves: OK. So we have an arrangement with the banks where they lend the money; while the student is in school, we pay the interest to the bank for the loan; six months after graduation, the student is required to start paying back the loan; 90 days after that six-month period, if the bank has sent them a couple of notices and they have not started to pay, they can then get all of the principal back-we've already been paying interest-from the government of Ontario, the taxpayers of Ontario.

Mr Zisser: That's correct.

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Mr Maves: When that happens-I mean, that's a pretty lucrative set-up for the banks, but once that happens, how do we then go after the student?

Mr Zisser: Once the province has paid the claim to the bank, the ministry transfers the loan to the collection management unit at Management Board. They in turn transfer the loans to five private collection agencies that were selected to collect on all Ontario debt, and the private collection agencies then make the efforts to collect the money.

Mr Maves: Have we been using those collection agencies long or is that something we've just done in the past few years?

Mr Zisser: The current approach to having all of the collection take place through private collection agencies started in January 1999.

Mr Maves: Previous to 1999, the government would pursue the debt. What was the recovery rate when the government was pursuing the debt?

Mr Zisser: I don't actually know what the recovery rate at that point was. The only information I have is that in the year prior to this arrangement coming into place, something in the order of $4 million was all that was collected on the outstanding accounts, but I don't have a recovery rate.

Mr Maves: That's total for a year's-

Mr Zisser: For the portfolio that was there at that time, that was the total recoveries.

Mr Maves: For that year?

Mr Zisser: For that year.

Mr Maves: OK. And for previous years on all these defaulted loans, it was a similar rate? Do you have any idea?

Mr Zisser: I don't have that information.

Mr Maves: Do any of the members of the group know? I'd like to know what our recovery rate was. Prior to January 1999, when the Ministry of Education and Management Board went after bad debts that the taxpayers had paid off for students, I would like to know what the recovery rate was. What is the recovery rate experience since January 1999?

Mr Zisser: We don't have a rate calculation at this point. We simply know the total value of the monies that are being paid to the province by the collection agencies. An analysis of a rate like this would require a substantial amount of work, in that the loans that are in collection come from all the previous years and you would have to relate something back to a cohort or some other unit to be able to determine what it was for that group. Again, the information we have is simply the cash we are getting. We don't receive information at this point of how many of the loans are in repayment with the collection agencies. In some cases, the payment we receive is as a result of the individual making a payment; in some cases they're making a lump sum payment to pay off the entire amount; in some cases they're settling the account.

Mr Maves: Are we selling these debts to the collection agencies?

Mr Zisser: I believe that under the contract Management Board has at this point, it is a two-year contract during which the collection agencies have the right to collect on the accounts.

Mr Maves: Are we getting a set amount or are we going to get a percentage of whatever they collect?

Mr Zisser: Management Board has signed contracts with each of the collection agencies, and it's my understanding that there is a percentage that the collection agency receives for collection and the balance of the money comes to the province. So it's a percentage.

Mr Maves: Do you know what the percentage is?

Mr Zisser: My understanding is that it varies by collection agency. There are five different contracts.

Mr Maves: Are they public numbers?

Mr Zisser: I don't have the numbers.

Mr Maves: So this is the first fiscal year for this, or do we have any numbers yet? Have we exceeded, in this arrangement, the $4 million that was there in the last year?

Mr Zisser: Certainly we've exceeded it. The collection process started in January 1999, so in the first three months of collections, because that was all that was left in the 1998-99 fiscal year, recoveries were $21.2 million.

Mr Maves: Wow.

Mr Zisser: This would have included some recoveries that were made under the previous arrangements. Then this year-that is, from April through to January-so far $35.7 million has been recovered.

The Chair: We'll have to leave it at that.

Mr Maves: OK. I'll pick up, when you leave, some background.

The Chair: I think Mr Peters has a comment about that.

Mr Erik Peters: If I may make a comment on that, Mr Maves, with your permission, could the information also be supplemented by the value of the accounts turned over? I believe the value of the accounts turned over by the ministry to CCS and then to the private sector collection agency-am I not right that there was a hiatus, there was a time period where you couldn't turn over accounts to CCS, so that this $4 million may be a particularly skewed number? To give you a little bit of a history of how this works, it may be worthwhile to relate the value of accounts turned over for collection with the collection year by year.

Mr Maves: Wouldn't the accounts be cumulative also? Aren't we trying to get the money from previous years?

Mr Peters: We are, but I think there was a period of time where CCS was in a hiatus, where they were not in a position to accept accounts. So various collection years were affected.

We reported to this committee, actually, when we dealt with CCS, that there was a year, and I believe it was 1998, when collections virtually dropped to 50% of their normal volume because they had real problems in getting information across. It wasn't just this ministry; it was the relationship of the Central Collection Service of the government with everybody else in the government. That's why this information may give you a clearer picture of the success.

Mr Maves: Do you know, Auditor, since you did this audit in 1997, what the previous annual numbers were for recoveries?

Mr Peters: Since 1997, did we audit this particular area?

Mr Maves: No. You audited in 1997. In the years prior to that, what were typically the annual recoveries that were being made in the old system?

Mr Peters: They are in one of my annual reports. I'm not sure up to which date we reported, offhand. I don't recollect.

The Chair: But does the ministry have the figures as to how much you collected in the years prior to 1998?

Dr Christie: We don't have them with us at the moment, but I believe, in discussion with Helmut, that what we can assemble is the annual dollar recovery versus the cumulative amount outstanding for recovery.

The Chair: Could you table that for the committee?

Dr Christie: Yes, we can.

The Chair: The other question that Mr Maves asked: Do you have the amount that was actually turned over to the collection agencies for collection?

Dr Christie: Yes. That should be part of the total out for recovery, so we'll identify what's available and we'll provide everything that's available to the committee.

Mr Patten: Good morning. I'm just going to ask some questions in the first round related to your report, and then I have some others from the auditor's report for clarification.

The performance agreements with institutions are related to the OSAP arrangements, right? This has nothing to do with the certification or the licensing of the private vocational schools.

Mr Zisser: That's correct.

Mr Patten: OK. Now, what is the interrelationship with the office that does the licensing and certification, which to me is part of the root cause of the problem of the manner in which many of these loans have been managed by some of these institutions? The reason I say this is because my riding is in Ottawa Centre and I have a fair number of downtown, private vocational institutions, and they are coming in in droves. Perhaps that's an overstatement. Many of them are continuing to operate and are establishing new offices because of the high-tech sector in the Ottawa area. Therefore, the standards of acceptance for licensing and certification are important, because many of these institutions have high fees, $18,000 or so, and part of their promotion for attracting students is, "We will help you get a loan if you are in financial need." That's promoted quite stridently in a number of instances. I could provide some examples of that; you probably have this. In your attempt to be more stringent in putting pressure on them for their obligations related to student loans, is there not a relationship also in terms of the continued growth of this particular sector?

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Mr Zisser: The licensing of a private vocational school takes place pursuant to the Private Vocational Schools Act. That act is a piece of consumer protection legislation which is intended to ensure that there are some minimum assurances to the consumer for a school which is in the for-profit business of providing vocational education, that is, education that leads to employment in an occupation. Those assurances are essentially around the facility: that there has been a fire inspection, for example; that there is a curriculum; that there are instructors who meet certain minimum standards; and that the school has posted a bond in the event that a student is not satisfied with their program and wishes a refund. The act specifically sets out conditions under which a student can have a refund and the rate of refund they are to receive. Essentially it's consumer protection to get a refund if you're not happy with the product.

The student assistance program, then, sets further conditions in terms of what constitutes post-secondary education. Generally the definitions we use are definitions that are used in other provinces: that the program must be a minimum of 12 weeks in length; it must lead to a certificate, diploma or degree; it must serve individuals who have completed grade 12 or have mature student status; and the institution must be licensed or recognized in some manner. Those are the entry requirements.

The performance requirements set a further set of conditions on the school with respect to the due diligence that the ministry expects if an institution is going to participate in the student loan program. Those requirements are essentially around making sure that students have been given proper information about the loan program, that the application is carefully screened by the institution, that the supporting documentation is carefully reviewed and that the institution then adheres to requirements with respect to students' attendance at the institution and students making academic progress in order to maintain their benefit. The agreement we sign with institutions is around good management in terms of the administration of the student loan program.

Mr Patten: Is there any federal legal tie-in here, or is it all provincial?

Mr Zisser: The regulation of the schools is a provincial matter. There are entry requirements for schools to become approved for OSAP as well. We require a school to have been in operation for a minimum of one year before we will extend Canada student loan eligibility to the school. The school must then administer that appropriately for a minimum of two years and there must be an audit completed that verifies the administration was properly carried out. At that point they can be considered for Ontario student loan designation.

Mr Patten: On the issue of income verification, you talked about a double-check a year with the CCRA for incomes reported by students, parents, spouses and whoever else in between.

The confidentiality or accessibility to the files, does this remain always with the students? My point is, for parents who are perhaps making contributions or are part of the-the file of parents is available for the program, but do the parents have access to the student's file in terms of whether their payments are being made or anything of this nature?

Mr Zisser: No. The ministry is governed by the freedom of information and protection of privacy legislation, and we seek from the student a proper release with respect to accessing their taxpayer information. We seek similar releases from parents and spouses. There is no practice of sharing that.

Mr Patten: No, I meant that the other way around. I'm sorry. I meant, can a parent find out whether their offspring, the student, is fulfilling the obligations of repayment of a loan?

Mr Zisser: Not from us.

Mr Patten: From anybody?

