Hon. Elizabeth Hubley:

Honourable senators, today we will play a little game. Perhaps you are familiar with it, from episodes of "Sesame Street." It is called "one of these things is not like the others."

Here is my list: Court-imposed fines; court-imposed family payments; court-imposed damages in civil cases; court-imposed liabilities from fraud; and, government student loans.

The answer seems obvious, does it not? That is, unless you read the Bankruptcy and Insolvency Act. In this act, you find that all of these things are the same. When it comes to declaring bankruptcy, government student loans are treated the same way as court findings against an individual and are exempt from relief through bankruptcy. While the exception for student loans is only for 10 years, it still seems incongruous that student loans are lumped in with court-ordered payments. Senator Goldstein, in his remarks in support of Bill S-205, outlined some of the history behind this categorization — principally, the fear of widespread abuse of the bankruptcy provisions of the Canadian legal system by recent graduates.

First let me dispense with this myth. Not only is there no documented justification for this viewpoint, the reality is quite the opposite. There is substantial evidence to show that this viewpoint is wrong. Studies have looked at bankruptcy applications before this exception was enacted, and the conclusions were that there was no evidence of widespread fraud. Those people who were listing student loan debts in bankruptcy applications were those who were unable to profit from their education. The reasons for this were widespread, from disability through to declining job futures in a given field. It was evident that these were legitimate cases of people experiencing undue hardship; that is, people who needed a fresh start and people who the Bankruptcy Act was intended to help.

Why is there a special status for student loans? The existing provision leads to the assumption that any bankruptcy applicant with a student loan is fraudulent, that there is no valid reason to apply for bankruptcy relief for a student loan and, even worse, this is a blanket provision. The applicant does not even have the option of proving that they are honest and acting in good faith. The law does not provide for an appeal process or recognize that there can be a legitimate reason for applying for bankruptcy due to excessive student debt.

At present, students cannot hope for relief from overly burdensome student loans for 10 years. It does not matter if the student suffers from some disability that prevents them from earning a living. It does not matter if economic pressures prevent them from earning a living. It does not matter if family situations limit their choices. In most cases, their student loan is the main problem. If they find themselves in trouble, there is no hope. Although they may leave university full of promise for the future, much can happen in 10 years.

Honourable senators, I fully support this bill and congratulate Senator Goldstein for introducing it. In fact, I wish that this bill went farther, and removed fully the student loan exemption. There is no need to assume that students who need to seek bankruptcy protection are perpetrating a fraud. This bill will at least give them the opportunity to prove that they are acting in good faith, a simple option which is not available to them now.

Although we can start to impose some sanity into the system by passing this bill, I believe that we must go much further. After all, the underlying problem is student debt. As a society, we constantly repeat the mantra that the path to a prosperous future is through education, but successive governments have failed and are failing young Canadians. We repeatedly acknowledge the importance of education, not only to the individual, but also to the health of our economy and our society. In the meantime, the cost of education continues to increase. The response has been to give more loans to students, but is that really the answer? If we truly believe in the importance of higher education, why do we add to the system that burdens young graduates with huge debt loads? If we did not force high debt on our students, we need not worry about whether or not student loans are covered in bankruptcy legislation.

Perhaps a few figures will help to describe the situation faced by many students. Last year, Statistics Canada released a report entitled, "How Students Fund Their Post-Secondary Education," which looked at data up to the year 2002. One of the facts that jumped out at me was the increase in tuition. From 1990 until 2002, tuition increased by an average annual rate of 8.1 per cent. When one compares this to inflation, at an average annual increase of 1.9 per cent, one will see that tuition has increased four times faster than inflation. This report also noted that, when one looks at higher-priced university programs, the participants were predominantly from families from higher socio-economic backgrounds. This suggests that perhaps we, as a society, are limiting some programs to those who can afford the program, not those who are best suited for the program.

Another report released last year from Human Resources and Skills Development Canada analysed trends in student borrowing from 1990 to 2000. This study found that, although the percentage of university and college students who take advantage of government student loan programs remained about 50 per cent for the study period, the typical amount owed over this 10-year period increased by over 60 per cent. It is not surprising that this same study found that the number of students having difficulty paying back their loans has increased over the 10 years.

In conclusion, these statistics reveal an underlying problem: While we talk about the importance of higher education and the need to encourage students to pursue higher education, we then sit by and watch the barriers for those same students climb higher and higher. It is not surprising that we are here today talking about student bankruptcy. However, while this bill will remove one of the glaring faults in the system, and I fully support this initiative, we are missing the real point. Today I encourage and challenge all honourable senators to begin dealing with the real problem, the problem of student debt and the increasing cost of higher education.

Hon. Sharon Carstairs: Would the honourable senator accept a question?

Senator Hubley: Certainly.

Senator Carstairs: Honourable senators, let me congratulate the Honourable Senator Hubley on her speech and Senator Goldstein on this extremely important initiative.

Honourable senators, I want to set the stage by explaining my own error. I had thought that the six-month period following a student's graduation — and where they had not given indication that they were going to continue on school the next year — was a period which was interest-free. However, it is not. Interest actually begins to accrue the day the students have completed their course. The six-month period refers to a period of time when they can set up their repayment schedule.

I subsequently learned that the bureaucracy is taking some three or four months to respond to the student with respect to what this repayment schedule will be. If a student does not finish classes and begin immediately to negotiate how to pay back their student loan — should they let a couple of months go by — they will find themselves in default, and they will be listed in the statistics as a student in default.

Does the Honourable Senator Hubley believe that is fair to the students of this country?

Senator Hubley: I thank the honourable senator for her question. I also appreciate her illuminating the problem as it comes down on students. Of course, what Senator Carstairs has stated is correct and, of course, I do not agree with it.

Hon. Jane Cordy: Would the senator take another question? I should like to congratulate Senator Hubley on her speech, along with Senator Goldstein for raising this extremely important issue.

There are students in Canada with overwhelming debt. To not be able to declare bankruptcy until 10 years has passed since graduation puts a tremendous onus on a student, particularly in an age where so many of the jobs students are getting now are contract jobs. These young people are not guaranteed employment for a full year, and they have no benefits. They are getting short-term contracts one after the other.

I know the honourable senator has done some studies on this subject. I am wondering whether she has come across any information to suggest a correlation between students who are buried under debt and mental health problems? We are talking here of people in their late 20s only and who are faced with debt they cannot get out of. I have heard of depression and other mental health issues — and, in some cases, unfortunately, suicides — as a result of debt these students are facing.

Senator Hubley: I thank the honourable senator for her question. Again, she has shown to us the effects of heavy student loans on individuals.

One of the most difficult things today for our young people who have worked their way through university and accumulated a huge debt load, in many instances, is that they do not have any hope of getting the job they have worked all their lives for and received the training and the education to fulfill. That letdown is a difficult one.

That realization, when they get out of school and are faced with their debt, is difficult on our young people. In other words, we are pushing our young people back; we are not bringing them forward and providing the opportunity for them to be successful in their lives.

The other thing that is difficult about this subject is that we do not hear enough about it, so I thank the honourable senator for her question. I am sorry I do not have actual statistics to share with Senator Cordy, but I have heard many stories that tell me that what she has alluded to does in fact happen.

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