Vol. 143, No. 24 — June 13, 2009

Regulations Amending the Canada Student Financial Assistance Regulations and the Canada Student Loans Regulations

Statutory authorities

Canada Student Financial Assistance Act and Canada Student Loans Act

Sponsoring department

Department of Human Resources and Skills Development

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue

Educational attainment is a key driver of economic growth and is critical to Canada’s continued prosperity. Advantage Canada, the Government’s long-term economic plan, recognized that Canada must put in place the elements that would enable individuals and businesses to compete effectively in a global market with the best in the world. This means ensuring that Canada has access to the right skills, ideas and assets to thrive in a knowledge-based global economy.

The rising cost of post-secondary education has increased the debt level of those pursuing higher education. Given the role of the Canada Student Loans Program (CSLP) in helping Canadians develop skills by facilitating access to post-secondary education, the Government launched a review of the CSLP in 2007. During this review, it was determined that the CSLP debt management measures do not currently meet the needs of those experiencing repayment difficulties. The shortcomings identified include the all-or-nothing eligibility, borrowers in the workforce experiencing debt-to-income ratios that increase too quickly for them to qualify for the Interest Relief program, low uptake relative to eligibility, and operational gaps in delivery leading to default.

Furthermore, the two separate programs that currently exist, i.e. Interest Relief (IR) and Debt Reduction in Repayment (DRR), possess differing eligibility criteria. Thus, there is confusion among borrowers who may have been eligible for IR but may be ineligible for DRR even though their economic situation may not have improved.

As a result of this review, and to confirm its commitment, the Government announced in its Budget Plan 2008 a number of reforms to the CSLP to address many of the above-noted issues and to better support Canadian students. Implementation of the majority of these initiatives is targeted for the beginning of the next academic year (by August 1, 2009).

Objectives

The proposed measures are designed to effectively mitigate the identified issues and shortcomings of the current debt management measures. Both repayment plans (RAP and RAP-PD) and the amended criteria for the PDB would take into consideration the ability of borrowers to repay their loans and would provide more comprehensive, graduated support for student borrowers experiencing difficulty in repayment. These measures are intended to

• reflect more accurately the capacity of borrowers in financial difficulty to repay their loans by assessing it with a single criterion, the debt payments-to-income ratio;
• ensure that no payments are required from borrowers with very low incomes;
• ensure that no borrower is required to make student loan payments above affordable levels; and
• ensure that no repayment period exceeds 15 years from the latest Post Secondary End Date (PSED).

The proposed amendments would streamline, modernize and simplify repayment assistance from the borrower’s perspective by presenting and promoting a comprehensive assistance program with clear eligibility criteria that provides continuous assistance as necessary.

Description

Recent research by Statistics Canada suggests that the main determinant of student-loan default is not debt per se, but rather post-study income. In order to lower the default rate, RAP would increase access to eligibility and increase uptake of repayment assistance through the general attractiveness of its design; its future online application feature; promotion; and dissemination of RAP information at federal, provincial and institutional levels. It would also allow for the possibility of a provincial RAP-like plan alongside the federal program and likewise provide for the inclusion of RAP benefits in borrower loans held by financial institutions.

The CSLP operates under two sets of acts and regulations: the Canada Student Loans Act (CSLA) and Canada Student Loans Regulations (CSLR), which govern the guaranteed loan regime (loans disbursed prior to 1995), and the Canada Student Financial Assistance Act (CSFAA) and Canada Student Financial Assistance Regulations (CSFAR), which govern the risk-shared (loans disbursed between 1995 and 2000) and direct loan (loans disbursed since 2000) regimes, respectively. Loans disbursed prior to 2000 are administered by individual financial institutions. Loans disbursed since 2000 are administered by the Government of Canada.

All borrowers with loans under any regime (guaranteed, risk-shared and direct loans) would be eligible for repayment assistance. (see footnote 1)

In addition to these federal student loans, students may also have provincial/territorial student loans, which also require repayment. If the province offers a program similar to the RAP, results can be easily harmonized, but in either case, the presence of provincial loans would be considered when assessing the need for assistance.

The following are the key elements of the proposed changes:

Repayment Assistance Plan (RAP)

A borrower would be eligible to benefit from the RAP once they enter repayment on their student loans, i.e. six months following the end of their full-time or part-time studies. A two-stage RAP approach based on a borrower’s ability to repay would provide consistent eligibility criteria available under both stages of the plan.

A borrower is deemed eligible for RAP for a period of six months if their Affordable Payment (AP) is less than their required monthly payment. The AP is based on income that is above an established standard of living threshold. Borrowers with incomes above the minimum threshold are required to make a monthly payment based on income and family size. The affordable payment made by the borrower will be less than the actual payment and the required monthly payment.

A borrower’s required monthly payment is determined by amortizing their consolidated principal amount over 120 months since they last ceased to be a full-time or part-time student. This payment would take into consideration all federal and provincial student loan balances of the borrower and of their spouse if the latter is in repayment and making payments on their loans.

This AP would be based on a percentage of income that starts at 1% for those just above the minimum threshold, increasing to a maximum of 20% on both federal and provincial loans as the borrower’s income climbs. It could be equal to zero for borrowers with a monthly family income under an established minimum threshold for their family size.

The assistance provided at this point is in two stages. In both stages, borrowers with income above the minimum thresholds are required to make a monthly affordable payment that is applied to the principal portion of the loan payment first, and any excess amount would be applied to the interest payment. The Government would only pay the amounts established under both stages if the borrower makes all the affordable payments required for the approved period. If the borrower fails to make these payments they will not qualify for further assistance.

