Vol. 148, No. 24 — November 19, 2014

Registration

SOR/2014-255 November 7, 2014

APPRENTICE LOANS ACT CANADA STUDENT FINANCIAL ASSISTANCE ACT

Apprentice Loans Regulations

P.C. 2014-1245 November 6, 2014

His Excellency the Governor General in Council, on the recommendation of the Minister of Employment and Social Development with the concurrence of the Minister of Finance, pursuant to section 12 of the Apprentice Loans Act (see footnote a) and section 15 (see footnote b) of the Canada Student Financial Assistance Act (see footnote c), makes the annexed Apprentice Loans Regulations.

APPRENTICE LOANS REGULATIONS

INTERPRETATION

Definitions — Act and Regulations

1. (1) The following definitions apply in the Act and in these Regulations.

“acknowledgment of liability”
« reconnaissance de responsabilité »

“acknowledgment of liability” means

“apprentice”
« apprenti »

“apprentice” means

“apprentice loan”
« prêt aux apprentis »

“apprentice loan” means a debt obligation incurred by an eligible apprentice on entering into an apprentice loan agreement that is owed to Her Majesty in right of Canada, as represented by the Minister.

“borrower”
« emprunteur »

“borrower” means a person to whom an apprentice loan is made under the Act.

“eligible apprentice”
« apprenti admissible »

“eligible apprentice” means an apprentice who is enrolled at a technical training provider for technical training in an eligible trade and whose primary occupation during the technical training period is to participate in that technical training.

“severe permanent disability”
« invalidité grave et permanente »

“severe permanent disability” means a functional limitation caused by a physical or mental impairment that prevents a borrower from performing the daily activities necessary to participate in an apprenticeship program and in the labour force and is expected to remain with them for their expected life.

“technical training”
« formation technique »

“technical training” means formal instruction or training that is offered by a technical training provider and that is determined by a province to be an essential element of an apprenticeship program in that province and required for the practice of an eligible trade.

“technical training period”
« période de formation technique »

“technical training period” means a continuous period of technical training that begins on the first day of the month in which technical training begins and ends on the last day of the month in which the training ends.

Definitions — Regulations

(2) The following definitions apply in these Regulations.

“Act”
« Loi »

“Act” means the Apprentice Loans Act.

“apprentice loan agreement”
« contrat de prêt aux apprentis »

“apprentice loan agreement” means an agreement entered into between an eligible apprentice and the Minister under section 4 of the Act that is in the form determined by the Minister and includes the social insurance number of the apprentice.

“apprenticeship program”
« programme d’apprentissage »

“apprenticeship program” means a program of practical experience, technical training and certification examination that must be undertaken — as determined by the province — by an apprentice in an eligible trade.

“common-law partner”
« conjoint de fait »

“common-law partner”, in respect of a borrower, means a person who is cohabiting with the borrower in a conjugal relationship, having so cohabited for a period of at least one year.

“confirmation of continued apprenticeship”
« confirmation d’apprentissage continu »

“confirmation of continued apprenticeship” means proof that a borrower is still registered with a province as an apprentice in an eligible trade.

“confirmation of enrolment”
« confirmation d’inscription »

“confirmation of enrolment” means proof that an apprentice is enrolled in technical training with a technical training provider.

“family income”
« revenu familial »

“family income” means the aggregate income — including income from employment, social programs, investments and monetary gifts — of the borrower and their spouse or common-law partner, as the case may be.

“financial assistance”
« aide financière »

“financial assistance” means any form of financial aid provided under the Act, including apprentice loans.

“fiscal year”
« exercice »

“fiscal year” means the one-year period that begins on April 1 in any year.

“guaranteed student loan”
« prêt garanti »

“guaranteed student loan” has the same meaning as in subsection 2(2) of the Canada Student Financial Assistance Regulations.

“permanent disability”
« invalidité permanente »

“permanent disability” means a functional limitation caused by a physical or mental impairment that restricts the ability of a person to perform the daily activities necessary to participate in an apprenticeship program or the labour force and that is expected to remain with them for their expected life.

“provincial loan”
« prêt provincial »

“provincial loan” has the same meaning as in subsection 2(2) of the Canada Student Financial Assistance Regulations.

“student loan”
« prêt d’études »

“student loan” has the same meaning as in subsection 2(1) of the Canada Student Financial Assistance Regulations.

Schedule 1 — Eligible trades

(3) For the purposes of subsection 2(1) of the Act, eligible trades are those that are listed in Schedule 1 to these Regulations.

OBTAINING AN APPRENTICE LOAN

Conditions

2. Subject to section 6, the Minister may make an apprentice loan to an eligible apprentice if the following conditions are met:

INTEREST-FREE PERIOD

No interest accrues

3. Subject to section 6, no interest accrues under a borrower’s apprentice loan in respect of the following periods:

PAYMENT OF PRINCIPAL AND INTEREST

Payment begins

4. The borrower must begin to repay the principal amount of any apprentice loan made to them, and interest, on the last day of the seventh month after the day on which interest started accruing.