Mr Zisser: Since the loan is with a bank, it would be whatever banking policies are. I would imagine in most cases that banks would not be revealing information from their clients to anyone else.

Mr Patten: OK. That's a little unfair, it seems to me. But anyway, I won't comment on it now. I'll speak to my son.

The Chair: Would you like to declare a conflict of interest there?

Mr Patten: No, no. I'll speak to the bank.

In your section under "Increased Accountability for Students," requiring submissions or receipts for child care, in this whole area of child care, the support for students for child care purposes, have there been any changes in the application of support? I continue to hear especially from women who are saying they want to go back to school and what is calculated as income-the loans, for example, are calculated as income, which immediately makes them inaccessible for child care support. Is that true or is this old information? Are we still having difficulties with this?

Mr Zisser: Assistance for students with children can be provided in a number of ways. First of all, the loan program itself will recognize the number of children a student has in terms of providing additional assistance, depending on number of children. The assistance for the first two children comes through the loan program itself. In addition to that, the ministry has a bursary program to provide assistance with child care, and that is for the third, fourth and fifth child. There is also a Canada study grant for students with dependants that essentially works by replacing a loan with non-repayable bursary assistance for students with children. All of those mechanisms are there to assist students with their child care costs.

Mr Patten: If we can construct a little case, let's say here's a single mom with two children. She wants to go back to university and is on welfare. Tell me what happens in that case. She's saying: "If I can get support for child care, that's the major problem and stumbling block for me. But I'd need a little bit of OSAP money."

My understanding is the OSAP money is considered in the application as income rather than a loan, and that's added to the welfare amount and therefore there is a question of eligibility for child care support.

Ms Zisser: So you're not talking about how OSAP provides support to students, but how OSAP relates to child care programs at the municipalities.

Mr Patten: Yes. What's your experience? I don't fully understand where the problem is, but people are saying there is a problem there. It's not quite as clean as what it seems. Are you saying that if somebody is on welfare and they need child care, they should not talk to the municipality at all about child care; they should be incorporating that need assessment as part of their discussions around the OSAP grant?

Mr Zisser: OSAP certainly builds it into its need assessment. For example, for students with one or two dependent children, we would be providing them, through the loan program, $40 per week per child, or $83 per week per child for sole-support parents. That is simply built into the assessment-

Mr Patten: That's a grant, though; it's not a loan.

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Mr Zisser: For the first two children it's part of the loan. Since many of these individuals will end up with loan funding in excess of the $7,000 for two terms, in effect it turns into a grant when they complete their studies. Those individuals who have more children will now be eligible to receive the child care bursary for the additional children.

Mr Patten: All right. This is perhaps part of the same thing, the "Increased Contributions from Students with Assets" section that you referred to, and you said assets include vehicles, bank accounts, investments, RRSPs, level of eligibility. The level of eligibility, first of all, for an OSAP grant in terms of income was $900? If someone makes more than X amount a year, part-time or whatever, obviously part-time in most cases-where do they not qualify? What's the level of income?

Mr Zisser: OSAP always looks at a student's need and it calculates the need first by looking at the student's education costs. It would look at their tuition fee, their ancillary fees, book costs and so on. It will also then calculate a value for living costs, things like child care and so on. So it creates a figure for costs.

On the other hand, it looks at the student's resources. When it looks at resources, it looks at the 16 weeks leading up to the study period and asks, "How much is the student making there?" and it expects some contribution from those earnings. It would look at any resources that a student might have during their study period: For example, are they receiving scholarships, grants, bursaries? Do they have part-time employment? Then it makes a calculation based on those two factors to determine whether the costs exceed the need, and to the extent that the costs exceed the need, the program is in a position to recognize that up to certain pre-established levels.

In the case of the study period contributions, the program currently exempts the first $600 of resource, and then for every dollar beyond that will consider 80 cents of that as a resource to the student's education.

Mr Patten: How did you arrive at $600?

Mr Zisser: That is the Canada student loan national policy.

Mr Patten: So that's the reason. What's the rationale for it? It's a pretty feeble number. It's a ridiculous number, really.

Mr Zisser: My understanding is that there were extensive consultations taken by the federal government back in 1993-94, where they looked at various models of doing this, and this was the policy option they adopted based on that.

Mr Patten: OK.

The Chair: Ms Martel now. We'll be going five minutes over because of the earlier intervention, so you've got your full 18 minutes.

Ms Shelley Martel (Nickel Belt): Thank you for coming today. Before I ask you some questions, though, I wanted to make a comment about the collection efforts because I saw Mr Maves's eyes light up when he heard how much those private collection agencies were taking in. I think it's incumbent upon me to go back to what the auditor said in 1997 about collection agencies, because we dealt with it at the time, and it would be relevant if the researchers could get some additional information.

In his 1997 annual report the auditor said, "There has been a serious lack of student loan collection activity during the last year, primarily because Central Collection Service"-which is government-"experienced a 50% reduction in staffing and had not accepted new loans for collection since May 1996." The status of the accounts at the end of October 1996 as reported by the auditor was that there were 45,000 claims, $99 million worth in default. So the issue really is, what went on in government in terms of collection, if anything, from May 1996 until these files were turned over to private collection agencies in January 1999? The fact is that there were no loans being collected from any source, not just OSAP but AG as well and other ministries, where there was no work going on at all.

If we're going to make a valid comparison about the efforts of the private collection agencies versus perhaps the efforts of government staff, we would probably have to go past 1996 and into 1995 and 1994 to get some idea of what was actually going on in that branch, because it was clear there was nothing for what may have been a two-year period.

On the collection agencies, though, to the ministry-and perhaps you can't provide this information because the contracts are not directly with you but with Management Board-I would really like to know why we'd have different percentages of collection with the different collection agencies. I can't even understand why the government would set a different rate, in terms of percentages, with each collection agency. Do you have any idea of how that was arrived at?

Mr Zisser: Through a competitive bidding process.

Ms Martel: I understand that they might have been chosen through a competitive bidding process. I'm wondering why the government would actually set different rates of repayment to private collection agencies. Why would they not have a set percentage? If you collect a set percentage, a set percentage comes back to the government and a set percentage goes to all five collection agencies. Why the variation between collection agencies?

Dr Christie: I think probably the best way to address your question is for us to talk to Management Board and determine what, of those processes-some of them may have been commercially private-we can bring forward in answer to that question. This was a process undertaken by Management Board.

Ms Martel: When you're talking to them, if you could, just to be clear on what I'd like to see-I think the auditor already mentioned it-the total value of the defaulted loans that went to the collection agencies. I'd be interested in knowing why there are variations in percentages, but also the percentage that the government has received then from the five contracts, and the percentage that the private collection agencies have received as a result of the five contracts as well, so that we have those figures.

Let me begin by asking some questions with respect to your presentation. On page 22 you talked about the ability of individuals to apply for OSAP through the Web site. If I might, Mr Zisser, you mentioned a couple of times that if they do it that way it's free, which leads me to the question of, what is the fee for a student who wants to use a paper application to apply for OSAP?

Mr Zisser: It's $10.

Ms Martel: If you call OSAP as a student and request some information-perhaps what's happening with your loan, whether it is going to be processed-is there a fee for that as well?

Mr Zisser: There is no fee if you call the regular telephone number; there is a fee if you call the 1-900 service. However, students who are attending Ontario institutions who want information about their loan are encouraged to deal with the financial aid office at their institution. Those financial aid offices all have direct access to the students' information. All of the public institutions have on-line access to our computer system and are in a position not only to provide information to students but to actually serve students by processing whatever transaction is required.

Given the large number of students that we're trying to serve and also the very real issue in terms of all students wanting service on the same day in the year, we need a system that distributes that work across to the financial aid offices. They are also in the best position to actually know the student's full set of circumstances and provide a complete service.

Ms Martel: What's the cost for the 1-900 line?

Mr Zisser: It's $2.

Ms Martel: I didn't really understand the difference between the 1-900 line and a regular call, so maybe you'd better explain that to me. Who would use the 1-900 line?

Mr Zisser: The 1-900 line is a way for a student to gain access to their account information. It's a voice interactive system that allows students to input their security code and, with that, to then obtain access to the status of their loans. So from a telephone they can find out: "Did you receive my application form? Did you assess it? What is the amount of loan? Are there errors on it? What are they? What do I need to do next? Do I have loan forgiveness owing to me?" and so on.

That same service is available through the Web, presented in a graphic form. Students would again have to enter their personal identification number to access the information.

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Ms Martel: I still don't understand why there's a fee for one telephone call and not a fee for another. You can get virtually the same information. In one case you'd have to wait to talk to someone, a live body, but you essentially are asking for the same information, essentially the same student. Why is there a fee for one call and not for another?

Mr Zisser: The students we generally serve through Thunder Bay would be students who are studying out of country, where we're acting as their financial aid office, or individuals who have inquiries that are not specifically related to the current year's application. What we are trying to do is to encourage students to make use of the financial aid office at their institution for those purposes or to serve themselves by going to the Web or going to the 1-900 service.

Ms Martel: If the student is appealing their OSAP loan, who are they generally calling? Their financial aid office or OSAP in Thunder Bay?

Mr Zisser: A student who is asking for a review-that's how we refer to an appeal at the first stage-is dealing with their financial aid office. Financial aid offices have been delegated the authority to handle those issues. If a student then is still not satisfied with the outcome of that, they can move that forward to the OSAP Appeal Board. In that case, they would then be dealing with our secretary who handles those issues for the board here in Toronto.

Ms Martel: Can I ask how many students would have to use that mechanism, would have no choice but to call you in Thunder Bay with respect to that?

