Regulations Amending the Canada Student Financial Assistance Regulations: SOR/2020-182

Canada Gazette, Part II, Volume 154, Number 19

Registration

SOR/2020-182 August 25, 2020

CANADA STUDENT FINANCIAL ASSISTANCE ACT

P.C. 2020-568 August 23, 2020

Her Excellency the Governor General in Council, on the recommendation of the Minister of Employment and Social Development, pursuant to paragraphs 15(1)(f), (f.1) footnote a, (g), (m) and (n) footnote b of the Canada Student Financial Assistance Act footnote c, makes the annexed Regulations Amending the Canada Student Financial Assistance Regulations.

Regulations Amending the Canada Student Financial Assistance Regulations

Amendments

1 The Canada Student Financial Assistance Regulations footnote 1 are amended by adding the following after section 7:

Medical Leave and Parental Leave

7.1 (1) The following definitions apply in this section and in section 12.21.

(2) The Minister may, on application, grant a borrower who ceases to be a full-time student on or after October 1, 2020 a period of postponement of repayment by reason of medical leave or parental leave, if the borrower submits the application in the form and manner specified by the Minister in the six months after the end of the borrower’s most recent period of studies, but no later than 12 months after

(3) If the Minister grants the borrower’s application, the borrower is deemed to continue to be a full-time student despite section 8 for a six-month period beginning on the first day of the month after the month in which they would otherwise have ceased to be a full-time student.

(4) If the borrower’s medical leave or parental leave must be extended or the borrower is entitled to a new medical leave or a new parental leave, the borrower may, no earlier than 30 days before the end of the six-month period referred to in subsection (3) and no later than 30 days after that period, submit a request to the Minister to extend the length of the period of postponement of repayment to 12 months.

(5) If the borrower’s medical leave or parental leave must be further extended or the borrower is entitled to a new medical leave or a new parental leave, the borrower may, no earlier than 30 days before the end of the 12-month period referred to in subsection (4) and no later than 30 days after that period, submit a request to the Minister to extend the length of the period of postponement of repayment to 18 months.

(6) A borrower who has been granted a period of postponement of repayment cannot submit a new application for a period of postponement of repayment by reason of a new medical leave or a new parental leave for 30 days after the first day of the current confirmed period.

2 The portion of subsection 8(1) of the Regulations before paragraph (a) is replaced by the following:

8 (1) Subject to paragraphs 5(3)(b) and 7(2)(b) and subsection 7.1(3), the borrower ceases to be a full-time student on the earliest of

3 The Regulations are amended by adding the following after section 12.2:

Medical Leave and Parental Leave

12.21 (1) The Minister may, on application, grant a borrower who ceases to be a part-time student on or after October 1, 2020 a period of postponement of repayment by reason of medical leave or parental leave, if the borrower submits the application in the form and manner specified by the Minister in the six months following the end of the borrower’s most recent period of studies, but no later than 12 months after

(2) If the Minister grants the borrower’s application, the borrower is deemed to continue to be a part-time student despite section 12.3 for a six-month period beginning on the first day of the month after the month in which they would otherwise have ceased to be a part-time student.

(3) If the borrower’s medical leave or parental leave must be extended or the borrower is entitled to a new medical leave or a new parental leave, the borrower may, no earlier than 30 days before the end of the six-month period referred to in subsection (2) and no later than 30 days after that period, submit a request to the Minister to extend the length of the period of postponement of repayment to 12 months.

(4) If the borrower’s medical leave or parental leave must be further extended or the borrower is entitled to a new medical leave or a new parental leave, the borrower may, no earlier than 30 days before the end of the 12-month period referred to in subsection (3) and no later than 30 days after that period, submit a request to the Minister to extend the length of the period of postponement of repayment to 18 months.

(5) A borrower who has been granted a period of postponement of repayment cannot submit a new application for postponement of repayment by reason of a new medical leave or a new parental leave for 30 days after the first day of the current confirmed period.

4 The portion of section 12.3 of the Regulations before paragraph (a) is replaced by the following:

12.3 Subject to paragraphs 12.1(2)(b) and 12.2(2)(b) and subsection 12.21(2), a borrower ceases to be a part-time student on the earliest of

5 Subsection 15(1.1) of the Regulations is replaced by the following:

(1.1) For the purposes of paragraph (1)(j), the number of weeks is the aggregate of the number of weeks corresponding to the borrower’s confirmed periods as a full-time student, or the equivalent, under the Act and the Canada Student Loans Act, less the number of weeks determined by the Minister for which the designated educational institution has provided that the borrower, despite subsections 7.1(3) and 8(2), was no longer a full-time student.

