Why are student loans permitted to be reported as credit items to the credit bureau? Are they really considered a product of consumer or retail credit? Years ago, student loans were not reported on ones credit history. What happened?
Let's build a platform for discussions in answer to these questions and explore things in greater detail.
Johnny
Questions Received ...
Moderator: michelle
11 posts • Page 1 of 1
Questions Received ...
by Johnny » Sat Apr 15, 2006 1:21 pm
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Johnny - Site Admin
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by aaronstew » Fri Apr 28, 2006 4:07 pm
Hi John!
That is an interesting question... I wonder how many people have stellar credit outside of student loans? My guess is the majority of us.
Also, the discrepancy between the government loans v bank loans being reported or not reported... there is no fundamental difference in the nature of the loans, simply the source, which ultimately all come from the same place (either federal or provincial if I'm not mistaken?) just distributed through retail banks, who in turn receive the guarantee from the government.
Seems like since the government is making the guarantee, we should have only been beholden to them, with recourse through the tax system etc. but not through the consumer/credit arena.
While the education received is a benefit, it is not a commodity per se, and not returnable for even a fraction of the initial cost... my point being consumer credit has a tangible element to it, which in most cases is recoverable (i.e.- you don't pay your mortgage, they take the house, you skip your lease payment, they take your car etc....).
Another aspect is that consumer credit has an element of choice to it... you either buy/finance the "things" or not. Many of the things you buy on credit are not a necessity but a luxury, in a sense, and therefore "optional", whereas education, I don't think anyone would see as optional.
I'm rambling, but let's see where we go with this!
Cheers!
That is an interesting question... I wonder how many people have stellar credit outside of student loans? My guess is the majority of us.
Also, the discrepancy between the government loans v bank loans being reported or not reported... there is no fundamental difference in the nature of the loans, simply the source, which ultimately all come from the same place (either federal or provincial if I'm not mistaken?) just distributed through retail banks, who in turn receive the guarantee from the government.
Seems like since the government is making the guarantee, we should have only been beholden to them, with recourse through the tax system etc. but not through the consumer/credit arena.
While the education received is a benefit, it is not a commodity per se, and not returnable for even a fraction of the initial cost... my point being consumer credit has a tangible element to it, which in most cases is recoverable (i.e.- you don't pay your mortgage, they take the house, you skip your lease payment, they take your car etc....).
Another aspect is that consumer credit has an element of choice to it... you either buy/finance the "things" or not. Many of the things you buy on credit are not a necessity but a luxury, in a sense, and therefore "optional", whereas education, I don't think anyone would see as optional.
I'm rambling, but let's see where we go with this!
Cheers!
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aaronstew - Posts: 42
- Joined: Mon Feb 07, 2005 11:19 am
- Location: Toronto
by Johnny » Sat Apr 29, 2006 7:34 pm
Credit reports are a very sacred thing to many people, and these lending groups know this. So, they lean on credit reporting as a tool to aid in the recovery of debt.
So, for those who are able to pay, it is in their best interest to do so. However, for those who truly cannot pay the demands that these banks and governments impose, one of the many punishments is to wreck that individual's credit portfolio, and tie them up really tight, financially. The governments and banks do not take into account that most people really do not deserve to be in the bad spot they are in. They simply lump everyone together who is in default - and treat them to the episodic bashings by hired third-party collectors. This is an outlook problem because this sort of thing clearly demonstrates that the government doesn't consider people who owe student loans to be the most productive and honest people. Otherwise, why would they:
1) subject people to the third-party agencies while knowing that they break the rule and directives, which is clearly NOT in the best interest of the people. It is the government's responsibility to act in the best interest of the people, is it not?
2) automatically seize income tax rebates and GST without taking into account a borrower's financial situation and NEEDS?
3) allow costs to increase by way of intereswt acrual well knowing that people are not going to be able to repay these debt amounts ina reasonable period of time?