Mr Zisser: With respect to?

Ms Martel: The OSAP Appeal Board.

Mr Zisser: Total appeals in 1999-2000 were 82, I believe.

Ms Martel: So it's only those people who would be at the board who would have no choice but to call you in that circumstance, those 82?

Mr Zisser: That's correct.

Ms Martel: Let me ask, when did you implement the policy of fees?

Mr Zisser: I believe the $2 fee was implemented around 1998-99.

Ms Martel: And the $10 fee?

Mr Zisser: Sorry, the toll charge line was introduced in November 1996 and the $10 fee was introduced in 1998-99.

Ms Martel: Can you tell me, how much has been collected in fees thus far between the toll charge and the $10 charge for a paper application for OSAP?

Mr Zisser: In 1996-97 the net revenues for the $2 toll line were $46,535; in 1997-98 they were $332,845; and in 1998-99 they were $311,512.

Ms Martel: So somewhere in the order of over $700,000. My math is not great. But just quickly, $680,000 maybe. Can I ask where those fees go.

Mr Zisser: They are directed to the consolidated revenue fund.

Ms Martel: So none of these fees go back into post-secondary education at all. A full 100% of the fees collected go directly to the consolidated revenue fund.

Mr Zisser: That's correct.

Ms Martel: OK. Let me go back into your presentation as well. On page 9 you talked about reducing student loan defaults. You had the loan default rates and you gave us a number of figures through 1996, 1997, 1998 and 1999. For 1996, just to use it as an example, you said the default rate was 18.6%. I'm not clear what that 18.6% represents. Is it the total number of students who applied for and are in receipt of OSAP in Ontario at a particular time? How do you arrive at that percentage?

Mr Zisser: We use a cohort method to do that. So for 1996, we used the 1993-94 cohort of students who would have completed their studies, and then two years after that point we measured to see, have they repaid their loans or not? So the base number is the number of students whose final year of study was 1993-94, and then the defaulters are, of those students, the ones who have two years later not-where we have paid the claim on the loan.

Ms Martel: So it's been paid out already. Do you have the actual numbers to match against the percentages?

Mr Zisser: Yes. I don't have the 1997 rates. We do have those numbers; they were published. I just did not bring that half-inch of paper with me.

Ms Martel: There are two things I'd be interested in: one, the number of students that is represented by 18.6% and, second, the monetary value that the 18.6% represents, what is the monetary value in terms of defaulted loans.

I ask this because in his 1997 report the Provincial Auditor looked at the trend in student loan defaults as part of his review, and he provided a graph in that report that went up to 1996-97, but clearly stopped there because he reported in that year.

The increase was quite dramatic in the default: In 1994-95, the total cost of defaulted loans was in the order of $21 million; in 1995-96, it was $35.3 million; and then in 1996-97 it jumped to $62.6 million, a dramatic increase, almost double, in one year. I would be interested in knowing then what the total value is. While the minister has said recently that we're reducing our loans, she didn't give the figures. So I'd like to know how dramatic the reduction is and if we're only slowly climbing down from what was a very high period of defaults noted in 1996-97.

Mr Zisser: The only year I don't have is 1996-97, but we can certainly put together that series of numbers. It would have been included in the ministry's estimates.

Ms Martel: That would be helpful, if you could go back. You see, we have the information already up to and including 1996-97. The information we have includes the average value of the claims, the number of claims, and then the total cost of the defaulted loans. So if that's a pattern that you can work with, that was already presented by the auditor in his 1997 report. If we could have the same comparisons for the balance of the years, that would be very helpful.

On page 10, you were talking about reducing student loan defaults and you listed a number of strategies that you're using. I was interested in the second one in particular, that institutions are to share the cost of high-default programs, and you mentioned established thresholds with respect to that item. I didn't catch all of the information, so can you explain to me a little more fully: Is it a different threshold per institution? What percentage is it of potential defaulted loans? How do you arrive at the calculation? And is it different institution by institution?

Mr Zisser: The thresholds that were established are the same for all institutions, and in the first year of the policy, the threshold was set at 38.5%. So institutions that would have been affected by the default sharing policy would have had to have a default rate of at least 38.5%. Any institution that had a default rate below that was not affected by the policy. At those institutions that had a default rate in excess of 38.5%, the ministry would have made a calculation as to the amount of loan that would be affected and the institution had the option of either posting some form of security for that amount or discontinuing one of those high-default programs that may have been putting the institution above that threshold.

Ms Martel: I'm sorry, did you give us, when you were speaking on this page, the number of institutions that found themselves in that position?

Mr Zisser: No, I didn't, but I know we have that information somewhere.

The Chair: That will be the last issue. We've gone through the time period.

Ms Martel: Can we just wait for the response?

The Chair: Sure, we'll wait for the response.

Ms Martel: You can bring it back to us later, if you'd like.

Mr Zisser: I know we do have a count of how many institutions were affected by that.

The Chair: OK. The one question that I have arising out of that is, have you actually collected on any of the securities that have been posted, or is this a matter that has been left in abeyance to see what's going to happen over the next number of years as far as the default rate with those institutions is concerned?

Mr Zisser: The policy was not retroactive, so what the postings relate to is the class of students that would be starting in that year. The calculation would then be done for that class of students when they had finished their studies two years after. So the first time that we will be looking at that issue will be next year. The purpose of the security, of course, in the case of private schools, is to make sure that there is some security there.

The Chair: Right. Thank you very much. We will recess, then, until 1:30.

The committee recessed from 1203 to 1335.

The Chair: I would like to reconvene the hearing on the Ontario student assistance program. We're back to the government side for 20 minutes of questioning.

Mr Maves: I'm just going to try to pick up where I left off, actually. I had asked questions about the recovery rate, if we could have some numbers of what previous recovery rates had been by the ministry and what they are now that the collection agencies have taken over. I just wondered if you had any opportunity to get those numbers over the last hour and a half.

Mr Zisser: I think we have determined that we don't have recovery rates per se at this point, simply because we haven't been able to do such calculations and such calculations have not been provided to us either from the collection agencies or Management Board at this time.

Mr Maves: I had it pointed out to me in the auditor's 1997 report-I think it was in the 1997 report-that where he did an audit of the CCS, the collection service, he was unable to even come up with any numbers of what was being recovered on an annual basis in previous years. I don't know how many of you were there at that time, but that's quite disconcerting to me as a member of the government, that the ministry couldn't even provide numbers on what they had recovered once the CCS had taken over the debt. I wonder if you have any comment on that.

Dr Christie: None other than that some of the reforms undertaken at Management Board to deal with collections and the collections process were undertaken for that reason, to improve the process, and we have a more centralized and better managed collections process. In terms of the particular numbers you're asking about, we are following up with Management Board to secure the numbers.

Mr Maves: I appreciate that.

Continuing along, quite often I hear the banks, when we talk about OSAP and Canada student loans-and I'll review it again. Banks lend the money to the students. We pay them the interest on it when the students are in school. We then pay the interest six months before the students have to pay it back. After 90 days, if it's defaulted on, we pay the bank. The banks often complain about being involved in this system. What is the downside to the banks in the system? Is there one?

Dr Christie: I think the downside to the banks overall has not been their involvement in the Ontario side of the student loan process.

Helmut pointed out earlier that Ontario is one of only two provinces that were not under the same loan system as the federal government over the last several years. The arrangement the federal government had with the banks was basically a 5% default arrangement whereby they paid the bank 5% based upon an estimated default rate, and then the bank was responsible for collecting. As it turns out, defaults were considerably higher than 5% across the country. That hit the banks rather than the federal government. A number of banks through that period were very unhappy with the amount of money that it was costing them, and in fact indicated that they would not continue the student loan arrangement under those conditions, which is in part why the federal government has been renegotiating the structure of the arrangement.

Mr Maves: If the system that we have right now with the banks is so, to me, safe and lucrative for banks-not only that, but they pick up clients because a student may take a bank account with Scotiabank and be there for four years, and even after they default and nothing happens to them, they probably will still end up banking at Nova Scotia. So I know that part of the rationale for banks being involved in this is that they get a client base. Considering how lucrative the system is right now for the banks, I'm just wondering if the ministry has considered negotiating ourselves a different deal, perhaps even by tendering it to the banks and saying: "Look, if you want this business, let's tender it and you come up with a process whereby we're not getting dinged for so much of it, but you're still going to get a benefit." Have we ever considered doing something like that?

Dr Christie: That's the kind of activity the ministry has been undertaking in the last couple of years. I will stand to be corrected by the people who are more directly involved, but there was a tender to the banks for a redesigned loan program a year or two or 18 months ago, I believe, on which we did not receive attractive responses. At that point we began discussing with the federal government their negotiations with the banks for a revised loan arrangement. One of the things that people told us would result in a better deal for taxpayers in Ontario was a harmonized arrangement with the federal government that simplified things for students and lowered administrative costs for the banks, and hopefully we would be able to capture some of that benefit in a better loan arrangement.

That is what has been done over the last year or so, and as Helmut noted, last May there was in effect an agreement in principle signed for a harmonized federal-provincial loan arrangement that would have somewhat more attractive features.

Mr Maves: I take, then, based on the federal set-up that we've done the calculations and said, "If it cost us 6.95%, but we no longer had to swallow the defaults that we do, we'd be better off." Have we done those?

Dr Christie: We have done those calculations. Again, depending on the default rate and how it's structured, we could certainly be better off. As Helmut noted, the default rate at the moment is around 18%. Default rates below 18% will certainly be to our benefit.

