Mr. Ken James (Parliamentary Secretary to Secretary of State for External Affairs):
Mr. Speaker, I would like to respond to the questions raised by the hon. member for St. Boniface which he first raised in this House on March 15.
The government is committed to reforming the Canada Student Loans Program with the aim of improving assistance for needy students while at the same time ensuring value for money for our taxpayers. The key to this reform will be the new financing arrangements for the program based on lender risk sharing. The central objective of the program, to provide financial assistance to needy students for the pursuit of post-secondary studies, will not only continue in the new arrangements but will be strengthened.
The hon. member has suggested that the new financing structure is a first step to privatization. This ignores the fact that the government has always used private sector capital to finance student loans. The new financing structure will provide for reasonable costs for borrowers in repayment and reduce the cost to taxpayers of the existing program.
I should remind the hon. member that under the current program the federal government guarantees 100 per cent of each loan. In the event of a default lenders have little incentive to apply the same level of diligence in servicing and collecting the student loans as they do with their own loans. This is inconsistent with other federal loan guarantee programs.
During a meeting of the National Advisory Group on Student Financial Assistance on June 2, 1993 the Secretary of State confirmed that under the new arrangements lenders will continue to make loans to all eligible students, except in the case of credit abuse. Lenders will be required by the terms of the contract to make loans available to needy students, the majority of whom have no credit history, security or co-signatory.
The introduction of lender risk-sharing in the new arrangements is expected to lower the over-all costs of the program and provide scope for the government to increase the assistance to individual students who may not be able to be served now. I thank the hon. member for raising this question.
Subtopic: SITTING RESUMED The House resumed at 5.31 p.m.