ICBC may soon be acting as a sort of repo man for the government. In a proposed amendment to the Financial Administration Act, the provincial Crown corporation insurer would be able to withhold issuing a driver’s license or plates to those who have defaulted on their student loans and are not currently repaying them. The amendment means to make ICBC a sort of enforcer in the government’s debt collections, with former students as the targets.
Defaulted loans amount to no small sum of money. Roughly 15 per cent of student loan dollars in British Columbia are defaulted upon, matching the Canadian average, according to figures from Statistics Canada looking at default rates from 2006 to 2011.
To me, it seems like this number should be lower. But not long ago it was actually a lot higher. Back in 2003- 04, the default rate was as high as 28 per cent, and it has declined almost every year since, according to the 2012- 2013 Canada Student Loans Program Annual Report. The reasons why that might be are worth knowing if you’ve got a student loan.
Canada’s repayment assistance plan (RAP) is intended to keep students from defaulting on their loans. The idea here is that no student will ever have to pay more than 20 per cent of his or her income, that the repayment period should never last for more than 15 years and that loan payments will be based on family size and income. Basically, it’s a set of rules meant to keep things fair, but more practically, it’ll allow you to reduce your payments or even stop making payments for a short period of time while you figure things out. It’s certainly not perfect, but it’s much more lenient than the repayment schemes you’ll hear about from your bank.
Despite the olive branch, student loans are certainly not trouble free, nor is the system that makes them necessary a good one. There’s more than $15 billion currently owing to the government in student loans, with the average borrower carrying a debt load of $28,000, according to a student debt report by the Canadian Federation of Students. That’s a big burden to carry, even if you do manage to repay it within the mandated 15 years. Imagine how difficult it might be to save for your kids’ education while still repaying your own?
But if you’ve taken out a student loan, you need to face reality: you owe that money and your only good option is to pay it back. With programs like RAP in place, there’s really no reason you shouldn’t be able to make some kind of payment. Even in worst case scenarios where you’re unable to work, you’ve got options and your loan may even be forgiven.
Deep inside the debate over whether or not ICBC should be able to withhold driver’s licenses is a debate over political philosophy. Because the collective taxpayer is essentially the lender of a student loan, they should have the right to collect on a debt owing. But at what cost?
In B.C. especially, the ability to drive amounts to a certain kind of freedom. Considering the state of public transportation in some cities, the line between a car as a convenience and a car as a necessity is blurry, especially when that vehicle is required for a defaulted borrower to work. No work, no money – no money, no repayment. The government might be shooting itself in the foot with this one. Not to mention the fact that inability to repay a loan has nothing to do with someone’s ability to drive – which is all ICBC should be concerned with, no matter who lines its coffers.