Evaluation of the Canada Student Loans Program - October 1997

Evaluation of the Canada Student Loans Program

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• Introduction
• Overview of the CSLP
• The Evaluation Process
• Key Findings
• Conclusions

The Canada Student Loans Program (CSLP) Evaluation conducted between September 1996 and August 1997 by Human Resources Development Canada (HRDC), addressed a wide range of issues related to the program relevance, program design and delivery, program impacts and alternatives. This brief summarizes the findings from this evaluation.

Created in 1964, the CSLP is aimed at assisting Canadians with demonstrated financial need to enroll, pursue and complete their post-secondary education and training leading to a degree, diploma or certificate in programs of 12 weeks or more in duration. Each year, it provides $1.2 billion in loans to over 315,000 students in post-secondary programs at universities, community and private colleges in Canada and around the world.

The role of the federal government in the CSLP is to develop policies around eligibility criteria, needs assessment determination, and approach to financial assistance, negotiate with the lending institutions and coordinate the delivery of the program.

The two key partners involved in the delivery of the program are the provinces and the lending institutions. Participating provinces determine individual eligibility based on federal criteria, assess student financial needs based on federal criteria, award the aid by issuing a loan certificate and designate institutions which students may attend with CSLP assistance.

The evaluation examined the following issues: the extent to which the financial aid meets student needs, the trends in repayment and reasons for default, and the impact of the CSLP on students' completion of studies in a timely and successful manner. Information sources included: a review of the literature; analysis of administrative data; 40 interviews with key informants; 29 focus groups with program stakeholders; a survey of 422 defaulters; and, a survey of 2,036 borrowers.

Relevance of the CSLP and its Provisions

The evaluation addressed issues associated with the relevance and provisions of the CSLP in financing post-secondary education.

i) Overall, the relevance of financial assistance to post-secondary students remains high since:

• CSLP and related assistance from provincial governments are heavily used by post-secondary students. For example, in 1993-94 there were 173,894 CSLP borrowers (40%) out of a total full-time university enrolment of 436,564;

• assistance received from governments constitutes a large share of the financial resources of current CSLP borrowers. For student borrowers, student loans accounted for, on average, more than 50% of their total financial resources;

• a large majority of current borrowers consider the support received as vital to their ability to pursue post-secondary education. Overall, an estimated 78% of CSLP borrowers would not have enrolled if they had not received a Canada Student Loan; and,

• post-secondary graduates experience above-average success in the labour market.

ii) Overall, the loan financing approach with an in-school interest subsidy continues to be regarded as an appropriate approach for the federal government. Nevertheless, the high levels of debt that will be incurred by future graduates is a serious concern with respect to this approach.

iii) The rationale for assisting students in the timely completion of their studies in general, remains strong given that it allows them to enter the work-force (with their desired qualifications) more quickly. However, some students perceive that timely completion is not appropriate for them for a number of valid reasons.

iv) The importance of successful completion of studies as a target for the CSLP is strongly supported by labour market statistics for individuals with some post-secondary education relative to those having completed their studies.

v) The Special Opportunity Grants (SOGS) are a poor fit with the CSLP since the three SOGS have policy objectives which are quite distinct from the policy objectives of the CSLP.

Program Design and Delivery

The evaluation examined, in the context of appropriateness and effectiveness, various aspects of the program's design and delivery.

i) Roles and responsibilities, in general, are well defined for partners in the program and appropriate given the positive experience of all parties with respect to student loans. Cooperation and harmonization among the parties has improved but there continues to be opportunities for improvement.

ii) The transition from the old program structure to the revised risk-sharing arrangement was awkward and continues to provide problems. For example, the regulations for the CSLP are complex and difficult to work with and having to work with more than one set of regulations and procedures exacerbates these difficulties.

iii) While the program's monitoring systems allow for reporting of general information to Parliament, performance measures have not been developed for the program. The program suffers from a lack of data and, a limited facility for electronic data interchange among the program's partners.

iv) Overall, the CSLP is characterized by rigid regulations rather than responsive processes. Numerous examples of rigidity are to be found in the manner in which money is disbursed to students; the needs assessment process; the lack of transparency in the appeals process; and, the lack of processes to ensure that relevant information is updated as required.