SPECIAL PAYMENTS

Amount determined by Minister

5. (1) For the purposes of section 7 of the Act, the special payment amount for a province as determined by the Minister after consultation with the Chief Statistician of Canada is the amount for the fiscal year that is obtained by multiplying the total costs for the fiscal year for provinces where apprentices registered with those provinces are able to enter into apprentice loan agreements for the fiscal year, by the ratio of the estimated number of persons in the province in question who are at least 16 years of age but less than 65, to the estimated number of persons of those ages in provinces where apprentices registered with those provinces are able to enter into apprentice loan agreements.

Total costs

(2) In this section, total costs for a fiscal year means the amount determined by the formula

A + B − C

where

A is the estimated aggregate of all amounts paid by the Minister in that fiscal year to service providers under the Act and to collection agencies in respect of apprentice loans;

B is the estimated aggregate of

C is the estimated aggregate of

Rate of interest

(3) The rate of interest for the purposes of paragraph (a) of the description of B in subsection (2) is the average percentage yield, during the fiscal year in question, of Benchmark Bonds issued by the Government of Canada maturing in 10 years, as published by the Bank of Canada.

RESTRICTIONS ON OBTAINING FINANCIAL ASSISTANCE

Denial of loan

6. (1) An apprentice loan is to be denied to an eligible apprentice who

Definition of “applicable day”

(2) For the purposes of this section, “applicable day” means

Denial of loan or termination of interest-free period

(3) Subject to subsections (5) and (7),

Termination of repayment assistance

(4) If an event described in paragraph 2(g) or (h) occurs, the Minister must terminate any repayment assistance granted to the borrower under section 10 or 12 and refuse to grant further repayment assistance.

Loan received erroneously

(5) If an event described in paragraph (2)(a) occurs in respect of an apprentice loan made to a borrower and, subsequent to that event, the borrower erroneously receives an apprentice loan,

New loan or interest-free period

(6) If, before the last day of the apprenticeship program in which the borrower is registered at the time the event occurs, an event described in any of paragraphs (2)(b) to (f) occurs in respect of an apprentice loan made to a borrower, the borrower is entitled, if otherwise eligible, to a new apprentice loan or an interest-free period for that apprenticeship program.

Subsection (3) measures delayed

(7) If the borrower receives a new apprentice loan or an interest-free period under subsection (6), the measures referred to in subsection (3) take effect on the earlier of

REMOVAL OF RESTRICTIONS

New loan, interest-free period, repayment assistance

7. (1) Subject to subsection (6), a borrower who has been subject to a measure taken under subsection 6(3) or (4) because of the occurrence of an event described in paragraph 6(2)(a) or (h), is entitled to a new apprentice loan, another interest-free period and further repayment assistance under section 10 or 12 if

Rights in subsection (1) apply

(2) Subject to subsection (6), a borrower who is subject to a measure taken under subsection 6(3) because of the occurrence of an event described in any of paragraphs 6(2)(b) to (f) has the rights referred to in subsection (1) if

Rights in subsection (1) apply

(3) Subject to subsection (6), a borrower who is subject to a measure taken under subsection 6(3) or (4) because of the occurrence of the event described in paragraph 6(2)(g) has the rights referred to in subsection (1) if

Rights in subsection (1) apply

(4) A borrower, who has been the subject of a measure taken under subsection 6(3) or (4), has received an apprentice loan as a minor and has refused to ratify that loan as an adult, has the rights referred to in subsection (1) if

Rights in subsection (1) apply

(5) Subject to subsection (6), a borrower who is subject to a measure taken under subsection 6(3) or (4) because of the occurrence of an event described in paragraph 6(2)(i) has the rights referred to in subsection (1) if the borrower has paid in full the outstanding balance of their apprentice loans.

Judgment

(6) If a judgment has been obtained against a borrower, the borrower is not entitled to the rights referred to in subsection (1) unless, in addition to fulfilling the requirements set out in subsection (1), (2) or (3), the borrower has been released from that judgment.

APPRENTICE LOAN LIMIT

Maximum amount

8. The maximum amount of an apprentice loan for one technical training period is $4,000.

MAXIMUM AGGREGATE AMOUNT OF OUTSTANDING APPRENTICE LOANS

Prescribed amount

9. For the purposes of section 11 of the Act, the maximum aggregate amount of apprentice loans outstanding is $1.5 billion.

REPAYMENT ASSISTANCE PLAN

FIRST STAGE

Conditions

10. (1) Subject to section 6 of these Regulations and section 15 of the Canada Student Financial Assistance Regulations, the Minister must on application in the form determined by the Minister — including the borrower’s social insurance number — provide the first stage of a repayment assistance plan to a borrower for a period of six months if

Monthly affordable payment

(2) The monthly affordable payment is equal to

0.2A

Formula - Detailed information can be found in the surrounding text.

where

A is, in relation to apprentice loans, student loans, guaranteed student loans and provincial loans, the ratio of the borrower’s outstanding principal for which instalments are due to the sum of that amount and the outstanding principal for which instalments are due for any loan of the same type to a spouse or common-law partner of the borrower,

X is the borrower’s monthly family income,

Y is the monthly income threshold for the borrower’s family size determined in accordance with the table set out in Schedule 2, and

Z is the monthly increment for the borrower’s family size determined in accordance with the table set out in Schedule 2.