Mr Maves: I guess what hangs over it is what the ultimate performance is of the contracting out of the debt recovery. If that vastly improves the picture for us, then giving the banks 6.95% or whatever it is up front may be less attractive to us.

Dr Christie: I'm not an expert on the collections process, by any stretch of the imagination, but what people have told me is that once a loan goes into collection, your chances of material recovery on the loan are not great; that the best way to recoup value is to keep the loan in service and in payment. You're likely to have a better outcome that way.

Mr Maves: How long after a collection agency gets a debt from us now will that debt remain on the books? Can they go after it forever? Is there a certain point in time where a person can resurface and no one will go after them for that debt? Any idea how that works? I heard you in your presentation say something about 10 years and that was the bankruptcy law.

Dr Christie: Ten years in the bankruptcy law is how long-and I'm always open to correction from my colleagues here, but my understanding is that at the moment a person cannot avoid their student loan debt by declaring bankruptcy. That student loan debt will stay with a person for 10 years, whether or not they declare themselves bankrupt and are freed of other liabilities. That's what I believe the 10-year period refers to.

On the collection side, as we noted this morning, I don't know the details of the agreements with the collection agencies, so I don't know the answer to how long they would pursue a loan. It would be my expectation that, given the costs of pursuing a loan, there will come a point where it will not be worth their while to continue spending money pursuing a loan on which they're not realizing anything.

Mr Maves: As a layperson I almost can't understand, when someone owes a debt to the taxpayers of Ontario, why it wouldn't be rather simple for us to collect that debt, assuming the levers that we should have available to us: garnisheeing wages, garnisheeing tax returns, limitations on reissuing of their licence and so on and so forth. I think most Ontarians would be astonished that a government has so much difficulty recovering debts owed to taxpayers.

Dr Christie: Over the last several years, the ministry and government have extended the range of instruments that they employ for exactly the reasons you cite. Because of the difficulty that one has, we have put into place, for example, the arrangement with the federal government on income tax set-offs. Where someone is getting money back on their tax return, we'll have a prior call on that against the student loan. But even there, there are conditions on that. If the person's income is very low, Revenue Canada has, in effect, a hardship test and they won't off-set the tax return against someone whose income is very low. Now, in many cases it's likely to be a person with low income who's unable to pay off a student debt. None of these vehicles is a guaranteed route to it. It's often difficult if a student moves out of province etc. Through ways other than national level means, like the income tax system, it is very difficult often to even track someone down if they have moved to another province and don't need an Ontario driver's licence any more.

Mr Maves: I notice the Queen's University table; 21% of their mathematicians default on their loans. I guess the math makes sense for them to default. The other one, you'd think there was a moral obligation to pay, but those in theology have a 16% province-wide default rate.

Mr Patten: In God's hands.

Mr Maves: Lawyers have 8%. I guess they know the law well.

The ICL, income-contingent loans, have you continued to pursue that or have we decided it's so impossible to get an agreement with the feds that we're not going to spend any more energy on that?

Dr Christie: We certainly pursued the feds vigorously on classic income-contingent loan programs, and there were strong features of that in what was tendered to the banks some time ago. We've preserved a number of features of that in the harmonized agreement with the federal government, which contains features whereby indebtedness and payment history is reviewed several years-is it five years, Helmut, or three years in?

Mr Zisser: Five years.

Dr Christie: They are reviewed five years into the repayment period, and depending on the person's income, there may be additional forgiveness at that point in the repayment period, the theory being that if people are not generating the income to pay the loan, it's foolish to force them into bankruptcy when they aren't going to be able to pay it anyway. So there is that form of income-contingent loan relief built into the harmonized agreement with the federal government.

Mr Maves: Have you looked at any processes used by the other provinces? Are any of them more successful, so that we should be adopting some of what they're doing? Are any of them contracting out that repayment?

Dr Christie: I'll ask someone else to address the loan repayment piece. Most other provinces, on the student loan side, had functioned under this 5% deal that the feds had with the banks. Therefore, the defaults were the banks' problem and not the province's problem. The banks made it very clear that that will no longer be the case. They won't engage in a student loan program under those conditions. So it would be my expectation, at least with respect to student loans, that because we've had to deal with them longer, we would likely have a more thorough process than other provinces did which are just beginning to have to think about having to deal with them. But I'll ask any of my other colleagues, who might have a better feel for what other provinces do, to comment.

Mr Zisser: The other provinces that are under the risk premium are, as the deputy mentioned, not in this business, because the debt is essentially being handled by the bank.

Mr Maves: The last thing I wanted to ask-I know Mrs Munro has a question and Mrs Molinari has one-the Credit Valley seemingly scam. Can you explain what went on there, and what are we doing about it?

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Dr Christie: The Credit Valley case-I'll ask Helmut to comment as to where that is with the courts at the moment, because I'm just a little leery depending on where it is in the courts.

Mr Zisser: As we understand, it is before the courts right now, so we shouldn't be talking about the particulars of the case. We could certainly talk about the steps the ministry is taking to make sure it properly administers OSAP and also the steps we're taking to make sure we've learned from this experience in reviewing our processes.

Dr Christie: Helmut might also want to comment on the general practices of the ministry in instances, not necessarily this particular one, where questions are raised with respect to occurrences at an institution, including the administrative practices followed.

Mr Zisser: The program relies on post-secondary institutions for delivery of OSAP, so the accountability framework we have really relies on, first of all, a clear set of requirements, which we have in place through the performance requirements. Those requirements also set out consequences in the event that there's a failure to comply, and we do monitor that through the audit process so that there is an annual basis for us to be able to determine: Is an institution complying with this?

In addition to that, one of the things the ministry does is that we do monitor, and we do that quite frequently now, any trend changes in terms of school performance. We look at factors related to patterns in enrolment, patterns in withdrawal, changes to tuition and so on.

Mr Maves: I appreciate all that. I'm going to finish. Then, Chair, maybe if we've got about three or four more extra minutes, my colleagues could ask their questions and then we would probably be done for the day.

We're pursuing Credit Valley in the courts and-you nod your head; thank you. OK, I'll leave it with you, Ms Munro.

Mrs Munro: I want to come back to the issue of harmonization, just for my own clarification, to be able to understand where the federal government has now indicated that they wish to move from the 5% to I believe 6.95%.

We were talking about the default rate currently standing at 18%. Is that correct? The ministry's objective is to reduce that to 10%. That's my understanding. I just wondered, following along in the conversation you had with Mr Maves, whether as part of that negotiation there would be an opportunity to revisit any agreement in light of changes in the default rate. Do you see that as a factor that would influence the position being held by the bank and, obviously, the point of view of the province in any ongoing agreement, not only the harmonization but, as a kind of subset to that, the relationship with the bank?

Dr Christie: Perhaps I could just make a general comment and then ask Helmut to deal with it further. It's important to understand, at least as I understand the harmonized deal, that the bank does not take all the risk above 7%. There's a 7% threshold, if you like, for the system. If the system as a whole runs defaults at 20%, then system-wide the difference is still to the cost of the sponsoring governments. But where the banks are at risk in this system is that if the system-wide default rate is 7% and bank A manages to secure 5% as defaults on their loans, they get to keep the improvement they've made, but if instead it's 9% for that bank they have to pay the amount above the system average. But if the system as a whole produces differently than the 7%, then overall that cost is charged to governments. Banks are not bearing that risk.

Mr Zisser: Banks are looking to governments to take measures to improve the performance of the program. They're not happy with some of the situations that have developed in the past regarding student loan default. So the federal government, in the period leading up to their renegotiation of their agreement-because they had a five-year agreement and it expires this July 31-paved the way for some of that in terms of starting to take steps to make sure there were adequate instruments in place to assist students who were in repayment difficulties. They had introduced an enhanced interest relief program. They had introduced a debt remission program. They have certainly encouraged provinces and worked with provinces to look at other steps we could take along this route as well, because the first preference is that we continue to have arrangements with banks.

Mrs Munro: I guess what I really wanted to know was whether any change in the provincial default rate would have any impact on the potential relationship with the bank and the way in which the bank would view its responsibilities in this agreement.

Dr Christie: To the extent that the province's actions result in improved default performance, that will be favourable for the banks; they won't make any money on it as long as it benefits each of them equally. Those who will benefit from a lower default rate will remain the taxpayers. If the default rate drops low enough, that will also benefit taxpayers; banks won't get the benefit of that. But there is an overall benefit to banks in being involved with fewer defaulted loans.

The Chair: Just so I have a clear understanding, when you're talking about default rate are you talking about the dollars in default or are you talking about the number of payers in default? Is it a dollar value that you're talking about or the number of loans?

Dr Christie: I believe it's the number of loans, Helmut?

Mr Zisser: If we're talking about the risk premium, the calculation made there is based not on the defaulted loans but actually the number of loans going into consolidation. So at the time loans go into repayment, this insurance payment is in effect made. The calculated rate that the media has reported on is one that the federal government has developed in its work with the banks as one that reflects the current trends in default. It already factors in the fact that we're making some improvement, that there are these measures in place to assist students in loan repayment and so on; otherwise, the rate would have to be higher.

Mrs Molinari: My question is on the harmonization again. I want to try and put this in very simplistic terms, because it's confusing when we're talking about percentages and we're not clear on what exactly that means. First of all, with the agreement we now have, harmonization, are we bound to the same agreement that the federal government has with respect to the percentage we pay?

Mr Zisser: What the agreement does is give us access to that rate the federal government is negotiating. The federal government is in a better position to get a good deal than we are in a situation like this, so one of the benefits we can get as provinces is access to this type of arrangement.