In Stage 1, Government assistance is limited to covering the monthly interest payment amount on federal guaranteed, risk-shared and direct loans that could not be met by the borrower’s AP. In this stage, there is no Government reduction of the principal amount of the loan. Stage 1 would last for a maximum of five years in cumulative periods of six months with reapplication required for each period. This five year maximum would be reset if the borrower returns to studies, and the borrower would be eligible for further financial assistance at any time during Stage 1 of RAP, including loans, grants and interest-free status.

Stage 2 would begin after Stage 1 is exhausted (10 periods of 6 months have been taken), or if the borrower has been in repayment for over 10 years since they last ceased to be a full-time or part-time student. Upon first qualifying for Stage 2, the principal outstanding at the time of application is re-amortized between the date of application and the date 15 years after they ceased to be a full-time or part-time student. This results in a new repayment schedule and a new required payment. If the eligibility requirements are still met, the borrower would continue to make their affordable payment and the Government would cover the remainder of the required payment, which could include both interest and principal amounts on federal guaranteed, risk-shared and direct loans. As a result, by the end of the 15-year period, the borrower’s loans would be repaid in full.

Once a borrower is approved for assistance under Stage 2 of RAP they would no longer be eligible for loans and grants until the remaining outstanding loan balance is paid in full. However, borrowers would still be eligible for interest-free status if they choose to return to full-time studies.

Unlike under the current IR and DRR programs, under the new regulations, once a borrower has been approved for RAP they would be eligible for both stages using the same income thresholds. A borrower who has used up their eligibility for Stage 1 would be eligible for Stage 2 based on exactly the same criteria. This would eliminate one of the major discrepancies of the current IR and DRR measures.

Permanent Disability Benefit (PDB)

The 2008 Budget includes measures and financial supports that are more comprehensive for students with disabilities who are experiencing difficulty in debt repayment. The 2008 Budget Implementation Act introduced a new legislative authority to reduce the confusion regarding the eligibility criteria for the PDB versus grants for persons with permanent disabilities.

Currently, the lenders rights under section 11 of the Canada Student Financial Assistance Act (CSFAA) and borrowers obligations under section 11.1 of the CSFAA in respect of a student loan terminate if a borrower meets the definition of “permanent disability” and demonstrates financial hardship. With the proposed coming into force of the legislation, amendments to the PDB are expected to be in effect on August 1, 2009. Eligibility would be limited to borrowers who, due to their “severe permanent disability,” are unable to pay their loans and will never be able to repay them.

The proposed definition of “severe permanent disability” means a functional limitation caused by a physical or mental impairment that prevents a borrower from performing the daily activities necessary to participate in studies at a post-secondary school level and in the labour force and is expected to remain with the person for their expected life.

As a result of changes to the CSFAA and the CSLA, the proposed Regulations have removed the tests for exceptional hardship and family income thresholds. It would now focus on the degree to which the physical or mental condition prevents the borrower from engaging in the labour force and post-secondary studies as a result of their condition.

As an operational policy requirement, the CSLP would continue to rely on a medical practitioner’s perspective to determine if a disability qualifies for special consideration. The assessment would no longer emphasize that a permanent disability is “restricting” a borrower from working or from participating in post-secondary education, but that a severe permanent disability “completely prevents” a borrower from seeking any remunerative employment. Borrowers who are able to participate in any form of sheltered employment or any form of post-secondary education would not be eligible for the PDB.

Although the criteria for eligibility for PDB would be more stringent, borrowers with a permanent disability who do not qualify for the PDB would be eligible for the Repayment Assistance Plan for Borrowers with Permanent Disabilities (RAP-PD) depending on their income. This plan is described more fully in the following section. Once an individual is approved for PDB, based on their inability to participate in the labour force or post-secondary education, they will no longer be eligible to receive any further assistance from the CSLP (i.e. further loans or grants).

Repayment Assistance Plan for Borrowers with Permanent Disabilities (RAP-PD)

There is conclusive evidence that borrowers with disabilities graduate with higher debt loads than non-disabled students who study in similar programs. Persons with permanent disabilities tend to earn less, are more likely to live in a family with low income than other Canadians, and are more likely to stay in this economic state. While borrowers with a permanent disability receive special financial assistance to help them address the barriers they face accessing post-secondary education, there is currently no enhanced repayment assistance program that takes into consideration their particular situation. Student loan debt presents greater challenges for Canadians with disabilities and may discourage them from pursuing post-secondary education.

Although current debt management benefits, including the Interest Relief and Debt Reduction in Repayment programs, are made available to all borrowers including those with disabilities, no specifically targeted measures are available, despite evidence that the latter are more likely to experience persistent financial problems over a longer period of time. The introduction of RAP-PD would provide an enhanced version of RAP to borrowers with permanent disabilities and would complement the PDB for those who do not qualify as having a “severe permanent disability.”

The proposed accelerated RAP-PD would enable individuals to have their loans written off faster than non-disabled borrowers who qualify for RAP (i.e. 10 years instead of 15) by allowing them to proceed directly to the Stage 2 of RAP, where the Government would cover the remainder of the monthly payment (both principal and interest, if required) that is not covered by the borrower’s affordable payment.