Monthly required payment

(3) The monthly required payment is equal to the sum of

Maximum number of months of repayment assistance

(4) A borrower must not receive more than 60 months, in the aggregate, of repayment assistance under this section since the day referred to in paragraph (1)(b).

Payment of federal portion

11. (1) A borrower must, no later than the day that is 30 days after a repayment assistance period ends, pay to the Minister the federal portion of the monthly affordable payments calculated in accordance with subsection 10(2) in respect of that period.

Reduction of interest

(2) The amount of interest payable by the borrower for a month during a repayment assistance period on the outstanding principal of apprentice loans is to be reduced by the Minister by the difference between the monthly required payment calculated in accordance with paragraph 10(3)(a) and the portion of monthly affordable payment attributed to apprentice loans calculated in accordance with subsection (4). That reduction is to be made only in relation to the months for which the borrower complies with subsection (1).

Definition of “federal portion”

(3) In this section, “federal portion” means

Attribution of payments

(4) Payments made under this section are to be attributed in proportion to the outstanding principal of each apprentice loan, student loan and guaranteed student loan for which instalments are due.

SECOND STAGE

Conditions

12. (1) Subject to section 6 of these Regulations and section 15 of the Canada Student Financial Assistance Regulations, the Minister must on application in the form determined by the Minister — including the borrower’s social insurance number — provide the second stage of a repayment assistance plan to a borrower for a period of six months if

Monthly affordable payment

(2) The monthly affordable payment is equal to

0.2A

Formula - Detailed information can be found in the surrounding text.

where

A is, in relation to apprentice loans, student loans, guaranteed student loans and provincial loans, the ratio of the borrower’s outstanding principal for which instalments are due to the sum of that amount and the outstanding principal for which instalments are due for any loan of the same type to a spouse or common-law partner of the borrower,

W is the borrower’s monthly family income less their monthly disability-related expenses not covered by their provincial health care or private insurance plan,

Y is the monthly income threshold for the borrower’s family size determined in accordance with the table set out in Schedule 2, and

Z is the monthly increment for the borrower’s family size determined in accordance with the table set out in Schedule 2; or

Monthly required payment

(3) The monthly required payment is equal to the sum of

Payment of federal portion

13. (1) A borrower must, no later than the day that is 30 days after a repayment assistance period ends, pay to the Minister the federal portion of the monthly affordable payments calculated in accordance with subsection 12(2) in respect of that period.

Reduction of principal and interest

(2) The amount owing as outstanding principal of apprentice loans and interest on those loans for a month during a repayment assistance period by a borrower is reduced by the Minister by the difference between the monthly required payment calculated in accordance with paragraph 12(3)(a) and the portion of the monthly affordable payment attributed to apprentice loans calculated in accordance with subsection (4). That reduction is made only in relation to the months for which the borrower complies with subsection (1).

Definition of “federal portion”

(3) In this section, “federal portion” means

Attribution of payments

(4) Payments made under this section are attributed in proportion to the outstanding principal of each apprentice loan, student loan and guaranteed student loan for which instalments are due.

BEGINNING OF REPAYMENT ASSISTANCE PERIOD

Beginning of period

14. A repayment assistance period begins no earlier than the later of

CONDITION

Unpaid accrued interest

15. If any accrued interest remains unpaid on the day on which a repayment assistance period begins, the borrower must, on or before 30 days after the day on which the repayment assistance period ends,

RECONSIDERATION OF APPLICATION

Conditions

16. (1) The Minister must, on the written request of the borrower and based on documentary evidence provided by the borrower, reconsider a borrower’s application for repayment assistance if

Notice

(2) The Minister must provide notice of his or her determination to the borrower.

BORROWER ERROR

Cancellation or reduction of repayment assistance

17. (1) If repayment assistance is granted based on an error by the borrower in their application for the assistance or for reconsideration, the Minister may cancel the assistance or reduce the amount of assistance.

Notice

(2) The Minister must provide notice of the cancellation or reduction to the borrower, specifying

Obligation of borrower

(3) The borrower must, within 30 days after the date of the notice,

EFFECT ON APPRENTICE LOAN AGREEMENT

Suspension

18. If repayment assistance is provided to a borrower, the apprentice loan agreement in effect between the borrower and the Minister on the day on which the borrower applies for that assistance is suspended until the earlier of

MEASURES

List of measures

19. (1) The following are measures for the purposes of subsection 20(1) of the Act:

Specified periods

(2) Subject to subsection (3), the following are the specified periods for the purposes of paragraphs (1)(a), (c) and (d):

Specified period — five years

(3) If more than one period applies to a person under subsection (2), the specified period is five years.

Limitation or prescription — measures

(4) The Minister must not take any measure under subsection (1) later than six years after the day on which he or she becomes aware of the false statement or misinterpretation or the false or misleading information.