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Mrs Molinari: OK. When we say that our default rate is 18%, are we saying 18% of the total dollars that are loaned, or are we saying 18% of the defaults?

Mr Zisser: The calculation of defaults, as we report them, is the incidence of students defaulting, not the dollar value of the default.

Mrs Molinari: The 18% is not in dollar terms, but the 6.95% that is paid to the bank is in dollar terms. It is 6.95% of what?

Mr Zisser: Of the loans going into consolidation, that is, the loans where students are due to make repayment. It's the face value of those loans at the time they are due for repayment.

Mrs Molinari: It's approximately 7% of all the loans, not the defaults.

Mr Zisser: That's correct.

Mrs Molinari: Moving to a different topic, the auditor mentioned that the loan forgiveness has been phased out and we have other things that we've put in place for that. I need some assurance that what has replaced that is of benefit to the students and allows more accessibility for a greater number of students and that is the reason that was replaced. Could you please comment on that and reassure me that's in fact the case.

Mr Zisser: The loan forgiveness program conferred a benefit on students that many students were quite unaware of. The way the program operated was that at the time a student completed their studies and the loans went into repayment, the ministry would make a calculation to determine how many terms the student was in school and then, based on that, calculate the amount of debt that the government would repay. Since 1997-98, the loan forgiveness level has been set at $7,000. So if an individual had a debt of $10,000, the student would be required to repay $7,000 and the ministry would remit $3,000 to the student's lending institution to reduce the debt.

Given that it was paid at the time students finished their studies, many students would have formed an opinion or impression that they were carrying very large debt, because they might be getting statements from their banks indicating their cumulative loan debt and there's no reference on that to loan forgiveness. It wasn't uncommon for students, first of all, to have an erroneous sense of the amount of debt that was there, and also the government was paying the interest on these amounts. So the decision was taken to change this program so that the debt reduction would happen annually. This has, again, two significant benefits; one is that for the student it gives them a realistic sense of their indebtedness. They now know that their debt for two terms of study is only $7,000 for that year of study and not some larger amount, even though we may have lent that student vastly larger amounts of money. We actually save money in terms of the interest we're not paying. I think it's an improvement both for students and in terms of the value that taxpayers get for the program.

Mrs Molinari: As far as dollar amounts going directly to the students, what is the difference?

Mr Zisser: The amounts would remain the same, that is, the threshold of forgiveness has stayed at $7,000. So in the same case of the student who had a $10,000 loan, they would see $3,000 of that paid at the time they finish that year's program of studies. It is a completion grant, so it does require the student to finish their studies for that year, and we do carry out the income verification before making the payment. We had also started to do that for the last year of the loan forgiveness program.

Mrs Molinari: Just so that I understand correctly, then, the program that's presently in place is not giving any of the students less money in dollars as the loan forgiveness program?

Mr Zisser: It's paying it more promptly and giving the student a much better understanding of what their debt is. We've instituted a few additional steps to make sure that students understand this is occurring. We send a notice to the students in advance of making the payment to advise them that this is going to happen and also to give them an opportunity to make sure the amounts of loan we have recorded are correct or to take steps with their lender to make changes that are required. We also confirm to the student when we have made the payment, so that they understand their debt has been reduced for that year.

Mrs Molinari: So in dollar amounts, the student is receiving the same thing as with the other program, but with this program the province is in fact saving money because of the interest that's not paid on the ongoing rate because it's paid on an annual basis. So we're saving money in not paying that interest. Is that correct?

Mr Zisser: That's correct.

Mr Patten: I'm going to look at it a little bit from the student's point of view. There's no question the percentage of enrolment has gone up, even in the university-college sector, let alone the private vocational schools, which I think probably would have the most dramatic increase. What's the relationship between the student body growth and the percentage of students who are now borrowing?

Mr Zisser: As I think I mentioned earlier, about 40% of Ontario students are receiving some form of assistance from the Ontario student assistance program. If you break that down by colleges versus universities, in the case of universities for 1998-99, which is the last year for which we have this information, 37% of full-time post-secondary enrolment students were receiving assistance from OSAP, compared to 50% for college students in that period. In the 1997-98 year, those numbers were quite similar, 39% for university students and 53% for college students.

Mr Patten: You just have a two-year period. What's the trend? Does this suggest that less of the student body is now using the program or the government programs?

Mr Zisser: There have not been any very significant shifts. This is a data series that will move a little bit from year to year, but it has remained relatively constant.

Mr Patten: During lunch I made a few phone calls to some of the student federation offices. Of course, you've heard their overall concern, which is that no matter how you cut it, more and more people are walking out of-if they graduate, and even if they don't graduate, they still have a mortgage. They're leaving their university or college or course of education with no house but a mortgage that they have to begin life with, and some of it is considerable. I know there's a top-up. You're still talking a maximum of $28,000, but that's considerably more for a lot of students and that is their major concern.

From time to time you must be meeting with them and certainly the minister or the PAs must be meeting with the federations of college and university students. What's their impact in terms of changes to your program? You talked about new programs that you were examining at the moment. What will that mean in light of the information that students themselves are telling you?

Dr Christie: In terms of the new programs we've talked about, particularly the Aiming for the Top scholarship, it hasn't been introduced yet. We haven't seen the demographic figures of the people who will qualify.

Mr Patten: I'm sorry, what was it called?

Dr Christie: Aiming for the Top. Not having seen the demographic, we don't really have the information to know how to assess what sort of impact it's going to have. It's clearly going to be beneficial, as will the harmonized loan program, certainly in terms of transparency. Of course, in a more cost-effective program there is the capacity to make loans available to a greater number of students. As we look at the enrolment growth coming over the next several years that is something that we're very conscious of as well.

In terms of the advice received from students, as was mentioned earlier, there has been an advisory committee on student assistance. That advisory committee has been reformed and will meet again and continue to provide advice to the ministry on matters around student assistance. Would anyone else like to comment?

Mr Zisser: I would just make the point that students have certainly expressed the desire to see assistance, not only in the form of loans but in the form of grants or bursaries. We certainly have seen a very significant growth in Ontario over the last three years in terms of the resources that are available to provide students with non-loan assistance.

Through the Ontario student opportunity trust fund program there are now $600-million worth of endowment funds that are generating income that institutions can use to assist students in financial need through bursaries. The 30% set aside from tuition fees also has provided very substantial resources to institutions to assist students. I think what we have is a better balance between the kind of assistance that OSAP provides in the form of a loan, according to its criteria, and the kind of discretion that institutions now have to assist students in need in a more flexible way through their own resources.

Mr Patten: Aiming for the Top, or whatever it was called, presumably is a program that will either reward or provide incentives for those who can maximize their achievements, whatever that is. I haven't seen the program but my only comment is that the higher achievers tend to have access to scholarships and other forms of remuneration based on merit, in any case.

I want to come to the other side of the program, and that's sole-support students. I'm coming back to the child care support. I think I've just about got a handle on what it means. Here's what I think it means. Let's say it's a mom with two kids, the example I used this morning, and she has the ability to go to university or college and would like to go. She's also got a child care subsidy. When she approaches the college or university they sit down and try to assess her situation. If I'm wrong please tell me, but I gather they take into account that her child care subsidy is a source of income as well, correct?

Mr Zisser: I don't believe we include child care subsidies, but I would have to double check.

Mr Patten: OK. I was led to believe it was. On the other side of the coin, I am told that's a barrier for people in that kind of a circumstance. What they would have to do is convert from what is a subsidy now and welfare income for a living, then take on all of the costs related to tuition, to books, to travel, to whatever it is, and convert a subsidy that was received before to now borrowing for child care. So the child care becomes a cost in the future because it's now on the loan side of the ledger. Is that correct or am I off on that?

Dr Christie: To the extent that child care was included under the loan program and to the extent that the person's total loan was less than $7,000, including the cost of child care, for a two-term program, that would be true in that case.

Mr Patten: But it would have to be below $7,000.

Dr Christie: Anything above $7,000 is countered by a student opportunity grant. It may be part of the loan at the start of the year, but at the end of the year, as Helmut was describing, it is written down to $7,000, the difference between the total loan during the year and the year-end amount being the amount of the student opportunity grant. In circumstances in which a child care subsidy is coming through the OSAP side, in addition to tuition, books, living expenses etc, and that's above $7,000, it will not increase the loan because the loan is capped at $7,000.

Mr Patten: That's true. However, it seems to me that the parent is then caught in a dilemma. It's a rock and a hard place, it seems to me. There's something that is not working in this, because I get this representation fairly frequently. I'm perhaps not able to understand the nuances or subtleties of the calculations because we're dealing with three: the calculations for the parent, the calculations for the OSAP program and the calculations for the child care subsidy at the municipal level, supported by the province; and OSAP is considered income.

I believe at the moment there is a disincentive. Even though I hear the government saying this, and of course we would all agree we'd want to maximize the opportunity for people on social assistance to be able to pursue their studies, but if they have kids, then we want to make sure they're taken care of. But at the moment my belief is that there's a disincentive. When I look at your program, the child care bursary and the levels of support-a maximum of $83 a week, for example-I think the rule of thumb will tell us that it's about $275 a week in actual costs. If a mom is receiving something fairly close to that on welfare, to trade that for a loan cost that she'll have to pay down the line, and it's less than what she's getting and she'll have to borrow more, you can see what I mean. It doesn't look very attractive.

I'd like to ask you if that can be examined and if you could let the committee know exactly how that works. The auditor might want to take a look at that too, because the objective is to help people reduce their dependence upon social assistance with the assistance of educational accessibility.

Dr Christie: Unless my colleague wants to add something, we will look at the figures you've described.