Statistics have shown that a higher proportion of RAP-PD eligible borrowers would have more persistent difficulties in repayment as they have higher than average debt loads, and their employment and earning rates are lower than average. Therefore, it becomes more cost effective to apply the gradual reduction of debt provided by Stage 2 rules immediately for these borrowers, rather than covering the interest shortfall and deferring the remaining principal balance for up to five years per Stage 1, as the interest costs to Government of carrying the outstanding loans would be reduced.

The same affordable payment formula for RAP would be used for RAP-PD, but allowable uninsured medical and other expenses related to the cost of accommodation of permanent disability would be deducted from the gross family income used in the debt-to-income ratio calculation before evaluating the affordable payment.

Regulatory and non-regulatory options considered

The proposed regulatory amendments are in response to legislative changes to the Canada Student Financial Assistance Act (CSFAA) and the Canada Student Loans Act (CSLA) included in the Budget Implementation Act, 2008 and are required to support the implementation of these new debt-management measures.

Benefits and costs

Costs

The costs to the Government for the proposed amendments to create the RAP under the Canada Student Financial Assistance Regulations (CSFAR) are estimated to be $21 million in 2009-2010, decreasing to $9.3 million in 2012-2013. This is in part due to one-time costs for initial implementation and increased eligibility for debt management measures.

There are no costs for the changes to the PDB.

The costs for the proposed amendment to create the RAP-PD are estimated to be $11.9 million in 2009-2010, decreasing to $2.9 million per year in 2012-2013.

Benefits

The federal amount of a student loan is typically at least 60% of an individual’s Government student loans. The RAP would provide benefits for an additional 22 500 people per year with no borrower being negatively affected. Currently, borrowers are not required to make any payments while they are on the Interest Relief program, and any payments made between Debt Reduction in Repayment program approvals are applied to interest first. Under the proposed amendments, RAP payments would first go towards repaying the principal of their loan. This would reduce the amount of interest paid by the borrower over the lifespan of the loan as the amount outstanding is reduced with each payment, and would enable the loan to be repaid in a shorter period of time, thus alleviating the burden on borrowers.

Post-secondary education students are facing increased costs and hence are carrying ever-increasing debt loads upon completion. Difficulties in repayment are one of the major concerns of stakeholders of the CSLP. RAP would help alleviate these concerns by targeting assistance based on income and need, and by providing assistance commensurate with the level of need. During times of economic difficulties, this assistance is especially beneficial for those newly graduated and experiencing difficulty in obtaining employment.

The proposed amendments would also enhance the benefits to borrowers with a permanent disability or a severe permanent disability by offering them improved repayment assistance based on their ability to repay. Many students with disabilities are still deterred from participating in post-secondary education due to the greater expenses they incur. These expenses are not only limited to education-related costs such as interpreters, translators and technical equipment, but also include living expenses. Many students with disabilities take a longer amount of time than students without disabilities to complete their post-secondary education and are generally less able to generate funds to finance their education (e.g. obtain summer employment or work part-time during the school year). RAP-PD would provide assistance for these borrowers with a guaranteed repayment period and allowances for the extra expenses that these individuals experience.

Increasing access and completion rates of post-secondary education for these under-represented groups would assist in increasing the income level of some marginalized groups and begin to break the cycle of poverty. As well, an increase in the number of individuals with post-secondary education in the labour market would assist in reducing the shortage of skilled labour, thus helping to sustain the economic growth and prosperity that Canada has achieved.

Rationale

Canada is facing shortages in the supply of skilled labour in key sectors and in certain regions. With an aging labour force, long-term wealth and prosperity must now depend on sustained productivity growth, an area in which Canada lags behind several trading partners (including the United States).

The introduction of the RAP would help mitigate the recent increases in average student loan debt by post-secondary education graduates that have been brought on by increases in average undergraduate tuition fees. In addition, the current economic situation has resulted in increased difficulties by borrowers in obtaining suitable employment. Enhanced repayment assistance will help alleviate temporary repayment difficulties that recent graduates may be experiencing.

Labour market participation rates of individuals with permanent disabilities decreases with the severity of their disability. By reducing the risks associated with the repayment of student loan debt, more individuals with permanent disabilities may be motivated to borrow money in order to attend and complete post-secondary education. Therefore, repayment assistance tailored to borrowers with permanent disabilities would provide incentives for more individuals with a permanent disability to undertake and complete their post-secondary education, thereby enhancing their participation in the labour market.

The CSLP Review was based on an extensive analysis of financial assistance to students validated by all stakeholders.

Consultation

Human Resources and Skills Development Canada conducted extensive diagnostic and consultative activities from the spring to the fall of 2007.

A diagnostic was developed based on an internal analysis of the CSLP to develop broad policy directions for federal financial assistance to students. Conclusions were shared with provincial/ territorial officials as well as selected experts, which validated the diagnostic’s findings. Following these consultations, it was agreed that the diagnostic had correctly captured the successes and the challenges of federal financial assistance to students.

The department of Human Resources and Skills Development Canada also conducted an online consultation in September 2007, which yielded responses from individual Canadians, stakeholder groups, and additional submissions presented outside of the online process. Of note, comments were received from key members of the National Advisory Group on Student Financial Assistance (NAGSFA), whose members include the Canadian Alliance of Student Associations, the Canadian Federation of Students, provincial post-secondary officials and Student Financial Aid administrators. NAGSFA meets on a regular basis with officials from the Department of Human Resources and Skills Development.