CONSEQUENTIAL AMENDMENTS TO THE CANADA STUDENT FINANCIAL ASSISTANCE REGULATIONS

20. Subsection 2(2) of the Canada Student Financial Assistance Regulations (see footnote 1) is amended by adding the following in alphabetical order:

“apprentice loan” has the same meaning as in subsection 1(1) of the Apprentice Loans Regulations (prêt aux apprentis);

21. Section 15 of the Regulations is amended by adding the following after subsection (9):

(10) Student loans and guaranteed student loans shall be denied and the interest-free period shall be terminated if

22. (1) The portion of subsection 19(1) of the Regulations before paragraph (a) is replaced by the following:

19. (1) Subject to section 15 of these Regulations, section 9 of the Canada Student Loans Regulations and section 6 of the Apprentice Loans Regulations, the Minister may, on application in the prescribed form containing the prescribed information, provide the first stage of a repayment assistance plan to a borrower for a period of six months if

(2) The description of A in paragraph 19(2)(b) of the Regulations is replaced by the following:

A is, in relation to student loans, guaranteed student loans, provincial loans and apprentice loans, the ratio of the borrower’s outstanding principal for which instalments are due to the sum of that amount and the outstanding principal for which instalments are due for any loan of the same type to a spouse or common-law partner of the borrower,

(3) Subsection 19(3) of the Regulations is amended by striking out “and” at the end of subparagraph (a)(ii), by adding “and” at the end of subparagraph (b)(ii) and by adding the following after paragraph (b):

23. Subsection 19.1(5) of the Regulations is replaced by the following:

(5) Payments made under this section shall be attributed in proportion to the outstanding principal of each student loan, guaranteed student loan and apprentice loan for which instalments are due.

24. The portion of subsection 20(1) of the Regulations before paragraph (a) is replaced by the following:

20. (1) Subject to section 15 of these Regulations, section 9 of the Canada Student Loans Regulations and section 6 of the Apprentice Loans Regulations, the Minister may, on application in the prescribed form containing the prescribed information, provide the second stage of a repayment assistance plan to a borrower for a period of six months if

25. (1) The description of A in subparagraph 20(2)(a)(ii) of the Regulations is replaced by the following:

A is, in relation to apprentice loans as well as student loans, guaranteed student loans, provincial loans and apprentice loans, the ratio of the borrower’s outstanding principal for which instalments are due to the sum of that amount and the outstanding principal for which instalments are due for any loan of the same type to a spouse or common-law partner of the borrower,

(2) Subsection 20(3) of the Regulations is amended by striking out “and” at the end of subparagraph (a)(ii), by adding “and” at the end of subparagraph (b)(ii) and by adding the following after paragraph (b):

26. Subsection 20.1(5) of the Regulations is replaced by the following:

(5) Payments made under this section shall be attributed in proportion to the outstanding principal of each student loan, guaranteed student loan and apprentice loan for which instalments are due.

COMING INTO FORCE

S.C. 2014, c. 20

27. These Regulations come into force on the day on which Division 30 of Part 6 of the Economic Action Plan 2014 Act, No. 1 comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

SCHEDULE 1
(Subsection 1(3))

ELIGIBLE TRADES

Column 1
Eligible Trades
Column 2
Provinces
Ont. Que. N.S. N.B. Man. B.C. P.E.I. Sask. Alta. N.L. Y.T. N.W.T. Nvt.
Agricultural Equipment Technician        
Mécanicien de machinerie agricole                          
Appliance Service Technician        
Technicien d’entretien d’appareils électroménagers                          
Automotive Painter    
Peintre d’automobiles                          
Automotive Service Technician
Mécanicien de véhicules automobiles                          
Baker    
Boulanger-pâtissier                          
Boilermaker      
Chaudronnier                          
Bricklayer    
Briqueteur-maçon                          
Cabinetmaker
Ébéniste                          
Carpenter
Charpentier                          
Concrete Finisher        
Finisseur de béton                          
Construction Craft Worker          
Manœuvre en construction                          
Construction Electrician
Électricien en construction                          
Cook
Cuisinier                          
Drywall Finisher and Plasterer                  
Jointoyeur et plâtrier                          
Electric Motor System Technician      
Électromécanicien                          
Floorcovering Installer  
Poseur de revêtements souples                          
Gasfitter - Class A        
Monteur d’installations au gaz (classe A)                          
Gasfitter - Class B        
Monteur d’installations au gaz (classe B)                          
Glazier
Vitrier                          
Hairstylist
Coiffeur                          
Heavy Duty Equipment Technician
Mécanicien d’équipement lourd                          
Industrial Electrician        
Électricien industriel                          
Industrial Mechanic (Millwright)
Mécanicien industriel (de chantier)                          
Instrumentation and Control Technician  
Technicien en instrumentation et contrôle                          
Insulator (Heat and Frost)  
Calorifugeur (chaleur et froid)                          
Ironworker (Generalist)          
Monteur de charpentes en acier (généraliste)                          
Ironworker (Reinforcing)        
Monteur de charpentes en acier (barres d’armature)                          
Ironworker (Structural/Ornamental)        
Monteur de charpentes en acier (structural / ornemental)                          
Landscape Horticulturist      
Horticulteur-paysagiste                          
Lather (Interior Systems Mechanic)    
Latteur (spécialiste de systèmes intérieurs)                          
Machinist
Machiniste                          
Metal Fabricator (Fitter)      
Monteur-ajusteur de charpentes métalliques                          
Mobile Crane Operator    
Opérateur de grue automotrice                          
Mobile Crane Operator (Hydraulic)        
Opérateur de grue automotrice (hydraulique)                          
Motor Vehicle Body Repairer (Metal and Paint)  
Débosseleur-peintre                          
Motorcycle Mechanic            
Mécanicien de motocyclettes                          
Oil Heat System Technician          
Technicien de système de chauffage à mazout                          
Painter and Decorator
Peintre et décorateur                          
Partsperson
Préposé aux pièces                          
Plumber
Plombier                          
Powerline Technician    
Monteur de lignes sous tension                          
Recreation Vehicle Service Technician        
Technicien de véhicules récréatifs                          
Refrigeration and Air Conditioning Mechanic
Mécanicien de réfrigération et d’air climatisé                          
Rig Technician          
Technicien en forage (pétrolier et gazier)                          
Roofer
Couvreur                          
Sheet Metal Worker
Ferblantier                          
Sprinkler System Installer
Mécanicien en protection-incendie                          
Steamfitter/Pipefitter
Monteur d’appareils de chauffage                          
Tilesetter        
Carreleur                          
Tool and Die Maker          
Outilleur-ajusteur                          
Tower Crane Operator        
Opérateur de grue à tour                          
Transport Trailer Technician          
Réparateur de remorques de camions                          
Truck and Transport Mechanic  
Mécanicien de camions et transport                          
Welder
Soudeur                          

