Monday, November 27, 2006

Canada Student Loans - Part 3 The Bureaucracy

Ok, here it is...the final post of the trilogy.

In my experience with the government institutions that administer student loans in Canada, its very obvious that people are are being cost thousands of dollars as a result of this bureaucracy.

Here are two examples that I have personally experienced that likely occur regularily:

My first experience happened during the Christmas break of my third year. During the period between Christmas and new years, I logged into my bank account to check the balance to make sure that my rent would clear in a couple days. To my surprise, my account was about $250 less than expected. At the time $250 was a massive amount of money to go missing. I followed up with my bank and all they could tell me was that it was a "pre-authorized debit". Wonderful, that sure helped. It took going into my home branch before they would tell me that it was my student loan payment that had been taken out. This was extremely odd as I was still in school.
When I contacted the National Student loan center they informed me that I failed to submit the "Federal" portion of the paperwork which documented that I was still in school. After checking, they did confirm they had my provincial portion. Despite having one but not the other, both my provincial and federal loans went into repayment. The real issue here is that the procedure for submitting your full time student documentation is to take your loan documents to a processing center (in my case, the table beside where I got the documents) and they send them off to all the institutions. This would of course mean that either the processing center, or the loan office themselves made the mistake. The frustration here is that despite proving I had submitted the form, all that the loan office was prepared to do was refund the principle. This meant that I would have to repay these dollars later and the interest portion would be lost forever. Furthermore, all the interest that had accrued from April-December would be tacked on to my principle.

The second issue to affect my sister is equally frustrating. She just finished school this September following a year in a post-grad college program and 4 months of unpaid co-op. She was fortunate to find a job within a month and wanted to start repaying her loan. Before she received her first paycheck, she received her loan consolidation paperwork that is typically sent out about 5 months after you graduate. This didn't make sense to her, so she called the national student loan center. She was told that their records indicated that she had finished school in April. She informed them that her program ran from September 2005-September 2006 and lasted 3 semesters. The loan center informed her that since she was already finished school, it was too late to have her status changed. This would result in about $1,000 in interest being tacked onto her loan before she even had a chance to repay. Could somebody please explain how this could have been avoided? It couldn't. Our student loan system is a joke and needs to be fixed.

I would have to suggest that Canada adopt a US style system where students would take their loans to a bank to have them consolidated. That way, the student could work with the bank over any mistakes as well as negotiate better rates. Even better, just get rid of the "there is nothing we can do" mentality that exists with this bureaucracy.


At 12:01 PM, Blogger Bryce said...

The loan system used to go through the banks. It was only changed probably 6 years ago or so. I'm not sure why.

At 2:06 PM, Anonymous James said...

The banks stopped processing student loans because loads of students were graduating and then declaring bancruptcy to wipe out their loans. Banks are for profit businesses and these loans were just not profitable with all the bancruptcies. The government took over, and realized the banks were right and changed the bancruptcy rules so that student loans can no longer be discharged in bancruptcy. Very unfortunate as some people were abusing bancruptcy to avoid their obligations and it has resulted in some people who genuinely need bancruptcy relief are now denied it due to the rule change.

At 2:10 PM, Blogger Jeadie5 said...

I agree with the government position regarding student loan bancruptcy, but having the banks administer the loans under the existing rules would also solve the problem. Also, if Im not allowed to go bankrupt against this loan, why am I being charged Prime + 2%?

At 11:22 PM, Anonymous Anonymous said...

I had my student loans when they were through the banks. Trust me you don't want to go back to that. They were much worse than government bureaucracy, hard to believe but it was.

I have found (well, my wife anyway) that the current system is much better customer service wise.

In addition to James' comments I seem to recall some high profile screwups / misconduct by one or more banks under the old system. Supposedly the gov't thought that moving loans "in-house" as it were would provide more accountability since the banks simply told you to go you know what yourself when they screwed up.

I was the victim of one myself that was only rectified after having a heated argument with a bank manager in the middle of a busy bank.

Be careful what you wish for, your "cure" may be worse than the disease.

If you have had problems with the NSLC have you tried complaining to your MP? You would be suprised what happens when a polititian starts asking questions.

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