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Paul Massicotte

The Hon. Paul J. Massicotte, B.Comm., C.A. Senator Paul Massicotte was appointed to the Senate on June 26, 2003 by Prime Minister Jean Chrétien. He represents the province of Québec and the Senatorial Division of De Lanaudière.

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Bankruptcy and Insolvency Act

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Statement made on 05 February 2009 by Senator Yoine Goldstein (retired)

Hon. Yoine Goldstein:

Honourable senators, let me sincerely congratulate and welcome our 18 new senators who will be bringing to this chamber a variety of life experiences, knowledge, skills and commitment that can only serve to enhance this chamber. You are all very welcome. I think I can speak for everyone that we look forward to working with you.

Honourable senators, I must tell you that I was rather intrigued by the exchange between Senator Duffy and Senator Munson. Both senators remarked that they were people who Canadians looked at, listened to and recognized on their television sets and, earlier, on the radio. I must tell you that I, too, had some Canadians looking at me and listening to me for some 25 years at the University of Montreal. The fundamental difference between Senators Duffy and Munson was that I was teaching law and they had to listen to me because I was setting the exams, whereas, they willingly listened to Senator Duffy and Senator Munson.

Speaking about post-secondary education provides a good segue into the subject of our discussion today. Canadian universities and post-secondary educational institutions are internationally recognized for providing a first-class education. Canada's competitive advantage in the world economy is due in no small measure to the access afforded to bright young Canadians to our post-secondary education system, which is second to none in the world.

We must ensure, however, that the conditions to access student financial aid are fair and balanced and that there are no barriers to the growth of a highly-educated workforce.

When I first introduced this bill in the Thirty-ninth Parliament, I stated that it is neither a Liberal nor a Conservative bill, which indeed it is not. It is a bill for fair and balanced financing of post-secondary education presented in the spirit of non-partisanship. I reintroduce the bill with the belief and hope that honourable senators can come together across partisan lines to ensure that students have the necessary protection and to know that their investment in post-secondary education will not become a crushing burden on them if they fall on hard times due to circumstances beyond their control.

As I said when this bill was first introduced, post-secondary education is, in many respects, invaluable but it does not come cheaply. Indeed, as tuition fees have grown, students increasingly rely on support from government loans or government-guaranteed loans to receive the education they need to find employment in our knowledge-based economy and in the trades.

Student debt has become an inescapable reality for many young Canadians and their families. It is imperative that our government adopt a practical and compassionate approach when dealing with individuals who have trouble repaying student loans. Canadian bankruptcy legislation must follow suit.

At present, bankruptcy legislation does not permit former students experiencing financial difficulty to apply to be discharged from their student loans until a full five years have passed since they have left college or university. This rule applies even if it becomes clear much earlier that the former student is unable to repay the loan and will not be able to do so in the foreseeable future. As a result, potentially hundreds and perhaps thousands of young Canadians have been forced to suffer unreasonable financial hardship because of loans which they obtained in good faith with the view to entering the workforce and contributing to the Canadian economy but which they are now unable to pay because of circumstances beyond their control. Especially, at this point in time, many of these students or former students are unable to obtain jobs or have lost their jobs.

Our economic system values judicious risk taking, and bankruptcy is an important part of that system. It provides individuals, businesses and entrepreneurs with a way of dealing with debts they cannot pay back and of eventually starting over so that they can again play an active role in the economy. Bankruptcy allows individuals, entrepreneurs and investors to cope with the risk inherent in any business venture by allowing them to be freed from their debts if an entrepreneurial venture does not turn out as planned. Without the last resort availability of bankruptcy, people would be much less willing to take financial risks or invest their money in new ventures, which would greatly inhibit economic growth.

When students borrow money for post-secondary education, they are taking the same kind of risk that entrepreneurs take. They are taking a risk in investing in something that is likely, but not guaranteed, to benefit them and to benefit society. Student borrowers should therefore have the right to declare bankruptcy in appropriate circumstances in a timely fashion just like any investor or entrepreneur and be released from their debts just like any investor or entrepreneur.

However, student loans are treated differently from any other kind of loan in bankruptcy proceedings. Student loans are among the few debts that are not subject to discharge in the bankruptcy process. Student loans therefore continue, at least for a period of five years after graduation, to hound and depress students who are unable to repay the loans.

The only debts not included in the bankruptcy process, aside from student loans, are certain court-imposed fines and a limited number of other kinds of debt that are incurred, for instance, by way of fraud. Should we treat student loans as court-imposed fines, should we treat them as fraud or should we treat them as an investment?

Currently, a former student cannot be freed of student loans in bankruptcy proceedings until he or she has been out of school for seven years. A former student who is suffering severe financial hardship by reason of personal injury, illness in the family, fluctuations in the job market or any other personal catastrophe must wait five years before that student or former student can apply to the court for the inclusion of their student loans in the discharge mechanism of bankruptcy proceedings.

Bill S-219 would amend the Bankruptcy and Insolvency Act to automatically subject student loan debts to discharge if the bankruptcy occurs more than five years after this student ends his or her studies. It would also allow former students experiencing severe financial difficulty to apply to the court at any time to be discharged from student loan debts in bankruptcy proceedings if the former student can satisfy a judge that the student has acted in good faith in the management of the debt and has and will continue to experience hardship because of the debt. Furthermore, the judge would have to consider, first, the former student's efforts in seeking debt relief from other programs and other assistance; second, the former student's effort to pay the loan; third, the former student's future earning capacity; and, fourth, the former student's current and future financial obligations.