Mr Patten: Thank you.

The other question is on the relationship. You have said you're in negotiations with the federal government at the moment, and the harmonization of this. The millennium scholarship: I'm quite aware that many of the provinces didn't like this apparent intrusion by the federal government even though they have concurrent responsibilities in relation to post-secondary education. Perhaps this was a response to a neighbouring province and the circumstances that it would never acknowledge any benefit from the federal government, so this may be part of it.

At the moment my understanding is that if someone is in a debt position-and I have a few examples here that I may not have to use if you agree-and is eligible for the millennium scholarship, then that immediately is an offset for any provincial loan debt. Is that correct?

Mr Zisser: I think we recognize that there is some overlap between the provincial student opportunity grant program and Aiming for the Top-

Dr Christie: The millennium fund.

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Mr Zisser: Sorry, it's the millennium fund.

This was an issue that we were aware of and that the millennium foundation was aware of when we entered into these discussions. It was recognized that for them to do what they wanted to do across the country, recognizing different circumstances, they would find cases where these two things would overlap. The way it was addressed at the time was to acknowledge that. The millennium fund at that point calculated what they estimated to be the value of that overlap and requested provinces that signed agreements to agree to reinvest such savings for the benefit of students. At the time Ontario signed the agreement, we committed to doing that as well, because there wasn't a practical way to disengage the two programs.

One of the issues we face is simply that of timing. The Canada millennium fund wanted to make payment at that point very early in the new year. It's turning out to be probably in March, but it's still very early in the new year. At this time, students are not yet eligible for an Ontario student opportunity grant. We have to wait until they complete their study periods and we have to verify their income. There is a sequencing issue: That amount is going to be paid to students, it's going to reduce the amount of debt that they have, and some of those students will be eligible for further debt reduction through the student opportunity grant later on. It's certainly one of the design issues that is worrisome and that we wish to look at in terms of seeing if there is a better way to make that work in future years.

Mr Patten: There are two implications here. The first one I wasn't aware of and you just mentioned it. The province of Ontario has agreed that if they use the millennium scholarship as an offset, if they take that money, even though it's taken off the student's debt, the province takes a similar amount and puts that into post-secondary education in some manner. What happens with that money? It just goes to the financial institution?

Mr Zisser: What we signed specifically said we would reinvest the money for the benefit of students. The government has not yet announced what those reinvestments will be, but certainly has stated quite emphatically that it will do so.

Mr Patten: Could you notify the committee when that happens?

Dr Christie: We will certainly do so. I expect that it will occur in the form where you will be aware of it, but we will certainly make sure that the committee is formally advised.

Mr Patten: Does the letter that's received on this scholarship come from the feds or does it come from the Ontario government?

Dr Christie: On the millennium scholarship?

Mr Patten: Yes.

Dr Christie: It's from the federal government. It's from the millennium foundation, which is not per se the federal government. They've set up a piece of legislation to create this foundation. It's a separate body, but they are the ones who send out the letter.

Mr Zisser: We provide them with 35,500 names. We did that in November. In addition to that, we provided to them the mailing addresses for those individuals. They were all selected based on their criteria from the list of individuals who had applied to OSAP and had high need and met those criteria. They then took that step. The foundation is requiring provinces to then make the payment later on, and we expect that will happen sometime in March.

Mr Patten: I'd like to switch to customer service. This is somewhat along the lines of the questioning from Ms Martel this morning. The 800 number for OSAP information no longer exists, correct?

Mr Zisser: We don't have a general 800 number; we do have 800 numbers. We have an 800 number for students who are deaf and hard of hearing to support that service, we have an 800 number to serve the millennium fund and we have an 800 number for purposes of income tax set-off. But we don't have a general 800 number because, in general, students should be dealing with the financial aid office at their institution for all services related to their loan. That's the best place for them to get the service promptly. That's also where they can immediately have their account dealt with, because the authority for making changes and so on has been delegated to the financial aid officers at the public institutions. We still provide a service for out-of-country students.

Mr Patten: The 900 number is a pay, $2 a shot, is it?

Mr Zisser: That's correct.

Mr Patten: In your chart this morning you said the demand is pretty high when you hit August and early September and it probably drops off somewhat in November or what have you, and maybe it starts up again in December for the next semester. Was this a ministry decision or was this imposed? Was this a mandated requirement that you charge for these services or was this in the pursuit of trying to make your contribution to cost recovery or whatever it is, that this was recommended from the ministry? Or was this something that come through finance or a cabinet directive?

Mr Zisser: It was certainly a decision by the ministry to carry out this activity. I think the issue was, how do we provide a service to students and do that in a cost-effective manner? So there was the issue of investing and setting up such a service. At that time it was felt that to adopt this type of approach was something we wanted to try. Certainly in the initial two years of operation, a lot of students used the service and they could for the first time obtain information that they could not otherwise have obtained as quickly. We've seen now that with the Web site gaining popularity, this service is not being used quite as much by students as it was at that time.

Mr Patten: I'm picking up a pattern here in a variety of ministries that to kind of push or encourage citizens to access various services, the one that's perceived to be the least desirable by the ministry has a user fee applied to it, and the one that they want people to start using is still perhaps a free service.

In my discussions at lunchtime I had someone say, "Listen, at certain times it's extremely difficult to see their financial officer or the adviser at the college or university." For days on end they cannot get the information and so they're forced, somewhat, to use that 900 phone number, or any of them, to try to get information. If you're saying that this is something you're trying, that means to me it's something that's being examined for its effectiveness. You might check with the students and their utilization of that.

The other thing I would like to suggest, if I may, because we have talked about this-I don't know if we've got a report that has been released on it yet, but maybe it's an upcoming one. In the portion of financial counselling that we believe should be taking place with students when they submit their application for loans, and I don't want to be hard on some young people, but not having had to incur debt or manage it or understand the significance of it, to an 18- or 19- or 20-year-old: "Hey, this is free money. This is great. This is how I'll manage it." I've had some personal experience on that score myself and have said, "Just a minute, maybe we should talk about what this actually means, especially when you have to begin to pay this." Part of the counselling is not just the eligibility but the long-term responsibility and the implications of what this would mean for the student down the line. So when your advisory committee-I don't know if that's one of the items that is being examined, but it might very well be.

I guess Bart mentioned the whole issue of the income contingency loan repayment plan. Has that been dropped or is it under reconsideration or has it gone back for renewal or what?

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Dr Christie: The agreement we have with the federal government, as I noted earlier, has an income-contingent loan feature as a dimension of that, as part of the program.

Mr Patten: In your discussions with the harmonization, I want to know where the ministry is at or where the government is at. Is this something you want to discuss with the federal government in terms of sharing that responsibility of looking at such a program?

Dr Christie: In fact, that feature has been discussed with the federal government and is part of the structured federal offer to the banks, which the provinces then have the capacity to sign.

Mr Patten: OK. I guess you can't say what the story is at the moment because you're negotiating.

I think I'll stop here. Thank you.

Ms Martel: I will return to the millennium scholarship issue, if I might. I have a number of questions. Let me begin in this way. My understanding of the intent of the federal program was that it was to put money directly into the hands of the neediest university and college students in the country. Is that correct?

Dr Christie: I believe that was their intention.

Ms Martel: Presumably the neediest would be those with some of the highest debt load in either the province or across the country. Would that be your understanding?

Dr Christie: Certainly before a program like our student opportunity grant, it's likely that they would have a high debt load.

Ms Martel: Let me be sure this is clear. Each province made its own decision about how that federal money would be used, correct?

Dr Christie: Helmut, would you comment on how other provinces have approached this?

Ms Martel: Before you do that, though, I want to make it clear that the decision ultimately about how the federal money was used was made by the province of Ontario.

Mr Zisser: I think the way the program is administered from province to province is something that was negotiated between provinces and the foundation, taking into account the different circumstances of different provinces. There is not a uniform way that provinces deliver student financial assistance. Not all provinces have debt remission programs, the same levels of debt remission, the same terms and conditions, the same way of treating things. So the foundation I think has tried to enter into arrangements that respected some of those differences and tried to make the program work in all jurisdictions.

Ms Martel: Let me put it this way: Ontario made a conscious decision to send this money directly to financial institutions instead of giving it to students, correct?

Mr Zisser: No. Ontario agreed with the foundation that for this year the most expeditious way of implementing the program was to use the existing process that the province had to pay down student debt. Clearly it was their desire to see the money used to reduce student debt. The mandate that the foundation has adopted for itself is one of assisting students and helping to reduce student debt, and they opted for this. One of the factors that certainly contributed to how this approach was put in place was the fact that we were having these discussions prior to the year 2000. There was a lot of concern by both parties about what would happen on January 1, and we wanted to have a reliable method of doing that. This was a proven method that we had already put in place, and we offered to extend that to the millennium foundation as well.

Ms Martel: Let me ask, in the eight other provinces, did they provide funding directly to students?

Mr Zisser: They all do it differently.

Ms Martel: Is there any jurisdiction that provides funding directly to students under this program?

Mr Zisser: I believe there are some that do that.

Ms Martel: Could Ontario have exercised that option as well?

Mr Zisser: If Ontario were that province and it made sense to do so, but Ontario's circumstances are different from that of all other provinces; our programs are different. It was the judgment of the parties at the time that this was the way we could deliver the program within the timelines and within the criteria that the foundation had established for the program.

Ms Martel: Isn't it true that the net effect of the program in Ontario is that many students who have a debt load of over $7,000 will receive only a partial benefit or no benefit at all? That is the net effect of you deciding to send the money to the financial institutions instead of the students.