One group of stakeholders that expressed hesitation regarding the value of the measures for their membership was those representing medical students. They argued that the measures to be introduced would not go far enough to assist them with their high debt loads and repayment. They also noted that due to the income received while in residency they may be ineligible for RAP.

Provincial/territorial counterparts have been extensively consulted and the final solution of RAP has the support of the majority of these individuals. Some are expected to implement similar measures on provincial/territorial loans in 2009-2010, and more may join in subsequent years.

Implementation, enforcement and service standards

These measures are expected to be available for the 2009-2010 academic year. Borrowers who have finished studies in April 2009 would be entering their repayment period on November 1, 2009. This initial repayment period is the time when borrowers typically begin to experience repayment difficulties.

RAP and RAP-PD would be delivered through either the Financial Institutions or the National Student Loans Service Centre (NSLSC) depending on the type of loans involved. The NSLSC is the contracted corporation that delivers student loans and debt management measures on behalf of the Government of Canada.

RAP would be delivered through the NSLSC and through the process already in place for current debt management measures. The NSLSC would create the systems architecture to provide the RAP to individuals in possession of Direct Loans or a combination of a Direct Loan and a Risk-shared or Guaranteed Loan. This program would be available to all individuals with federal financial assistance to students from all jurisdictions that participate in the CSLP. The framework for the provision of RAP to individuals with Risk-shared and Guaranteed loans only would be provided through the financial institution providing the loan.

For those provinces that have integrated their provincial financial assistance to students programs with the CSLP, these loans would have at minimum the federal loan eligible for RAP. With the zero-payment income level set at the current Interest Relief threshold, most borrowers would not be disadvantaged if provinces do not initially implement RAP.

Performance measurement and evaluation

The improvements to the CSLP would be monitored, assessed and reported by HRSDC against the CSLP’s Results-based Management and Accountability Framework (RMAF), which includes considerations for client-centric service quality, service delivery efficiency and portfolio performance. The RMAF would be expanded to include the new Canada Student Grant Program.

As a companion document to the Program’s RMAF, the CSLP has developed a Risk-based Audit Framework (RBAF) to document the key risks faced by the Program and to identify an action plan of audit and review strategies that would mitigate these risks.

The RMAF and RBAF are being updated and unified into an integrated document. The new integrated RMAF/RBAF would reflect the proposed changes and would be finalized by the end of the 2009-2010 fiscal year. As part of this, a draft Performance Measurement Framework (PMF) is undergoing a review and consultation process and would be finalized to reflect the proposed changes. This process would include consultation and review among departmental officials, central agencies and various other partners and stakeholders.

In 2006-2007 the CSLP began a five-year Summative Evaluation Framework Plan. In the final year of this plan a supplementary evaluation plan would begin, in order to evaluate proposed changes to the program announced in Budget 2008.

The Supplementary Evaluation Plan will include an econometric evaluation of RAP in 2009-2010 and again in 2012-2013 to determine the effect of RAP on default rates of CSLP borrowers. Other performance measures will be considered as well, but since performance tends to be affected extensively by economic conditions, the evaluation will be done with a model that will mitigate economic changes as a factor.

Given the size and complexity of the CSLP, a five-year approach to evaluation work, consistent with that used in other large departmental programs such as Employment Insurance and Canada Pension Plan, was adopted for the summative evaluation of CSLP.

There will be an extensive survey of post-secondary education entrants in 2008-2009 to act as a baseline for pre-Budget 2008 measurements. There will be follow-up surveys beginning in 2011-2012 to begin to measure the effectiveness of the Budget 2008 initiatives. The summative evaluation report will be complete in 2015-2016 to evaluate the effectiveness of the program changes.

Contact

Barbara Glover
Director General
Canada Student Loans Program
Human Resources and Skills Development Canada
200 Montcalm Street, Tower II, 1st Floor
Gatineau, Quebec
K1A 0J9
Telephone: 819-997-1094
Fax: 819-953-9591

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to section 15 (see footnote a) of the Canada Student Financial Assistance Act (see footnote b) and section 17 (see footnote c) of the Canada Student Loans Act (see footnote d), proposes to make the annexed Regulations Amending the Canada Student Financial Assistance Regulations and the Canada Student Loans Regulations.

Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Glennie Graham, Senior Director, Canada Student Loans Program, Human Resources and Skills Development Canada, 200 Montcalm Street, Tower 2, Gatineau, Quebec K1A 0J9 (tel: 819-956-8937; e-mail: glennie.graham@hrsdc-rhdsc.gc.ca).

Ottawa, June 4, 2009

JURICA ČAPKUN
Acting Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE CANADA STUDENT FINANCIAL ASSISTANCE REGULATIONS AND THE CANADA STUDENT LOANS REGULATIONS

CANADA STUDENT FINANCIAL ASSISTANCE REGULATIONS

1. Subsection 2(1) of the Canada Student Financial Assistance Regulations (see footnote 2) is amended by adding the following in alphabetical order:

“severe permanent disability” means a functional limitation caused by a physical or mental impairment that prevents a borrower from performing the daily activities necessary to participate in studies at a post-secondary school level and in the labour force and is expected to remain with the person for their expected life; (invalidité grave et permanente)

2. (1) Paragraph 15(1)(i) of the Regulations is replaced by the following:

(i) if the borrower fails to comply with subsection 19.1(1) or 20.1(1), section 20.3 or subsection 24(3), the 30th day after the end of the applicable repayment assistance period or after the day of the notice, as the case may be;