SCHEDULE 2
(Subsections 10(2) and 12(2))

MONTHLY INCOME THRESHOLDS AND INCREMENTS

Family Size Monthly Income Threshold Monthly Increment
1 $1,684 $250
2 $2,631 $350
3 $3,399 $425
4 $4,009 $500
5 and over $4,569 $575

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: In the last five years, vacancy rates in the skilled trades have risen sharply, largely on account of a growing mismatch between labour supply and demand. Evidence shows that despite steady increases to new apprenticeship registrations, the rate of successful completion of apprenticeship programs has been declining over recent years. Financial issues, including the costs of apprenticeship technical training, are a contributing factor. This lack of completion results in lower wages for non-completers and represents a loss to the economy and individuals alike.

Description: The Apprentice Loans Regulations (the Regulations) are required to implement the Apprentice Loans Act (the Act) and to begin disbursements to eligible apprentices. Under the Act, apprentices registered in an apprenticeship program in an eligible trade will be able to apply for an interest-free loan of up to $4,000 per period of block release technical training, up to a maximum of five times. The list of eligible trades in the Regulations is comprised of Red Seal trades, which are designated by each province and territory across Canada. Subject to a maximum of six years of interest-free status from the first disbursement, a borrower’s total Canada Apprentice Loan balance will remain interest-free until the borrower completes or terminates his or her apprenticeship. Interest charges will then begin to accrue and the loan will enter a six-month non-repayment period, after which regular payments will start.

Cost-benefit statement: The Canada Apprentice Loan (CAL) will cost the Government of Canada (GoC) $74 million (present value) over 10 years, from 2014–2015 to 2023–2024. Benefits include income gains for additional apprentice completers as a result of the CAL. If a 10 percentage point increase in the completion rate due to the CAL were assumed, this would yield income gains of $185 million over 10 years, and net benefits to Canadians of $111 million (present value).

The CAL is expected to increase the supply of skilled journeypersons, with a positive impact on economic productivity, particularly in those sectors where there are shortages of skilled tradespersons. The CAL may also foster standardization of apprenticeship certification across provinces and hence facilitate labour mobility.

“One-for-One” Rule and small business lens: The “One-for-One” Rule and small business lens do not apply to this proposal.

Background

Vacancy rates in the skilled trades have risen sharply over the last five years and employers and stakeholders have identified the skilled trades as among the most difficult positions to fill. TD Economics has reported that vacancies in the skilled trades have risen sharply in relation to other occupations (TD Economics, 2013). Several contributing factors have been identified, including low apprenticeship completion rates and the financial costs of attending periods of block release technical training, which is a required component of the majority of Red Seal apprenticeship training programs. Some of these factors were discussed in the 2007 National Apprenticeship Survey, which identified four broad categories of barriers effecting the completion of an apprenticeship:

Apprenticeship training is a key component of improving workers’ knowledge and skills, and for the development and sustainability of the Canadian economy. However, the costs associated with block technical training (e.g. foregone wages, tools/equipment, educational fees, and living expenses) can place a large burden on many individuals and their families.

A number of federal initiatives exist to help Red Seal (see footnote 2) apprentices complete their training and obtain certification, including up to $4,000 in Apprenticeship Incentive Grants and Apprenticeship Completion Grants; a tradesperson’s tool deduction of up to $500; the tuition tax credit; and employment insurance benefits during periods of technical training when they have to leave work.