6 Section 17 of the Regulations is renumbered as section 11.1 and that section 11.1 and the heading before it are repositioned after section 11.

Coming into Force

7 These Regulations come into force on October 1, 2020.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

Issues: In Budget 2019, the Government of Canada announced its intention to make post-secondary education more affordable by introducing an interest-free and payment-free leave for Canada Student Loan (CSL) borrowers taking temporary leave from their studies for medical or parental reasons, including mental health leave.

The Canada Student Loans Program (CSLP) currently has no special provisions for students who take a temporary leave of six months or longer from their post-secondary education for medical or parental reasons. CSL borrowers in this situation are treated like any other borrower who has left school, meaning that monthly payments are required, and interest starts to accrue on their loan starting six months after leaving school. This can place a significant financial burden on students taking a temporary leave from studies for medical or parental reasons, including mental health reasons, or following the birth or adoption of a child, compounding the impact of financial stressors due to the added expenses associated with health recovery or parenting.

In the context of the COVID-19 pandemic, more students may experience illnesses, including mental health challenges, that could lead them to take time off from their studies. Additionally, students who are new parents may need extended parental leave due to uncertainties in the availability of childcare.

Description: Amendments to the Canada Student Financial Assistance Regulations (CSFAR) and Canada Student Loans Regulations (CSLR) help make CSLs more affordable by introducing interest-free and payment-free leave from student loan repayment for up to 18 months for borrowers taking temporary leave from their studies for medical or parental reasons, including mental health reasons.

Rationale: These amendments build on previously introduced measures to modernize the CSLP and make student loans more affordable and accessible by responding to the particular needs of borrowers facing financially challenging life circumstances. It is anticipated that an average of 7 000 borrowers will directly benefit from medical and parental leave annually. The amendments result in a benefit-to-cost ratio of 1:1. This reflects that the savings to CSL borrowers are offset by forgone interest revenues and additional borrowing costs to the Government of Canada. In addition to the monetized benefits and costs, medical and parental leave will bring significant qualitative benefits to students and Canadian society.

Issues

Currently, borrowers begin repaying their CSLs and interest begins to accrue six months after the date they leave their studies. This rule makes the CSLP less responsive to the needs of students in challenging financial and life situations and can create a significant financial burden for some vulnerable student loan borrowers. To better respond to the needs of borrowers who take a temporary leave from their studies for medical or parental reasons, including mental health reasons, Budget 2019 proposed specific amendments to the CSFAR and the CSLR.

Requiring students who take a leave from studies for medical or parental reasons to start repaying their loans as if they had permanently left school can compound the impact of already stressful and costly circumstances that result from dealing with illness or injury, or becoming a parent. The additional financial burden of student loan repayment could contribute to borrowers further delaying or entirely withdrawing from their studies, thereby delaying or forgoing the substantial benefits of a post-secondary credential. In addition, this financial impact is particularly felt by borrowers with disabilities, who may be more likely to take a leave from school for medical reasons, and women borrowers, who may be more likely to take a parental leave, as they still tend to be the primary caregivers within families.

In the context of the COVID-19 pandemic, more students may experience illnesses that could lead them to take time off from their studies, including for mental health reasons. A recent Statistics Canada survey (Canadians report lower self-perceived mental health during the COVID-19 pandemic, April 24, 2020) noted a drop in the proportion of those aged 15 to 24 who reported excellent or very good mental health from 62% in 2018 to 42% during the pandemic. Additionally, students who are new parents may need extended parental leave due to uncertainties in the availability of childcare.

Background

The CSLP provides financial assistance to students in the form of grants and loans to supplement resources and help meet the costs of post-secondary education. Delivered in partnership with 10 provinces and territories, the CSLP provides up to 60% of a borrower’s calculated financial need in grants and loans, while participating provinces and territories cover the remainder. The non-participating provinces and territories, namely Quebec, Nunavut and the Northwest Territories, receive alternative payments from the federal government to administer their own student financial assistance programs.

The Canada Student Financial Assistance Regulations provide the framework to administer Canada Student Grants and CSLs, including the direct CSLs that have been issued since 2000 up to the present day and risk-shared CSLs that were disbursed between 1995 and 2000. The Canada Student Loans Regulations govern guaranteed CSLs that were issued prior to 1995. Both regulations include provisions respecting the entire loan lifecycle from eligibility to disbursement to repayment.