4) Apply every penny that a defaulted borrower pays to the back interest FIRST - and principle after all interest is paid? (think of those borrowers out there who have 20, 30, aqnd 40 thousand dollar loans in default!)
It is less costly and easier for them to just to stereotype - and treat EVERYONE the same old agressive way. It is dehumanizing.
There are just so many things wrong with the system, Stew. It is broken in several areas and they (governments and banks) do not even have the necessary tools to fix it. The CFW Group spends the majority of it's time fixing these problems that they (governments and lending institutions) leave behind, and demonstrating the tools that are needed - because we do have them. Sooner or later they are going to have to see this. Maybe they do and do not want to admit that they cannot fix their own broken machine. The system knows it is broken - and it doesn't appear overly concerned. Is therea hidden agenda? Otherwise, why wouldn't the individuals in charge of the system seek the tools and solutions they need to fix the broken parts?
The CFW Group has the tools that the government needs so that people can live and breathe a lot easier, - and they don't cost much! If the governments truly knew what we do, and how to use these tools, the student loan default rates would DROP SIGNIFICANTLY.
Hypothesis:
The Canada Student Loans Program & National Collection Services depends on collection agencies to do their recovery work, and they also depend on NSLSC/Edulinx to service student loan borrowers, and help keep them out of default.
The default rate is VERY high in Canada (over 24%). There is no way Edulinx/NSLSC can service the government's needs in this regard because the government sets the standards too high - and the universities in this country set the tuition rates and costs to an even higher platform!
Edulinx does it's job and provides services to borrowers, and it reaps it's rewards - regardless of the high default rate! Remember, Nelnet (an American Corporation) owns Edulinx, and their shares are down a wee bit as of recently, but over the past years - they raked in so many millions of dollars in profit from Canadian students. This is where the Canada Student Loans Program is really broken. Many people blame the service center level (Edulinx) for the default issues, but it is not Edulinx that is the problem (outside of the issues involving lost documents and other errors that cause financial problems for borrowers); - it is the Government of Canada and the university system. Edulinx simply does what it is told to do by their client - swho happens to be the government of Canada.
The Canada Student Loans Progam is no longer a career pathway, educational outpost, and economic stability provider for Canadian youth because it is impossible for the larger percentage of Canadians to acquire it due to tragic economic restrictions and restaints that these Canadian student loan borrowers face.
The bottom line - the default rate is too high. So, someone is not doing their job properly. Who is it, exactly? Or, is it a culmination of severely broken systems working together?
This is where the heated discussions should be focused.
Johnny
So, for those who are able to pay, it is in their best interest to do so. However, for those who truly cannot pay the demands that these banks and governments impose, one of the many punishments is to wreck that individual's credit portfolio, and tie them up really tight, financially. The governments and banks do not take into account that most people really do not deserve to be in the bad spot they are in. They simply lump everyone together who is in default - and treat them to the episodic bashings by hired third-party collectors. This is an outlook problem because this sort of thing clearly demonstrates that the government doesn't consider people who owe student loans to be the most productive and honest people. Otherwise, why would they:
1) subject people to the third-party agencies while knowing that they break the rule and directives, which is clearly NOT in the best interest of the people. It is the government's responsibility to act in the best interest of the people, is it not?
2) automatically seize income tax rebates and GST without taking into account a borrower's financial situation and NEEDS?
3) allow costs to increase by way of intereswt acrual well knowing that people are not going to be able to repay these debt amounts ina reasonable period of time?
4) Apply every penny that a defaulted borrower pays to the back interest FIRST - and principle after all interest is paid? (think of those borrowers out there who have 20, 30, aqnd 40 thousand dollar loans in default!)
It is less costly and easier for them to just to stereotype - and treat EVERYONE the same old agressive way. It is dehumanizing.