(2) Subsection 15(1) of the Regulations is amended by striking out “or” at the end of paragraph (j) and by replacing paragraph (k) with the following:

(k) if the borrower has been granted repayment assistance under section 20 or a reduction of outstanding principal under section 42 or 42.1 or section 30.1 of the Canada Student Loans Regulations, as they read immediately before the coming into force of this paragraph, the earlier of, as the case may be, the day of the reduction or

(i) in the case of a borrower who has a permanent disability, the day that is 60 months after

(A) in respect of the loans referred to in paragraph 19(1)(b)(i), the day on which the borrower most recently ceased to be a full-time student under section 8 or, in the case of a borrower to whom only guaranteed student loans have been made, section 4.1 of the Canada Student Loans Regulations, and

(B) in respect of the loans referred to in paragraph 19(1)(b)(ii), the day on which the borrower most recently ceased to be a full-time student under section 8 or a part-time student under section 12.3, as the case may be, and

(ii) in any other case, the day on which the assistance begins; or

(l) the day on which, as the case may be, the obligations referred to in section 11 of the Act or the rights referred to in section 11.1 of the Act or section 13 of the Canada Student Loans Act, are terminated.

(3) Subsections 15(2) to (4) of the Regulations are replaced by the following:

(2) Subject to subsections (5), (6) and (9),

(a) if an event referred to in any of paragraphs (1)(a) to (l) occurs the Minister shall, effective on the applicable day referred to in that paragraph,

(i) deny a borrower a new certificate of eligibility for any student loan, and

(ii) if a certificate of eligibility has been issued to a borrower, deny the borrower a new student loan; and

(b) if an event referred to in any of paragraphs (1)(a) to (j) and (l) occurs, the Minister shall terminate, effective on the applicable day referred to in that paragraph,

(i) in respect of all outstanding student loans made to the borrower as a full-time student, an interest-free period, and

(ii) in respect of an outstanding student loan made to the borrower as a part-time student, an interest-only period.

(3) If an event referred to in paragraph (1)(a) or (b) occurs and the Minister pays a claim for loss in respect of the borrower’s guaranteed student loans, the Minister shall refuse to grant to the borrower repayment assistance under section 19 or 20.

(4) If an event referred to in paragraph (1)(h) or (i) occurs, the Minister shall terminate repayment assistance granted under section 19 or 20 and refuse to grant to the borrower further repayment assistance.

(4) Paragraph 15(5)(b) of the Regulations is replaced by the following:

(b) the measure referred to in paragraph (2)(b) shall take effect on the last day of the period of studies for which the certificate of eligibility was issued.

(5) Paragraph 15(6)(b) of the Regulations is replaced by the following:

(b) the measure referred to in paragraph (2)(b) shall take effect at the end of the period of studies for which the certificate of eligibility was issued.

3. The portion of subsection 16(1) of the Regulations before paragraph (a) is replaced by the following:

16. (1) Subject to subsection (5), where a borrower is subject to a measure taken in accordance with subsection 15(2), (3) or (4) due to the occurrence of an event referred to in paragraph 15(1)(a), (b) or (i), the borrower is entitled to a new student loan, a new certificate of eligibility, another interest-free period and further repayment assistance under section 19 or 20 if

4. The headings before section 19 and sections 19 to 24 of the Regulations are replaced by the following:

PART V

REPAYMENT ASSISTANCE PLAN

FIRST STAGE

19. (1) Subject to section 15 and section 9 of the Canada Student Loans Regulations, the Minister may, on application in the prescribed form containing the prescribed information, provide the first stage of a repayment assistance plan to a borrower for a period of six months if

(a) the borrower resides in Canada;

(b) the borrower has signed, in respect of

(i) risk-shared loans, guaranteed student loans or direct loans made to the borrower as a full-time student, a consolidated risk-shared loan agreement, a consolidated guaranteed student loan agreement or a consolidated direct loan agreement, as the case may be, and

(ii) risk-shared loans or direct loans made to the borrower as a part-time student, a student loan agreement or a direct student loan agreement, as the case may be;

(c) all of the risk-shared loan agreements and guaranteed student loan agreements referred to in paragraph (b) are held by a lender, or, in the case where an event referred to in any of paragraphs 15(1)(c) to (g) or paragraphs 9(1)(c) to (g) of the Canada Student Loans Regulations has occurred, by the Minister or a lender;

(d) no more than 120 months have elapsed

(i) in respect of the loans referred to in paragraph (b)(i), since the day on which the borrower most recently ceased to be a full-time student under section 8 or, in the case of a borrower to whom only guaranteed student loans have been made, section 4.1 of the Canada Student Loans Regulations, and

(ii) in respect of the loans referred to in paragraph (b)(ii), since the day on which the borrower most recently ceased to be a full-time student under section 8 or a part-time student under section 12.3, as the case may be; and

(e) the borrower’s monthly affordable payment calculated under subsection (2) is less than their monthly required payment calculated under subsection (3).

(2) The monthly affordable payment is equal to

(a) $0, if the borrower’s monthly family income is no more than the minimum monthly income threshold for their family size determined in accordance with Schedule 1; or

(b) the borrower’s monthly family income multiplied by the lesser of the amounts determined by the following formulae

0.2A 1.5[(X – Y)/100Z + 0.01]A

where

A is the ratio, in relation to all loans referred to in paragraph (1)(b) and provincial student loans, of the borrower’s outstanding principal to the borrower’s outstanding principal plus the outstanding principal of those loans for which instalments are due for any spouse or common-law partner of the borrower,

X is the borrower’s monthly family income,

Y is the monthly income threshold for the borrower’s family size determined in accordance with Schedule 1,

Z is the monthly increment for the borrower’s family size determined in accordance with Schedule 1.