Mr Zisser: I think the net effect is that because there is an overlap between the programs, some students certainly will not derive as great a benefit as other students. Certainly, many students will be getting that benefit, and again, as was made very clear at the time the agreement was signed, in the press release from the foundation, all the parties knew in advance that there was this overlap. There was an attempt to quantify that, and there was a commitment to reinvest.

Ms Martel: With the overlap, you're saying that somehow these students couldn't have received both. Is there any legal or legislative reason why a student in Ontario could not have received a millennium scholarship, the full amount directly, and not still have received the Ontario student opportunity grant? What legislative or legal barrier was there to say that they couldn't receive both fully?

Mr Zisser: It would not have been possible under the current legislation.

Ms Martel: Can you provide this committee with a copy of the piece of legislation that would clearly have said that these students can't receive both? What legislation is that?

Mr Zisser: Well, there's no legislation that has that wording. The regulation that specifies how the student opportunity grant is calculated indicates that there is an order in which we do things, which is that the student must complete their program of studies; it sets out-

Ms Martel: Sorry, this is a regulation?

Mr Zisser: Yes.

Ms Martel: A regulation can be changed. The regulation could've been changed to allow for Ontario students to receive a millennium scholarship amount and an amount of money under the opportunities grant and to not have one offset the other. Am I correct?

Mr Zisser: Well, you're correct that regulations can be changed.

Ms Martel: Right. So if Ontario had really wanted to put money into the hands of the neediest students, Ontario could have had a regulation change which would say that Ontario students could receive the full amount of the millennium scholarship, $3,000, and they could also receive the full amount of the Ontario student opportunity grant at the same time. We could have done that by regulation, correct?

Mr Zisser: The province has the ability to make regulations.

Ms Martel: Right. OK. I wanted to read into the record what the net effect of this has been, because I think it's important for you to understand and for other committee members. We got a letter from Confederation College, from the chair of the board of directors, that said the following:

"I am writing on behalf of the board of governors of Confederation College to express our concern with the way in which the province of Ontario has chosen to administer the Canada millennium scholarship fund. We understand that Ontario and British Columbia are the only provinces where the benefit of this important federal program largely accrues to the province and not to the students to whom it was intended.

"To our knowledge, 312 students at Confederation College have been advised that they qualify for the scholarship this year.

"-173 students will obtain no personal benefit whatsoever as the province is using their scholarship to pay down the forgivable portion of their student loan.

"-These students actually never see their $3,000 scholarship, however they will be taxed on it.

"-It may also affect daycare or rent subsidies and other income-contingent assistance.

"-The province is the only party to benefit since the forgivable portion of the student loan is now funded by the millennium scholarship, not the province.

"-139 students will receive only a small benefit as their overall student loan will be reduced by an average of $800 (and pay tax on $3,000).

"-56 students from reserves will have their loans reduced by an average of $1,515.

"-12 students will have their student loan reduced by the full $3,000 (and pay tax on the $3,000 scholarship).

" ... As you can see, this approach suggests most students should refuse the scholarship as it increases their financial burden rather than reducing it. For most it has little benefit. For all, it has possible tax implications. In some cases, it may have a negative effect on the tax situation of supporting parents. We do not believe that this was the intent of the fund."

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Neither do I, and I regret that Ontario and British Columbia decided to go about it this way, because the net effect is that the millennium scholarship fund is in fact subsidizing the Ontario student opportunity grant. You're subsidizing with federal money costs you would have incurred to pay that grant to students. Is that correct?

Mr Zisser: At this stage there have been no savings. We will not know what the savings are because we will not know what that actual overlap is until we complete the process for these student opportunity grants. So some students will not complete their program of studies and will not be eligible. We will find through income verification that some students have not provided accurate information and will not be eligible. I don't know how the college would draw those conclusions because we have no such information and I would argue that you could not make such calculations until November of this year.

Ms Martel: Can I ask why it was that in a leaked cabinet document in November 1999 the suggestion of a $90-million windfall to the province was outlined?

Mr Zisser: I'm not familiar with that.

Dr Christie: The $90 million is not a number that I am aware of having been associated with.

Ms Martel: Okay, Deputy. If it's not $90 million, how much do you suspect the province will benefit by this windfall this year?

Dr Christie: For fiscal 2000-01, there should be no net fiscal benefit as a result of the province's commitment to reinvest any savings to the benefit of post-secondary students. The gross benefit may be between $50 million and $75 million. We're not sure how much it is yet, because we're still-

Ms Martel: But you must have some idea. You know already who the students are because you sent those names to the fund, all right? So you would also have access to what their debt load is, and you would also know that $3,000 applied against their debt load will leave the province with some portion of money to pay or not, because the province might be totally off the hook because the $3,000 would cover what the province would have paid out in a grant. So you must have some fairly substantial good guess or estimate about what this means for the province, how much money you're going to save because you're using federal money to replace your money this year.

Dr Christie: The original estimate in May of last year-and I think this was an estimate jointly arrived at by the millennium foundation and the ministry-was on the order of $50 million. As we see the actual numbers come in, we will have a better idea. But as Mr Zisser noted, the actual impact won't be known until students have completed their term and we know how much debt is there and therefore how much student opportunity grant is required. But that won't be known for some months yet.

Ms Martel: Deputy, the May estimate of $50 million is for the student academic year 2000-01? How are you defining that as a year?

Dr Christie: For what period was that estimated?

Mr Zisser: That estimate was for those students who would be eligible to receive the millennium fund who were in the 1999-2000 year. But there are no savings in 1999-2000 because the province would not be paying the student opportunity grant within this year. It would be paid next year.

Ms Martel: So you'll see these savings beginning April 1, 2000; through that fiscal year.

Mr Zisser: No, the earliest-

Ms Martel: Through that fiscal year.

Mr Zisser: -we would possibly see them would be November.

Dr Christie: But in that fiscal year.

Mr Zisser: In that fiscal year.

Ms Martel: What's your estimate for what you might receive next year? Because this is a 10-year program, correct?

Mr Zisser: In terms of savings or in terms of the monies that the millennium fund will make available to students in Ontario?

Ms Martel: I'm more interested in the savings that Ontario is going to accrue.

Mr Zisser: We don't have an estimate at this stage, because I think there will certainly be some discussions in terms of how this program will unfold in Ontario. It is not a design that we have been particularly happy with, and I think it is certainly an area that we will continue to monitor.

I think this needs to be remembered: We decided to deliver a program that has never been delivered before, that was designed in such a manner that it certainly had a large potential to overlap with Ontario initiatives and it had to be delivered very promptly, because the desire was to have it up and running by January of this year. So the design we have is not a perfect design but it is a design that is ensured to get money to students. To the extent that there is that overlap, the provision has been made to make sure there is a reinvestment of those monies by the province.

Ms Martel: I'm not blaming you for this decision; I'm sure it was a political one. But what I am saying is a regulation doesn't even have to go through the House. It could have passed by cabinet at any one of the cabinet meetings that went on all last fall, because this was under discussion all last fall. The point I'm making is, I don't think there was the political will to be sure that students could benefit from both. I think the design of the political powers that be was to have this money subsidize the provincial program, because the province has a windfall under this situation. The province gets $50 million that they weren't counting on, paid for courtesy of the federal government or the federal private corporation. I think this could have been done without any problem whatsoever. I don't think there was the political will to do it, and I don't blame you for that.

With respect to the $50 million, does that also include interest payments that would have been paid out if Ontario was making payments under the Ontario student opportunity grant for those people who might have that offset by the millennium fund?

Mr Zisser: I don't believe it was that precise a calculation, because at that time we had very little information that would help us refine a calculation to that point. It was an estimate. It was one that I think both the foundation and the province thought was reasonable in terms of what we knew about the program at that stage.

Ms Martel: So the estimate might actually be higher, because when you take into account potential interest payments that will be forgone in a number of cases, that might be an additional saving to the province, an additional amount of money that the province would in fact accrue.

Mr Zisser: I think what the deputy has indicated is that there is now a range in which we believe this will take place, but we really will not know until a few more steps occur.

Ms Martel: Do you have any idea how many students now in the province, the percentage of students, will not benefit at all because their debt load is higher than $10,000?

Mr Zisser: I don't have that information.

Ms Martel: Could you provide that information to the committee? I would assume that you can do those calculations because for anything over $10,000, the $3,000 would be applied and it would be left for their debt. I'd like to get from you some idea of those people who have got a scholarship, because you provided the names, whose debt would have been over $10,000 who will automatically now not see any benefit at all in terms of what they have to pay on their own debt. If you could provide that to the committee it would be very helpful.

I want to just be clear then. You're saying this was a measure that was put in place for this year in order to get some money out to people. Are you going to be reviewing the situation with respect to how many students may in fact turn down the scholarship because they don't want to be assessed with the tax penalty that might come?

Dr Christie: The design is a matter that we are discussing and will continue to discuss with the foundation. As Helmut has noted, this was a program that the federal body wished to get up and running within a certain timeframe. They looked for assistance from the provinces, including being concerned about duplicating administrative systems etc. The provinces have worked with them in this regard. But there is nothing in this that doesn't admit of improved delivery mechanisms in the future, and we'll certainly be discussing those improved mechanisms with them.

On the issue of the taxable status of this, this is a decision that Revenue Canada has made. It is not a function of anything in the province's design. It is a matter of the federal government's design of this system. It is our preference certainly that this not be taxable. I think we have expressed that. This is a matter for the millennium foundation to deal with Revenue Canada on.

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Ms Martel: Deputy, do you have any idea how many Ontario students might have refused the scholarship, if you have access to that information?