There are just so many things wrong with the system, Stew. It is broken in several areas and they (governments and banks) do not even have the necessary tools to fix it. The CFW Group spends the majority of it's time fixing these problems that they (governments and lending institutions) leave behind, and demonstrating the tools that are needed - because we do have them. Sooner or later they are going to have to see this. Maybe they do and do not want to admit that they cannot fix their own broken machine. The system knows it is broken - and it doesn't appear overly concerned. Is therea hidden agenda? Otherwise, why wouldn't the individuals in charge of the system seek the tools and solutions they need to fix the broken parts?
The CFW Group has the tools that the government needs so that people can live and breathe a lot easier, - and they don't cost much! If the governments truly knew what we do, and how to use these tools, the student loan default rates would DROP SIGNIFICANTLY.
Hypothesis:
The Canada Student Loans Program & National Collection Services depends on collection agencies to do their recovery work, and they also depend on NSLSC/Edulinx to service student loan borrowers, and help keep them out of default.
The default rate is VERY high in Canada (over 24%). There is no way Edulinx/NSLSC can service the government's needs in this regard because the government sets the standards too high - and the universities in this country set the tuition rates and costs to an even higher platform!
Edulinx does it's job and provides services to borrowers, and it reaps it's rewards - regardless of the high default rate! Remember, Nelnet (an American Corporation) owns Edulinx, and their shares are down a wee bit as of recently, but over the past years - they raked in so many millions of dollars in profit from Canadian students. This is where the Canada Student Loans Program is really broken. Many people blame the service center level (Edulinx) for the default issues, but it is not Edulinx that is the problem (outside of the issues involving lost documents and other errors that cause financial problems for borrowers); - it is the Government of Canada and the university system. Edulinx simply does what it is told to do by their client - swho happens to be the government of Canada.
The Canada Student Loans Progam is no longer a career pathway, educational outpost, and economic stability provider for Canadian youth because it is impossible for the larger percentage of Canadians to acquire it due to tragic economic restrictions and restaints that these Canadian student loan borrowers face.
The bottom line - the default rate is too high. So, someone is not doing their job properly. Who is it, exactly? Or, is it a culmination of severely broken systems working together?
This is where the heated discussions should be focused.
Johnny
-
Johnny - Site Admin
- Posts: 1072
- Joined: Wed Dec 08, 2004 12:29 pm
- Location: Halifax
by aaronstew » Wed May 03, 2006 12:42 pm
Hi Johnny,
With regard to the default rate, I would suggest that part of the core of the problem rests in the classification of Student Loans as a credit product.
The default rate, over and above those caused by administrative and bureaucratic "errors" is so high because the repayment schedule is determined in such an arbitrary manner, similar to a credit card or loan...
If you were approved for $X in studen loans, you are, upon completion, required to pay $Y per month for a set term to pay it off. Defaults result when people are unable to make these payments for any number of reasons, not least of which would be the limited income potential for entry level positions in most fields.
There has to be a more reasonable way of determining payback... it may not be popular, but I would think that tying SL repayment directly to income taxes would be a fair way of doing it... rebates automatically applied to balance (without interest accumulating in the interim) until it is paid off... essentially guranteeing the loan against future income... as you make more and are able to get more in refunds, you pay more of your loan off.
As I say, this may not be popular, but in my way of thinking, those tax returns are money that you wouldn't have anyway since it went to tax... those who don't pay taxes, or have income etc... obviously would not have to pay on their loans... this also eliminates the problem of those small minority who actively seek to avoid paying... if you're working and have income, then you pay... period... no lump sums, no credit ratings, no CA's... simply run as an extension of an existing system, therefore not onerous in terms of cost to set up, as a separate income contingent system might be...
Any thoughts?
Cheers!
Aaron
With regard to the default rate, I would suggest that part of the core of the problem rests in the classification of Student Loans as a credit product.
The default rate, over and above those caused by administrative and bureaucratic "errors" is so high because the repayment schedule is determined in such an arbitrary manner, similar to a credit card or loan...