(3) The monthly required payment is equal to

(a) the outstanding principal of the loans referred to in subparagraph (1)(b)(i) and provincial student loans, amortized over a period of the greater of

(i) six months, and

(ii) 120 months minus the number of months that have elapsed since the day referred to in subparagraph (1)(d)(i) plus the number of months since that day during which the borrower benefited from any special interest-free periods under section 19 or 20 or section 17 or 18 of the Canada Student Loans Regulations, as they read immediately before the coming into force of this section, or repayment assistance under this section;

(b) the outstanding principal of the loans referred to in subparagraph (1)(b)(ii), amortized over a period of the greater of

(i) six months, and

(ii) 120 months minus the number of months that have elapsed since the day referred to in subparagraph (1)(d)(ii), plus the number of months since that day during which the borrower benefited from any special interest-free periods under section 19 or 20 as they read immediately before the coming into force of this section, or repayment assistance under this section; and

(c) in respect of the loans referred to in paragraph (1)(b)(ii) for which the borrower qualifies for an interest-only period, the amount of the monthly interest-only payment that is required by the student loan agreement or direct student loan agreement, as the case may be.

(4) A borrower shall receive no more than 60 months, in the aggregate, of special interest-free periods granted under section 19 or 20 or section 17 or 18 of the Canada Student Loans Regulations, as they read immediately before the coming into force of this section, and repayment assistance under this section

(a) in respect of any loan referred to in subparagraph (1)(b)(i), since the day referred to in subparagraph (1)(d)(i); and

(b) in respect of any loan referred to in subparagraph (1)(b)(ii), since the day referred to in subparagraph (1)(d)(ii).

19.1 (1) A borrower shall, no later than the day that is 30 days after a repayment assistance period ends, pay to the lender or the Minister, as the case may be, the federal portion of the monthly affordable payments calculated under subsection 19(2) in respect of that period.

(2) The amount of interest payable by the borrower for a month during a repayment assistance period on the outstanding principal shall be reduced by the lender or the Minister, as the case may be, by the federal portion of the difference between the monthly required payment calculated under subsection 19(3) and the monthly affordable payment calculated under subsection 19(2). That reduction shall only be made in relation to the months for which the borrower complies with subsection (1).

(3) If the reduction referred to in subsection (2) is made by the lender, the Minister, on being notified of the reduction by the lender in the prescribed form, shall pay to the lender the amount of the reduction.

(4) In this section, “federal portion” means the ratio of outstanding principal of the loans referred to in paragraph 19(1)(b) to the outstanding principal of the loans referred to in that paragraph and any provincial student loans.

(5) Payments made under this section shall be attributed in proportion to the outstanding principal of each loan referred to in paragraph 19(1)(b).

SECOND STAGE

20. (1) Subject to section 15 and section 9 of the Canada Student Loans Regulations, the Minister may, on application in the prescribed form, provide the second stage of a repayment assistance plan to a borrower for a period of six months if

(a) the borrower meets the conditions set out in paragraphs 19(1)(a) to (c);

(b) the borrower

(i) has a permanent disability, or

(ii) has received 60 months, in the aggregate, of the periods referred to in subsection 19(4) or at least 120 months has elapsed,

(A) in respect of the loans referred to in subparagraph 19(1)(b)(i), since the day referred to in subparagraph 19(1)(d)(i), and

(B) in respect of the loans referred to in subparagraph 19(1)(b)(ii), since the day referred to in subparagraph 19(1)(d)(ii); and

(c) the borrower’s monthly affordable payment calculated under subsection (2) is less than their monthly required payment calculated under subsection (3).

(2) The monthly affordable payment is equal to

(a) in the case of a borrower who has a permanent disability

(i) $0, if the borrower’s monthly family income, less their monthly disability-related expenses not covered by their public health care or private insurance, is no more than the monthly income threshold for their family size determined in accordance with Schedule 1; and

(ii) the borrower’s monthly family income multiplied by the lesser of the amounts determined by the following formulae:

0.2A 1.5[(W – Y)/100Z + 0.01]A

where

A is the ratio, in relation to all loans referred to in paragraph 19(1)(b) and provincial student loans, of the borrower’s outstanding principal to the borrower’s outstanding principal plus the outstanding principal of those loans for which instalments are due for any spouse or common-law partner of the borrower,

W is the borrower’s monthly family income less their monthly disability-related expenses not covered by their public health care or private insurance,

Y is the monthly income threshold for the borrower’s family size determined in accordance with Schedule 1;

Z is the monthly increment for the borrower’s family size determined in accordance with Schedule 1;

(b) in any other case, the amount referred to in subsection 19(2).

(3) The monthly required payment is equal to

(a) the outstanding principal of the loans referred to in paragraph 19(1)(b)(i) and provincial student loans, amortized over a period of the greater of six months and

(i) in the case of a borrower who has a permanent disability, 120 months minus the number of months that have elapsed since the day referred to in subparagraph 19(1)(d)(i); and

(ii) in any other case, 180 months minus the number of months that have elapsed since the day referred to in subparagraph 19(1)(d)(i); and

(b) the outstanding principal of the loans referred to in subparagraph 19(1)(b)(ii) amortized over a period of the greater of six months and

(i) in the case of a borrower who has a permanent disability, 120 months minus the number of months that have elapsed since the day referred to in subparagraph 19(1)(d)(ii), and

(ii) in any other case, 180 months minus the number of months that have elapsed since the day referred to in subparagraph 19(1)(d)(ii).