v) The requirements (of 60% course load and completion in years of study plus one year) to encourage timely completion may not be sufficient to achieve the program's goals.

vi) Information provided to students is not well focussed. There is too much information for a student population that is already suffering from information overload and available information does not adequately deal with student specific problems. Many students stated that education institutions (specifically private schools) and lenders could do a better job of providing financial counselling and informing students of their responsibilities, obligations and repayment options with respect to CSLP loans.

vii) Interest Relief was underutilized under the old program. However, revisions made to Interest Relief, increased publicity, the new partnership with lenders, and increasing debt levels are all expected to increase the use of Interest Relief.

viii) The Revised Needs Assessment methods are generally viewed as providing a more accurate assessment of student needs thereby ensuring improved targeting of funds. Nevertheless some weaknesses continue to exist and some assumptions contained in the methodology (e.g. parental contributions) create hardship for individuals for whom those assumptions are invalid.

ix) Part-time student loans are used in a very limited way and are generally viewed as an administrative nuisance which is not responsive to the needs of students. Accommodation of needy part-time students within the standard CSLP system is generally viewed as preferable.

Impacts of the CSLP

The four aspects of program impacts addressed by the evaluation are: enrolment, timely and successful completion of studies, repayment and defaults, and student debt.

i) Overall, the findings around enrolment are that:

• CSLP allows some individuals, who would otherwise be unable to do so, to enrol in post-secondary education. An estimated 78% of CSLP borrowers reported that they would not have enrolled if they had not received a loan;

• the lack of sufficient financial resources remains a barrier to enrolment in post-secondary education for some individuals. As well, significant risk exists, under the current program terms and conditions, that the size of this group may expand over time. The evaluation did not directly address the issue of individuals who wished, but were unable to attend a post-secondary institution; and,

• the reforms to the Needs Assessment appear to have improved the extent to which the Program truly targets individuals in need.

ii) Evidence suggests that the CSLP assists in timely completion of at least the early years of post-secondary education. The most important determinant of persistence was how well students were integrated into the social and academic life of their institutions.

iii) Evidence suggests that the CSLP assists students to complete their studies successfully by limiting the amount of time they must devote to work while at school.

iv) For borrowers under the old program, the cumulative amount borrowed had a significant but small impact on the probability of default. However, extrapolation of these results to the higher loan amount which will be incurred under the new program may not be valid.

v) Growing levels of student debt are a major concern. The CSLP estimates that the average debt load of a bachelor's graduate who borrows in each year will be close to $25,000 by 1999 as opposed to the $9,000 level for 1990 graduates.

Alternatives to student debt and default issues

The evaluation addressed two issues (designation of educational institutions and income contingent repayment) which have received much recent attention.

i) Current approaches for designation of educational institutions are not satisfactory. Development of processes for de-designation of institutions could be troublesome. Within this context, measures of student loan default rates for institutions are a potentially useful indicator for reviewing designation of institutions. However, there are also disadvantages such as administrative burden.

ii) The Income Contingent Repayment experience of other countries provides evidence that it can be implemented on a large scale.

From an historical perspective, the CSLP has been a good program that has fostered access, choice and perhaps encouraged persistence in completion of post-secondary education. However, it is not apparent that the program, as currently designed, is equipped to achieve these same goals in the future, as well, evidence suggests that several aspects require special attention:

• Growing levels of student debt are a major concern;

• Interest Relief was underutilized under the old program mainly because of a lack of adequate information;

• Many borrowers stated that education institutions (specifically private schools) and lenders do not provide adequate financial counselling and adequate information about their responsibilities, obligations and repayment options with respect to CSLP;

• Borrowers from colleges, especially from private colleges, are more likely to default than university students. Evidence also exists that student loan default rates are significantly higher for borrowers of some financial institutions than others. However, the evaluation did not focus on the explanation of this;

• The program suffers from serious management information problems which range from a lack of performance indicators, a lack of data and a limited facility for electronic data interchange among program's partners;

• The Special Opportunity Grants (SOGS) are a poor fit with the CSLP since the SOGS have policy objectives which are quite distinct from the policy objectives of the CSLP;

• While the CSLP has made some progress towards increasing efficiency through harmonization, much more progress is required.