If you were approved for $X in studen loans, you are, upon completion, required to pay $Y per month for a set term to pay it off. Defaults result when people are unable to make these payments for any number of reasons, not least of which would be the limited income potential for entry level positions in most fields.
There has to be a more reasonable way of determining payback... it may not be popular, but I would think that tying SL repayment directly to income taxes would be a fair way of doing it... rebates automatically applied to balance (without interest accumulating in the interim) until it is paid off... essentially guranteeing the loan against future income... as you make more and are able to get more in refunds, you pay more of your loan off.
As I say, this may not be popular, but in my way of thinking, those tax returns are money that you wouldn't have anyway since it went to tax... those who don't pay taxes, or have income etc... obviously would not have to pay on their loans... this also eliminates the problem of those small minority who actively seek to avoid paying... if you're working and have income, then you pay... period... no lump sums, no credit ratings, no CA's... simply run as an extension of an existing system, therefore not onerous in terms of cost to set up, as a separate income contingent system might be...
Any thoughts?
Cheers!
Aaron
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aaronstew - Posts: 42
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- Location: Toronto
by akheila » Thu May 04, 2006 11:08 am
I like the idea of tying payments to your income. I'm not sure that taking a return would work best, as we've already seen around here that people often begin to count on that money.
How about coming up with a calculation like they have for how much they pay out for child tax credit or GST rebates. And if you have SL then you don't get the GST rebate. They aren't usually in the habit of taking Child tax credit. But again something like this system sounds like less people would go into default. And you would need other ways to recoup the loans from people who leave the country.
Of course the government doesn't really care about the numbers of default, most politicians were business men/women before. So again its about the number of $ in interest that keep rolling in. How else could this budget have so many tax cuts! I didn't see any relief for students in the budget. What a suprise! Even a 1% reduction on our interest rates would help! (in some cases) instead of GST or getting rid of some of the corporate taxes! Of all things to make the news how small wineries will benefit? Great if we could afford to drink!
How about coming up with a calculation like they have for how much they pay out for child tax credit or GST rebates. And if you have SL then you don't get the GST rebate. They aren't usually in the habit of taking Child tax credit. But again something like this system sounds like less people would go into default. And you would need other ways to recoup the loans from people who leave the country.
Of course the government doesn't really care about the numbers of default, most politicians were business men/women before. So again its about the number of $ in interest that keep rolling in. How else could this budget have so many tax cuts! I didn't see any relief for students in the budget. What a suprise! Even a 1% reduction on our interest rates would help! (in some cases) instead of GST or getting rid of some of the corporate taxes! Of all things to make the news how small wineries will benefit? Great if we could afford to drink!
- akheila
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- Joined: Tue Jan 24, 2006 4:03 pm
- Location: Moose Jaw
by aaronstew » Wed May 17, 2006 3:35 pm
What about making the repayment pre-emptive and ongoing?
Kind of like an EI/CPP type deduction off your paycheque? Eliminates any credit aspect and therefore any negativity associated therewith.
I'm sure that many will say "I don't want another deduction on my paycheque" but when you think about it, how many of you really believe that you're getting your money's worth out of CPP?
Really, make it like 0.5% of gross pay... a few bucks every couple of weeks, and that's all you need to worry about... and similarly, if you overpay throughout the year, you get a credit... if you have no income, you have nothing to worry about. On assistance? Again, no deductions, no one is going to harass you... get back on your feet and start working? Payment picks up where it left off before the trouble... Got a degree, but a crappy job? You're only paying a portion of your income, not a randomly generated number... sure, you'd pay for the duration of your working life, but wouldn't it be worth the peace of mind?
Something along those lines has to have some merit... I see it as win/win...
I look forward to comments!
Kind of like an EI/CPP type deduction off your paycheque? Eliminates any credit aspect and therefore any negativity associated therewith.
I'm sure that many will say "I don't want another deduction on my paycheque" but when you think about it, how many of you really believe that you're getting your money's worth out of CPP?