20.1 (1) A borrower shall, no later than the day that is 30 days after a repayment assistance period ends, pay to the lender or the Minister, as the case may be, the federal portion of the monthly affordable payments calculated under subsection 20(2) in respect of that period.

(2) The amount owing as outstanding principal and interest for a month during a repayment assistance period by a borrower in respect of the loans referred to in paragraph 19(1)(b) shall be reduced by the lender or Minister, as the case may be, by the federal portion of the difference between the monthly required payment calculated under subsection 20(3) and the monthly affordable payment calculated under subsection 20(2). That reduction shall only be made in relation to the months for which the borrower complies with subsection (1).

(3) If the reduction referred to in subsection (2) is made by the lender, the Minister, on being notified of the reduction by the lender in the prescribed form, shall reimburse the lender the amount of the reduction.

(4) In this section, “federal portion” means the ratio of outstanding principal of the loans referred to in paragraph 19(1)(b) to the outstanding principal of the loans referred to in that paragraph and any provincial student loans.

(5) Payments made under this section shall be attributed in proportion to the outstanding principal of each loan referred to in paragraph 19(1)(b).

COMMENCEMENT OF REPAYMENT ASSISTANCE PERIOD

20.2 A repayment assistance period shall begin no earlier than the later of

(a) the first day of the month that is six months before the day on which the borrower applies for the assistance,

(b) in the case of a loan referred to in subparagraph 19(1)(b)(i), the day on which the principal amount and any interest commence to be payable by the borrower,

(c) in the case of a loan referred to in subparagraph 19(1)(b)(ii), the first day of the month following the month in which the borrower receives the loan, and

(d) the day on which these regulations come into force.

CONDITION

20.3 If any accrued interest remains unpaid on the day on which repayment assistance begins, the borrower shall, on or before the day that is 30 days after the repayment assistance period ends,

(a) pay to the lender or the Minister, as the case may be, the unpaid accrued interest; or

(b) if they have not already done so, enter into a revised agreement for the payment of a period of up to three months of the unpaid accrued interest and pay to the lender or the Minister, as the case may be, any remaining unpaid accrued interest.

ADMINISTRATION

21. (1) With the written authorization of the Minister, a lender

(a) who holds a borrower’s risk-shared loan agreement may exercise the powers given to the Minister under subsections 15(3) and (4) and sections 19 and 20; and

(b) who holds a borrower’s guaranteed student loan agreement may exercise the powers given to the Minister under sections 19 and 20 and subsections 9(4) and (5) of the Canada Student Loans Regulations.

(2) The Minister shall provide the lender any information that is necessary to enable the lender to act under subsection (1).

22. (1) If an application is made for repayment assistance, notice of a decision in respect of that application shall be given to the borrower and the lender or, if the lender is acting under subsection 21(1), to the borrower and the Minister.

(2) The notice shall set out

(a) the day on which the repayment assistance begins and ends;

(b) the amount of the payment required under subsection 19.1(1) or 20.1(1); and

(c) the fact that the decision to grant repayment assistance is subject to the condition set out in section 20.3.

RECONSIDERATION

23. (1) The Minister may, on the written request of the borrower and based on documentary evidence provided by the borrower, reconsider a borrower’s application for repayment assistance if

(a) the borrower’s application has been rejected for the sole reason that the borrower did not meet the criterion set out in paragraph 19(1)(e) or 20(1)(c); and

(b) unforeseen and unavoidable circumstances beyond the control of the borrower or their spouse or common-law partner have led to the borrower incurring extraordinary expenses.

(2) The Minister shall provide a notice of the determination to the borrower in the case of a direct loan and to the borrower and the lender in all other cases.

MISTAKE

24. (1) If repayment assistance is granted because of an error by the borrower in their application, the Minister may cancel or reduce the assistance.

(2) The Minister shall provide a notice of the cancellation or reduction to the borrower, in the case of a direct loan, and to the borrower and the lender, in all other cases, specifying

(a) the date of the notice; and

(b) the day on which the repayment assistance is to be cancelled or reduced.

(3) A borrower shall, within 30 days after the date of the notice,

(a) repay to the Minister or the lender, as the case may be, the amount of repayment assistance that the borrower was not entitled to receive; or

(b) enter into a revised agreement for the repayment of that amount.

(4) A lender shall, without delay after the date of the notice, repay to the Minister any amount paid by the Minister as a result of the error.

5. Section 26 of the Regulations is replaced by the following:

26. If a repayment assistance period has been granted to a borrower, the provisions of any loan agreement or guaranteed student loan agreement that was in effect between the borrower and the lender or between the borrower and the Minister, as the case may be, on the day on which the borrower applied for that period shall be suspended until the earliest of

(a) the day on which repayment assistance is terminated in accordance with subsection 15(4),

(b) the end of that repayment assistance period, and

(c) in respect of the borrower’s consolidated student loan agreement or consolidated guaranteed student loan agreement, if any, the day on which the borrower again becomes a full-time student in accordance with subsection 6(2) or 7(2).