The GoC, in the 2013 Speech from the Throne, committed to ensuring that Canadians are aware of the opportunities offered by the skilled trades, and to further assist apprentices with the cost of their training. Delivering on this commitment, Economic Action Plan 2014 Act, No. 1, which received Royal Assent on June 19, 2014, enacted the Act to assist apprentices with the costs they face while in periods of block technical training.

Issues

Employers and various organizations have identified an acute need for skilled tradespeople. Employer surveys indicate that skilled trades are among the most difficult jobs to fill. Job vacancy rates in the skilled trades (e.g. construction workers, mechanics and machine operators) have risen sharply since 2009 and the unfilled demand for skilled labour has been significant in many provinces and territories. Apprenticeship training and completion are essential to developing the pool of available labour in the skilled trades, with benefits to individuals and the economy.

Although the number of registered apprentices and new registrations have been increasing steadily, the rate of successful completion of apprenticeship programs has been low. Recent research found that the 10-year completion rate for apprentices who began their training in 1994–1995 was 50%, and an even lower 40% for those who began their training in 2000. Apprenticeship stakeholders have identified a number of underlying reasons for these low completion rates, including the financial expenses of attending periods of block release technical training.

The Act provides the necessary authorities for the establishment of the CAL and for the Minister of Employment and Social Development (the Minister) to enter into a loan agreement with an eligible apprentice, but many program processes and parameters must be established in regulations before the distribution of loans can begin.

Objectives

The objective of the Regulations is to bring into force program parameters for the disbursement of CALs as authorized under the Act, complementing other financial measures available to apprentices aimed at increasing the rate of completion of apprenticeship training.

Description

The Regulations specify the following program parameters that are essential to the administration and enforcement of the Act.

Consequential amendments to the CSFAR with respect to restrictions on financial assistance and RAP are as follows:

Regulatory and non-regulatory options considered

The Regulations are required in order to implement the provisions in the Act. The Regulations are necessary to provide legal certainty in interpreting key terms in the provisions of the Act and to provide greater details of provisions outlined in the Act. No non-regulatory options have been considered for defining these terms for the purposes of implementing the Act.

Benefits and costs

The analysis of benefits and costs evaluates the anticipated “incremental” impact of the Regulations by comparing baseline (without CAL) and regulated (with CAL) scenarios. This comparison includes estimates of baseline and regulated apprenticeship completion rates, incremental completers, incremental income, and incremental costs. A sensitivity analysis shows the “sensitivity” of the results to changes in key variables (completion rate and apprenticeship income premium).

The analysis makes the assumption that CAL will result in a modest increase to the Red Seal apprenticeship completion rate. In addition to baseline completers (who would have completed apprenticeship without CAL), there would now be incremental completers (who, in the absence of CAL, would not have completed their apprenticeships) benefiting from increased income due to apprenticeship completion. While evidence suggests that apprenticeship completers earn a substantial income premium compared to discontinuers (and those who continue as apprentices without completing their apprenticeship program), ranging from $8,000 to $21,000 annually, it is assumed to be a conservative $10,000, in 2014 dollars, for this analysis.

Table 1 explains how the number of borrowers who will experience a gain in income due to the introduction of the CAL is estimated. Uptake for the CAL is assumed to be 50% of all Red Seal apprentices at different stages of their apprenticeship who participate in block release technical training each year (column b). In the first year, 2014–2015, (see footnote 4) uptake is lower as the CAL will only be available for three months. In subsequent years, it has been assumed that the growth rate in uptake will be 6% year over year, until 2019–2020. Based on available data, we then assume that 25% of CAL borrowers will enter repayment each year (column c).

Table 1 — Estimating the number of beneficiaries experiencing income gain

(a)
Fiscal year
(b)
Expected CAL uptake
(c)
Number of apprentices entering repayment
(d)
Number of baseline completers (40%)
(e)
Number of completers after the introduction of CAL (50%)
(f)
Incremental completers
(g)
Cumulative incremental completers
2014–2015 10 560 2 640 1 056 1 320 264 264
2015–2016 27 984 6 996 2 798 3 498 700 964
2016–2017 29 663 7 416 2 966 3 708 742 1 706
2017–2018 31 443 7 861 3 144 3 930 786 2 492
2018–2019 33 329 8 332 3 333 4 166 833 3 325
2019–2020 35 329 8 832 3 533 4 416 883 4 208
2020–2021 35 329 8 832 3 533 4 416 883 5 091
2021–2022 35 329 8 832 3 533 4 416 883 5 974
2022–2023 35 329 8 832 3 533 4 416 883 6 857
2023–2024 35 329 8 832 3 533 4 416 883 7 740

Given that recent research indicates a 10-year apprenticeship completion rate of around 40% (for the cohort starting in 2000), it has been assumed that 40% of CAL borrowers who enter repayment would be baseline completers, that is, they would have completed their apprenticeships under baseline conditions, in the absence of CALs (column d). Therefore, the CAL will not impart any incremental benefits, in terms of higher earnings, to these borrowers as they would have completed the training anyway.