Dr Christie: I'm not aware of any information on that.

Ms Martel: Would it be possible for you to deal with your connections at the foundation to find out in Ontario how many students may have refused? If they also have a general idea about why they refused it, I'd be interested too, because I'd be interested to learn how many students looked at it and, after realizing it wouldn't do anything directly for them because they were over a $10,000 debt, that they made a conscious decision not to accept it because they worried about the tax implications. They had to make a decision to refuse this grant what, two weeks ago?

Mr Zisser: The millennium foundation has extended the time that students had available to decline the award if they so chose. In fact, today is the last day for that. It had initially been set two weeks earlier, and they've extended it to today. They have requested that we then submit the revised list to them on Tuesday next week.

Ms Martel: OK. Part of the condition that the corporation set down was that the savings that Ontario realized would have to be used to benefit students, and I heard you say clearly earlier that Ontario hadn't made a decision. Can you give us some idea of what you're looking at? The intent was to directly benefit students with high debt load. I am curious about how Ontario might propose to directly benefit those same students.

Dr Christie: The manner in which any savings might be deployed would be a matter of the business planning process and decisions to be made, and those are under review. Decisions haven't been made. When they are, we'll be able to answer.

Ms Martel: Deputy, let me ask you something else. This is with respect to tuition. On February 2, you will remember, it was the Access 2000 Day of Action. I attended the rally that was held by Laurentian University students. I was driving home and I heard Premier Harris on the radio responding to a question about the students' demand for lower tuition. The Premier said on the CBC, and I will quote this for you, "I think you'll find that lower tuition has proven in study after study to benefit the wealthy, not lower-income classes."

I was astonished by that comment. I'm not sure that I believe it, but I'm going to give the Premier the benefit of the doubt and ask you if in Ontario we have any study that has been done that would show that lower tuition benefits the wealthy and not the lower-incomes.

Dr Christie: I'm not aware-this doesn't mean it hasn't been done-of a study on the impact of tuition by income cohort, let's say, at least of a recent one in Ontario. I think in general, because there is student assistance provided for the low-income groups but no assistance provided for higher-income groups, then certainly the impact of tuition might be expected, after student support, to be higher in the high-income groups than the low-incomes simply because student support affects the one but not the other. However, studies with respect to the degree of that I'm not aware of. I don't have that.

Ms Martel: You're not aware of studies that exist in Ontario, for example, that would prove this?

Mr David Trick: Ms Martel, as the deputy says, we haven't done a study specifically relating to Ontario students, but there are a number of academics who have studied this issue over time, and there are some studies of that nature that we could certainly share with you.

Ms Martel: So these studies would prove that the benefit for lower tuition goes to the wealthy. That's what you're saying?

Mr Trick: The studies that support the point that you heard the Premier make.

Ms Martel: OK. What jurisdictions do they come from?

Mr Trick: I'm sorry. I'd have to go back and look at exactly which jurisdictions were covered, and they weren't entirely within Canada.

Ms Martel: They weren't entirely within Canada?

Mr Trick: They weren't entirely within Canada. There were other jurisdictions as well.

Ms Martel: But you have copies of these?

Mr Trick: We can certainly share them with you.

Ms Martel: That would be very helpful. I'd certainly appreciate that.

Let me return to your brief from this morning, on page 12, where you talk about "improved linkages with lenders." You talk about your EDI system, your electronic data transfer, and that you've got one agreement in place with CIBC and discussions with others. Who pays to implement EDI? Is it a cost-sharing agreement? Is there new technology that's required? Who is responsible for developing it or putting it in place?

Mr Zisser: Both parties pay for their respective costs. What it means in practice is that you need to negotiate with the other party the data transfer protocols: how you're going to package the data and in what sequence; what kind of controls you will place on it to make sure there's integrity; what technology you're going to use to move the data from one to the other; the timing for that; what kinds of systems will pick it up; what you will do with it.

It has been part of our overall investment in the program to try to improve the speed with which we process by relying more on computer technology. We were fortunate to find a financial institution that was willing to work with us on that. It has proven to work very well because it has eliminated a lot of the paper between the two organizations. We do a better job administering those loans. There is less chance for error in those kinds of transactions because one party isn't turning something into paper that someone else is then keying and potentially making errors on.

That's the goal we would have for the future with all lenders. We would like to see the system move in that direction. We're also going to be exploring options that move beyond, for example, even loan documents. There may be a possibility to make some of those transactions occur electronically. In that case we'll need more linkages with our financial aid offices because there are those matters to consider.

Ms Martel: One of the issues that the auditor indicated in his reports in 1997 and 1999 had to do with the inputting of reams of information affecting financial institutions and payment to the same. I think in 1997 he noted it was about 150,000 pieces of a backlog; in his most recent report, 125,000. I'm going to assume it's a question of having this particular system implemented that would reduce some of that backlog. Are they directly tied or is it a separate issue?

Mr Zisser: There were two backlogs. The one we have dealt with successfully is the one of claims. The one dealing with what we refer to as bank errors is the one that we are still working on. I think we have resolved that issue now in the case of one of the lenders, and there are two others where we are working on that. We have created a facility that can permit the lender to do that. We have had success with one of the lenders to provide them with that tool and they are actively using it. We have provided the other lender with the tool and we are hoping it will receive active use.

Ms Martel: With respect to your customer service, you had told this committee that calls are answered in three minutes?

Mr Zisser: Three rings.

Ms Martel: I'm curious and I go back to a question that was probably raised facetiously. Is it answered by a live body in three rings or by voice mail, and do you track incoming calls on those times?

The Chair: That was not asked facetiously.

Mr Zisser: We do both. We do have a policy that if a person is not there, we will return that call within one business day, within 24 hours. We monitor that. We are also going to be monitored on that. I think the government more broadly will be making sure that all of us are routinely measured in terms of the customer service standards the government has set. We are also putting in place customer feedback systems which will start at the end of this fiscal year so that students and others can provide us with feedback on whether they are satisfied with the service we are providing and make suggestions in terms of what we might do to improve service to them.

Ms Martel: Do you phone in for that or do you mail that in?

Mr Zisser: What we are trying to do is use the Web to do that. We have looked at other very good Web applications and we've noticed that they have these kinds of features. That is the device we're going to use in the first instance to give people an opportunity. Again, given that is the area where we are now experiencing most of our traffic, that is the part that we would really like to work very well.

Ms Martel: Let me go back to the issue of studies. You had said earlier that Ontario hadn't done a study in this regard. I noticed in the auditor's report from 1997 that he talked about performance reporting and about examples of trends that we could be monitoring and reporting on. There was certainly indication of a level of student financial assistance versus tuition fee, proportion of students that require financial assistance by type of post-secondary institution etc.

I was looking through your performance reporting. On some of the issues you're starting to report, but clearly I don't see anything that would respond to the concern that I have about student indebtedness in relation to tuition increases.

I think there has been a dramatic increase. The Canadian Federation of Students, when they had their Access 2000 campaign, made that clear. I think it would be very important for the province of Ontario to start doing that kind of tracking so that we do know whether or not tuition increases benefit the well-off, lower-income or middle-income families, and what the relationship is between increasing tuition costs and students dropping out or the level of student indebtedness. It is becoming a situation in this province where lower- and middle-income families cannot afford to send their kids to university and to college. I don't think that's a position we in this province want to be in as we try and compete in a global economy.

So can you tell me, Deputy, given that this was raised in a preliminary way in the auditor's report in 1997, has the ministry thought about doing that kind of tracking in a detailed way to see what the impacts are on students?

Dr Christie: We are trying to track performance measures of various kinds. Obviously, measurability is a factor in each of them. We look each year at what we are measuring and whether we could improve the measurements or whether we need to look at new measurements. We look at that every year to see if there are things that we could measure reliably enough and that would be meaningful enough to include in that. We'll certainly continue to review things for addition to the measurements.

Ms Martel: Do you track tuition increases by institution now?

Dr Christie: Yes, we certainly monitor tuition levels by institution.

Ms Martel: And against that, would you track institution by institution default rates of students who had attended?

Dr Christie: Yes, we track default rates by institution.

Ms Martel: But do you make the connection between the financial institution, what that tuition increase was and what the level of default is?

Dr Christie: Because the default measure in any given year has to do with people who graduated at least two years prior and therefore studied the four years prior to that, it's a complex relationship to try and measure. Measures of that complexity or behavioural measures of that complexity are certainly of interest, but it's not clear that we have the capacity really to measure that at the moment.

Mr Trick: Ms Martel, if I could just add a bit to that. Clearly, as the deputy mentions, drawing some of these one-to-one connections requires a lot of fairly fine-tuned statistics. I think one of the general points-and we've gone through some of these numbers this morning-university default rates, as it happens, are less than half of what the default rates are at community colleges. At the same time, college tuition fees are less than half of what tuition fees are at universities. So there are a number of things that you have to put into the equation other than tuition in order to explain the default rates.

Certainly, when we've done studies of correlations, the two issues that are most prominent in terms of defaults are, did the student complete the program and, if he or she did complete, did the student find a job after graduation. Those are the two correlations that come out most strongly. Clearly there's a lot more work that could be done in terms of, within the university, trying to connect the students to what their reasons were for default. So we have numbers at a gross level, but maybe not at that finer level that you're getting at.

Ms Martel: All right. I think that's it. Thank you.

The Chair: Thank you very much for attending today. We appreciate the information that you've provided to the committee, and we look forward to receipt of the various undertakings that you've given.

The public session is adjourned.

The committee continued in closed session at 1505.