Really, make it like 0.5% of gross pay... a few bucks every couple of weeks, and that's all you need to worry about... and similarly, if you overpay throughout the year, you get a credit... if you have no income, you have nothing to worry about. On assistance? Again, no deductions, no one is going to harass you... get back on your feet and start working? Payment picks up where it left off before the trouble... Got a degree, but a crappy job? You're only paying a portion of your income, not a randomly generated number... sure, you'd pay for the duration of your working life, but wouldn't it be worth the peace of mind?
Something along those lines has to have some merit... I see it as win/win...
I look forward to comments!
-
aaronstew - Posts: 42
- Joined: Mon Feb 07, 2005 11:19 am
- Location: Toronto
by akheila » Wed May 17, 2006 3:42 pm
I agree I like the sound of that! They say when we get theree there will not be any CPP left for us anyway, so why should we pay it? Before you can contribute to CPP your deductions go to CSL or PSL. Works for me!
- akheila
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by Buff » Wed May 17, 2006 9:42 pm
How dare you propose any solutions that might make sense. You know full well that things don't work that way around here. Simple is not a good thing. It might make things easier and we just can't have that.
Buff
Buff
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by Buff » Sat May 20, 2006 12:57 pm
Hmm, I wonder if my cynical side might have come shining through on that one. I saw a sign at lunch today that said (in French) "Pessimists are just well-informed optimists". I figure it describes me pretty well.
Buff
Buff
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Re: Questions Received ...
by kkmcjo » Wed Aug 05, 2009 4:01 pm
Hello John, first I'd like to appologize, I have never used a forum before and I wasn't sure how to ask you a question. Please, I would very much appreciate to read your input to the following four questions.
I've had a collection agency calling me at work, even after I requested for them not to call me at work so I contacted the Ministry of Consumer Services and they stated that I had to send the agency a registered letter or fax requesting not to contact me at work. My student loan is stats barred and I sent the fax, no signature (typed name though), but I'm a little worried, could it be used as acknowledgement?
I did write at the end of the fax "Furthermore, I do not have any outstanding debt, stop calling altogether". Would this help alleviate acknowledgement?
I was tempted to request all original documentation pertaining to the debt, any acknowledgement and any payments made but would that not be considered acknowledgement if I requested the documentation in writing?
What would happen if they sent the original documentation by registered mail, would recieving and signing for the registered mail be considered acknowledgement.
It just seems like there are so many one-sided loopoles in trying to find out your status with no way for a person to find out where they are in life. I seems like the Ministry is set up to force people to acknowledge debt to be able to stop collection harrassment. This debt ruined my life for over 14 years and I still haven't recovered from it, I would have been better off to rob a bank for the money, at least I'd be out of jail and free and clear by now.
I've had a collection agency calling me at work, even after I requested for them not to call me at work so I contacted the Ministry of Consumer Services and they stated that I had to send the agency a registered letter or fax requesting not to contact me at work. My student loan is stats barred and I sent the fax, no signature (typed name though), but I'm a little worried, could it be used as acknowledgement?
I did write at the end of the fax "Furthermore, I do not have any outstanding debt, stop calling altogether". Would this help alleviate acknowledgement?
I was tempted to request all original documentation pertaining to the debt, any acknowledgement and any payments made but would that not be considered acknowledgement if I requested the documentation in writing?
What would happen if they sent the original documentation by registered mail, would recieving and signing for the registered mail be considered acknowledgement.
It just seems like there are so many one-sided loopoles in trying to find out your status with no way for a person to find out where they are in life. I seems like the Ministry is set up to force people to acknowledge debt to be able to stop collection harrassment. This debt ruined my life for over 14 years and I still haven't recovered from it, I would have been better off to rob a bank for the money, at least I'd be out of jail and free and clear by now.
- kkmcjo
- Posts: 1
- Joined: Wed Aug 05, 2009 3:10 pm
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