The subgroup of apprentices potentially benefiting most from the CAL would be those incremental completers who would have dropped out before completing the apprenticeship program if the CALs were not offered to them. It is anticipated that the CAL will facilitate program completion, for incremental completers, by easing their financial constraints. However, financial constraints are only one of several reasons for non-completion, and there are other forms of support, such as apprenticeship grants, that are already in place to ease financial constraints. The CAL is intended to augment these support measures. We project that the completion rate will increase by 10 percentage points (from 40% to 50%) due to the introduction of the CAL. This assumption gives us the number of apprenticeship completers after the introduction of the CAL (column e). Based on this assumption, column f shows the expected number of incremental completers, and column g shows the cumulative number of incremental completers from years 1 through 10.

Income gain due to completion is then obtained by multiplying the estimated number of cumulative incremental completers by the appropriate income gain profile ($10,000 in 2014 dollars). Lost earnings while an apprentice takes technical training have also been taken into account, and have been approximated at $4,000 per period of technical training for each incremental completer. As indicated in the cost-benefit statement below (Table 2), the resulting benefits due to the CAL include approximately $185 million in income gains over the 10-year period, present value, for approximately 7 740 new apprenticeship completers. (In the first year, 2014–2015, it is assumed there will be no income gain for incremental completers because CALs will only be available for three months.) Income gains beyond the 10-year period are not included.

On the cost side, the expected CAL disbursements are based on the assumption that each CAL recipient will be eligible to receive $4,000 of loans annually. However, since, over time, borrowers will be repaying the loans with interest, only a part of the amount of loans disbursed will result in costs to the Government. In order to calculate the costs of CAL, we need to account for a number of cost items: service provider fees; cost of funds (interest costs); repayment assistance measures; bad debt expenses; and a special payment to provinces where apprentices do not qualify for the CAL because of the structure of the apprenticeship system in that province. A portion of these costs is offset by interest revenue (paid by the borrowers during repayment) resulting in a net cost of approximately 11% of the disbursement amount.

It should be noted that the costs are incurred over the lifetime of a loan, extending to as long as 15 years; however, similar to benefits, only those costs that are incurred during a 10-year period have been taken into account for the purposes of this analysis. Thus, the CAL is expected to cost the GoC approximately $74 million, in present value, over the 10-year period. The Regulations are therefore expected to result in a net benefit to Canadians of $111 million (Table 2).

Table 2 — Cost-benefit statement (see reference *)

  Base Year: 2014–2015 Final Year: 2023–2024 Total (PV)(see reference **) Annualized Average
A. Quantified impacts (in million Can$, 2014 present value)
Benefits Apprentices — income gains for new completers $0 $37 $185 $18.5
Costs GoC — cash cost of loans $2 $8 $74 $7.4
Net benefits $111 $11.1
B. Quantified impacts in non-dollars (e.g. from a risk assessment)
Positive impacts Apprentices — new completers 264 883 7 740 774
C. Qualitative Impacts

GoC

  • Increased demand for other federal financial support measures (e.g. Apprenticeship Incentive and Completion Grants, and EI), as well as repayment assistance measures offered by the Government.
  • Expanded harmonization efforts with provinces and territories for Red Seal trades.

Provinces and territories

  • Each province and territory has its own apprenticeship system and is responsible for regulating and administering apprenticeship programs certifying tradespeople, as well for the delivery of benefits (for example EI Part II benefits). Due to the anticipated increases to apprenticeship participation and completion, the CAL initiative may induce some additional administrative costs to provinces and territories.

Apprentices

  • Short-term benefits to apprentices include increased access to skilled trades, increased financial support during apprenticeship, as well as increases to completions and certifications in Red Seal trades.
  • In addition to higher incomes, quantified above, long-term benefits of the CAL to apprentices include improved interprovincial mobility, more employment opportunities, and higher work satisfaction.

Employers

  • Benefits to employers include returns from higher productivity and performance of trainees, as well as savings on costs associated with recruiting and integrating external qualified workers.

Canadian society

  • The esteem of apprenticeship could grow, and more Canadians might see apprenticeship as a pathway to a rewarding and prosperous career.

Reference *
A discount rate of 7% was used for the analysis.

Reference **
Present value.

Table 3 summarizes the impact of using alternative assumptions on the benefit-to-cost ratio while holding the discount rate at the baseline value (7%).

Table 3 — Sensitivity analysis — Impact of changing the level of income gain and incremental portion of completion rate

  Completion rate increase
10 percentage points (main estimate) 5 percentage points
Annual real income gain $8,000 1.8:1 0.9:1
$10,000 (main estimate) 2.5:1 1.2:1
$12,000 3.2:1 1.6:1

A detailed copy of the cost-benefit analysis, completed in the development of these Regulations, can be obtained upon request to the contact identified below.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to this proposal, as there are no costs to small business.

Consultation

In April 2014, the GoC held a consultation with key stakeholder groups, including training providers, apprenticeship organizations and industry representatives (e.g. Canadian Apprenticeship Forum, Canadian Construction Association, Canadian Labour Congress, Polytechnics Canada) to provide them with an opportunity to contribute and help shape key program parameters for the CAL. Overall, stakeholders provided positive feedback and confirmed that they are supportive of the CAL.