Honourable senators, Bill S-219 would assist young Canadians who borrowed money to pay for post-secondary education but who are unable to repay their loans because of circumstances beyond their control. This bill is for the student who undertakes an engineering degree but must terminate his or her studies because of an unfortunate and unexpected disability. This bill is for the medical student who, having built up substantial debt, must leave university to care for his or her new family before completing medical training. This bill is for young carpenters, plumbers and electricians who must leave trade school to care for an ailing parent before receiving their certification.

This bill is intended to provide a safety net and a shield for unfortunate young Canadians, and to encourage young Canadians to pursue their academic endeavours in the knowledge that if they do not succeed in their economic endeavours and fall on hard times, they will not be oppressed and depressed forever, ad vitam aeternam, by the crushing burden of their student loan debt.

Canada's competitiveness in the global economy depends in large measure on the knowledge and skills of its citizens, especially given the growing importance of advanced technology. A highly trained workforce increases Canadians' productivity, drives innovation and attracts foreign investment. An educated workforce benefits the Canadian economy and Canadian society as a whole.

Honourable senators, according to Industry Canada, "human capital has a crucial role in the knowledge economy — skilled and educated workers are needed to maximize the benefits of new technologies."

In a recent report, the Canadian Chamber of Commerce stated that by next year, 75 per cent of all new jobs created — and God knows we need new jobs created — will be high skilled, meaning that those without a post-secondary education will find it more difficult, if not impossible, to secure employment. By 2010, next year, only 6 per cent of jobs will be open to those with less than a high school diploma. The report begins by stating plainly and directly, "There is a skilled labour shortage facing Canada." Improving access to post-secondary education is the key way to meet this demand.

The cost of post-secondary education in Canada has risen dramatically over the past 20 years, with the average annual cost of university and college fees more than tripling between 1991 and 2006. Professional schools experienced the most dramatic tuition hikes, with the cost of medical school in Ontario, for instance, skyrocketing 500 per cent, from under $3,000 in 1990 to roughly $50,000 in 2004.

Canada needs more doctors, but students finishing high school must decide to invest a minimum of eight years and about $100,000 worth of school fees. For many families, these costs are prohibitive and students are forced to borrow money if they wish to attend college or university. One of the additional aggravating elements is that those students who come from families that can afford to pay these fees or help them with these fees are more likely to complete their university education than those who come from families less fortunate from an economic perspective.

Of course, rising tuition fees have been accompanied by growing levels of student debt. On January 21, 2009, barely one month ago, the Canadian Federation of Students reported that this year, total student loans will surpass $13 billion owed by over 1 million students. This sum does not include the additional approximately $5 billion in provincial student loans, nor does it account for private bank loans. Moreover, it is found that those students with smaller financial resources tend to incur greater debt.

More students are borrowing money to finance post-secondary education. More assistance is needed to help students pay for post-secondary education. In addition to improving access and funding, we need to ensure that other types of legislation do not discourage young people from pursuing post-secondary education.

Data is beginning to emerge showing that high debt levels affect the choices that people make after they graduate from high school. For example, college and university students might complete one degree or diploma but decide not to pursue further studies if they already have a lot of debt.

Studies have shown that students who go on to graduate or professional schools usually have much less debt than those who stop after one degree. This finding suggests that student loans could be preventing Canada from having a more highly skilled group of workers and a greater number of professionals.

There are also concerns about equity, as I said earlier, because those who have the advantage of coming from wealthy backgrounds are presumably more likely to complete their education without amassing significant debt and are therefore more likely to continue their studies.

In conducting research for this bill, I discovered stories about young Canadians who have had personal misfortune compounded by financial difficulties relating to the repayment of student loans. For example, there are young Canadians who graduated from college or university with significant debt, only to be diagnosed with a terminal illness and told they cannot work to earn a living. These people subsequently defaulted on their loans and then were harassed continually by collection agencies, even though it is clear to all parties that circumstances beyond their control have made payment impossible for them.

One thing has become clear over the last 10 years, and this is essential for an understanding of the philosophy behind this bill: there is absolutely no evidence that students have been abusing the bankruptcy process to rid themselves of student debt. There is no proof any of that occurs; no statistics and no evidence at all. The research is clear and consistent, and should be noted.

Canada needs post-secondary students and post-graduate students. Tuition fees are on the rise. Students rely increasingly on student loans to finance their studies and we have an obligation to find a way to relieve the burden on those who cannot afford to repay their student loans. I do not suggest in this bill that students who have had the benefit of education and the benefit of student loans should be given a free ride. This would be inconsistent with the fact that society and Canada as a whole will have invested in their education. I suggest that we provide a technique supervised by a court and judge with clear criteria to allow former students who have particular difficulty in repaying their loans to be relieved of that difficulty in whole or in part.

Honourable senators, the bill provides that a judge may hold and decide that the student should repay the loan nevertheless; that the student need not pay any part of the loan; or that the student should repay part of the loan and provide a schedule for such repayments. There is no free ride or free lunch. There is a desperate need to provide this safety net for former students who truly need it — young Canadians who have entered the work force and are unable to repay these loans — so that they may become an integral part of Canadian economic society free from the crushing burden of their debts. I urge honourable senators to move this bill to committee as quickly as possible. During the last session, the predecessor to this bill, with some differences, had received significant study by the Standing Senate Committee on Banking, Trade and Commerce and the study was virtually finished prior to prorogation. It is imperative to give the bill, on a non-partisan basis, urgent consideration.

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