6. The heading before section 42 and sections 42 to 43 of the Regulations are repealed.

7. Schedules 1 and 2 to the Regulations are replaced by the Schedule 1 set out in the schedule to these Regulations.

CANADA STUDENT LOANS REGULATIONS

8. The portion of subsection 8(3) of the Canada Student Loans Regulations (see footnote 3) before paragraph (a) is replaced by the following:

(3) A period of repayment,

9. (1) Paragraph 9(1)(i) of the Regulations is replaced by the following:

(i) if the borrower fails to comply with subsection 19.1(1) or 20.1(1), section 20.3 or subsection 24(3) of the Canada Student Financial Assistance Regulations, on the 30th day after the end of the applicable repayment assistance period or after the day of the notice, as the case may be;

(2) Paragraph 9(3)(d) of the Regulations is replaced by the following:

(d) refuse to grant the borrower repayment assistance referred to in section 19 or 20 of the Canada Student Financial Assistance Regulations.

(3) Subsections 9(4) and (5) of the Regulations are replaced by the following:

(4) Subject to subsection (8), when the outstanding balance of the principal amount of a guaranteed student loan and any accrued interest become payable under any of paragraphs (1)(c) to (j), the Minister shall, effective on the day referred to in that paragraph, terminate an interest-free period in respect of all of the borrower’s outstanding full-time guaranteed loans.

(5) When the outstanding balance of the principal amount of a guaranteed student loan and any accrued interest become payable under paragraph (1)(h) or (i), the Minister shall, in addition to the measures taken under subsections (3) and (4), terminate any repayment assistance granted to the borrower under section 19 or 20 of the Canada Student Financial Assistance Regulations and refuse to grant further repayment assistance.

10. (1) The portion of subsection 10(1) of the Regulations before paragraph (a) is replaced by the following:

10. (1) A borrower who has been the subject of a measure taken in accordance with subsection 9(3), (4) or (5) is entitled to an interest-free period or repayment assistance under section 19 or 20 of the Canada Student Financial Assistance Regulations if, on or after the earlier of the day referred to in paragraph 9(1)(a), (b) or (i) and the day on which the measure was taken,

(2) Paragraph 10(1)(b) of the Regulations is replaced by the following:

(b) an event referred to in paragraph 9(1)(h) or (j) has not occurred in respect of the borrower’s guaranteed student loans;

(3) Paragraph 10(2)(b) of the Regulations is replaced by the following:

(b) an event referred to in paragraph 9(1)(h) or (j) has not occurred in respect of the borrower’s guaranteed student loans;

(4) Subsection 10(3) of the Regulations is repealed.

11. Subsection 13(4) of the Regulations is replaced by the following:

(4) Subject to subsection 14(4), the annual rate of interest applicable in any period for which the borrower or the Minister is liable to pay interest to a lender on a guaranteed student loan shall be calculated using simple interest.

12. The heading before section 16.6 and section 16.6 of the Regulations are replaced by the following:

REPAYMENT ASSISTANCE PLAN

16.6 Sections 19 to 26 of the Canada Student Financial Assistance Regulations apply to borrowers and lenders.

13. Sections 17 to 21.2 of the Regulations are repealed.

14. The heading after section 24 of the Regulations is replaced by the following:

PAYMENT ON SEVERE PERMANENT DISABILITY

25. For the purposes of subsection 13(1) of the Act, “severe permanent disability” means a functional limitation caused by a physical or mental impairment that prevents a borrower from performing the daily activities necessary to participate in studies at a post-secondary school level and the labour force and is expected to remain with the person for their expected life.

15. Paragraphs 26(b) and (c) of the Regulations are replaced by the following:

(b) a statement signed by a qualified medical practitioner that the borrower suffers from a severe permanent disability; and

(c) a statement signed by or on behalf of the borrower setting out the borrower’s income.

16. The portion of section 27 of the Regulation before paragraph (a) is replaced by the following:

27. If, pursuant to subsection 13(1) of the Act, the Minister is satisfied that a borrower, by reason of a severe permanent disability, is or will never be able to repay a guaranteed student loan, the Minister shall notify

17. Paragraph 28(1)(c) of the Regulations is replaced by the following:

(c) subject to subsections (2) and (3), if the borrower is in default in the payment of an instalment, fails to enter into a consolidated guaranteed student loan agreement as required by subsection 7(1) or (2) or fails to comply with subsection 24(3) of the Canada Student Financial Assistance Regulations, within the period beginning on the day that is three months after the day on which the default or failure began and ending 180 days after the day on which the default or failure began; and

18. The heading before section 30.1 and sections 30.1 and 30.2 of the Regulations are repealed.

COMING INTO FORCE

19. These Regulations come into force on August 1, 2009.

SCHEDULE
(Section 7)

SCHEDULE 1
(Subsections 19(2) and 20(2))

MONTHLY INCOME THRESHOLDS AND INCREMENTS

Family Size	Monthly Income Threshold	Monthly Increment
1	$1,684	$250
2	$2,631	$350
3	$3,399	$425
4	$4,009	$500
5 and over	$4,569	$575

[24-1-o]

Footnote a
S.C. 2008, c. 28, s. 108

Footnote b
S.C. 1994, c. 28

Footnote c
S.C. 2008, c. 28, s. 113

Footnote d
R.S., c. S-23

Footnote 1
There are no RAP provisions for part-time guaranteed loans, since these loans are no longer in existence. They were last disbursed in 1995 and were required to be repaid within 24 months under the current CSLR.

Footnote 2
SOR/95-329

Footnote 3
SOR/93-392

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