The issues that were discussed included limits, such as maximum loans and interest-free periods, as well as the means of confirming enrolment in technical training and continued apprenticeship. There was general agreement with the regulatory limits on the CAL (e.g. maximum of five disbursements and six years interest-free), recognizing that some apprentices may take longer to complete their apprenticeship than others. However, they recognized that limits also promote completion within a reasonable timeframe, which is better for apprentices, employers, and society at large, as the skilled labour force will grow more quickly. Stakeholders were also supportive of treating CAL borrowers similar to student loan borrowers when their loans become repayable (i.e. similar terms and repayment assistance, when required).

From March through June 2014, the Department of Employment and Social Development (ESDC) engaged provincial and territorial members of the Canadian Council of Directors of Apprenticeship (CCDA) on program parameters. CCDA members are also supportive of the CAL given the potential benefits to apprentices and the skilled trades in their jurisdictions. A critical issue that was discussed was the means for determining when apprentices have terminated or completed their apprenticeship, to determine when the loans become repayable. Provinces and territories administer apprenticeships in their jurisdictions and may, therefore, be an essential player in providing related data to the GoC. Thus, during the discussions, their views were taken into account, and processes for exchanging the data, where possible, are being tailored to the capacities of each jurisdiction.

The CAL was also considered during parliamentary committee hearings regarding Part 1 of the Economic Action Plan 2014 Act, No. 1. During these hearings, no opposition to the GoC’s announcement was raised and there was strong support for this new measure.

Rationale

In the last five years, job vacancy rates in the skilled trades have been rising sharply, indicating a shortage of skilled tradespeople. Apprenticeship training and completion is essential to developing the pool of available labour in the skilled trades, with benefits to individuals and the economy. However, the rate of successful completion of apprenticeship programs has been persistently low (now approximately 40%).

A number of federal initiatives exist to help Red Seal apprentices complete their training and obtain certification, including up to $4,000 in Apprenticeship Incentive and Completion Grants; a Tradesperson’s Tool Deduction of up to $500; the Tuition Tax Credit; and Employment Insurance benefits during periods of technical training when they have to leave work.

With the introduction of the Regulations, the CAL complements these other financial measures aimed at increasing apprenticeship completion rates. The completion of apprenticeship training increases employment opportunities, the availability of skilled workers, and salaries. Apprenticeship programs are a key provider of the vital skills and knowledge necessary to power and grow the Canadian economy. If a 10 percentage point increase in the completion rate due to the CAL were assumed, this would yield income gains of $185 million over 10 years, and net benefits to Canadians of $111 million (present value).

Since the CAL was announced, there has been broad support for this measure from provincial and territorial governments, and apprenticeship stakeholders. For instance, the National Association of Career Colleges stated that it will help students “access in-demand skills training more easily and meet Canada’s growing need for skilled training faster,” and Polytechnics Canada indicated they are “pleased the Government acknowledged the important role apprenticeship training deserves alongside Canadian university and college education.” In addition, while developing the Regulations, stakeholders, provinces and territories were consulted on program parameters and no adverse views were expressed.

Implementation, enforcement and service standards

Beginning in January 2015, apprentices registered in an apprenticeship program in an eligible trade will be able to apply for an interest-free loan of up to $4,000 per period of block release technical training.

CALs will be delivered by the Canada Student Loans Program’s (CSLP) private sector service provider, under the name National Apprentice Loans Service Centre (NALSC). The NALSC will receive and process applications, manage disbursements, handle communications with clients throughout their apprenticeship training program, and help clients transition into repayment (including the administration of repayment assistance measures to clients in need). The contract with the service provider is performance-based, which creates an incentive for high service standards aimed at increasing borrower satisfaction. In 2013, four out of five borrowers surveyed said they were satisfied with the overall quality of the CSLP’s services.

The NALSC will include applications, eligibility requirements, and key messaging on their Web site to ensure that clients have access to clear information and online services with respect to CALs. General information will also be available through Service Canada channels and bundled with existing information on Canada Student Loans, Employment Insurance, the Apprenticeship Incentive Grant, the Apprenticeship Completion Grant, and other relevant federal, provincial or territorial programs.

Performance measurement and evaluation

The CAL will be included as part of the overarching evaluation and performance measurement of the CSLP. Its effectiveness and impact will be monitored, measured and evaluated through the CSLP Performance Measurement Framework and the CSLP Evaluation Strategy. Performance indicators will be developed and could include CALs disbursed, average amounts, repayment and default. The CAL will be included in ESDC’s Evaluation Plan for 2015–2016 to 2018–2019. In addition, the CSLP Performance Measurement Framework and the evaluation plan will be revised to reflect these new loans. These evaluations will be done as an addition to the CSLP’s Results-based Management and Accountability Framework and Risk-based Audit Framework.

Contact

Atiq Rahman
Director
Policy and Research
Canada Student Loans Program
Employment and Social Development Canada
200 Montcalm Street, Tower II, 1st Floor
Gatineau, Quebec
K1A 0J9
Telephone: 819-994-4518
Fax: 819-953-6661
Email: atiqur.rahman@hrsdc-rhdcc.gc.ca