The CSLP provides the Repayment Assistance Plan to assist borrowers who are experiencing difficulty repaying their CSLs. However, there are currently no specific provisions to support borrowers taking temporary leave from their studies to care for a new child or recover from an illness or injury. Students are required to begin making payments on their CSLs, and interest begins to accrue, six months after leaving their studies, and there are no regulatory provisions allowing the beginning of the repayment period to be postponed.

In Budget 2019, several measures were announced to modernize the CSLP and help make it more flexible and accessible for borrowers in vulnerable financial or life situations. Legislative and regulatory amendments have already been made to implement several of these measures, including lowering interest rates on CSLs; making the six-month non-repayment period following studies interest-free; increasing supports and flexibility for students with disabilities; and making it easier for borrowers in default to return their loans to good standing. These regulatory amendments address the final Budget 2019 measure to be implemented: an interest-free and payment-free leave from CSL repayment for borrowers taking temporary leave from their studies for medical reasons, including mental health leave, or for parental reasons.

In response to the COVID-19 pandemic, the Government of Canada has put in place a series of temporary measures to support students, including

While the commitment to introduce interest-free and payment-free medical and parental leave for CSL borrowers was announced before the COVID-19 pandemic struck Canada, it remains a salient measure to support students facing the direct economic, physical, and mental health impacts of COVID-19.

Objective

The objective is to help make post-secondary education more accessible and affordable for borrowers in financially challenging circumstances by introducing interest-free and payment-free medical and parental leave from CSL repayment. Specifically, the regulations help address the financial burden and stress on students who take temporary leave from their studies for medical and parental reasons, including mental health leave, and help reduce financial barriers to pursuing their post-secondary education. It is expected that the measures will particularly benefit borrowers with disabilities, many of whom have to take temporary breaks from their studies, and women borrowers who may be more likely to take parental leave.

Description

Several sections of the CSFAR and CSLR are amended to provide both full- and part-time CSL borrowers with the ability to apply for an interest-free and payment-free medical or parental leave in 6-month periods up to a maximum of 18 months. Specifically, the following changes are made:

Medical and parental leave are not available to borrowers who are no longer in school and who have begun repaying their loans once their six-month interest-free and payment-free period has ended.

Following additional consideration within the CSLP, three changes have been made to the regulatory text following prepublication in the Canada Gazette, Part I, to

Regulatory development

Consultation

The CSLP regularly engages with stakeholders and partners, including student groups, borrowers, and provinces and territories, through the National Advisory Group on Student Financial Assistance (NAGSFA) and the Intergovernmental Consultative Committee on Student Financial Assistance (ICCSFA). The CSLP discussed policy ideas related to making student loans more affordable and accessible with these stakeholders, including an interest-free and payment-free medical and parental leave, and all were generally supportive.

Following the release of Budget 2019, the Canadian Alliance of Student Associations, the Canadian Federation of Students, and the Canadian Association of Student Financial Aid Administrators all expressed support for the CSLP measures announced. Student organizations specifically welcomed the medical and parental leave proposal.

The Regulatory Impact Analysis Statement and proposed regulations were prepublished in the Canada Gazette, Part I, on February 8, 2020, for public comment. Submissions were received from four stakeholders: the Canadian Alliance of Student Associations, the Canadian Federation of Students, the Canadian Association of Student Financial Aid Administrators, and the National Educational Association of Disabled Students. These organizations were generally very supportive of the proposed regulatory amendments. Stakeholders acknowledged that these changes are a positive step in recognizing mental health as grounds for temporary leave. In addition, it was noted that these measures will benefit many vulnerable students, including those with episodic disabilities. One stakeholder expressed concern that the burden of student debt was still too high and suggested additional reforms to the CSLP were needed. Such changes are beyond the scope of this regulatory package and therefore, have not been incorporated in these regulatory amendments.

Modern treaty obligations and Indigenous engagement and consultation

The regulatory amendments are not expected to have differential impacts on Indigenous people or negative implications for modern treaties, as per Government of Canada obligations in relation to rights protected by section 35 of the Constitution Act, 1982, modern treaties, and international human rights obligations.

Instrument choice

Given that the CSFAR and CSLR include provisions prescribing when CSLs become payable and periods during which interest does not accrue, regulatory amendments are required to implement interest-free and payment-free leave from CSL obligations for borrowers taking a leave from their studies for medical or parental reasons. As a result, non-regulatory options were not considered.

Regulatory analysis

Benefits and costs

A cost-benefit analysis was conducted to assess the incremental impacts to stakeholders of implementing medical and parental leave from student loan repayment obligations, compared to a baseline scenario in which these regulatory amendments are not made.

The stakeholders that will be most directly affected are student borrowers and the Government of Canada. The 10 participating provincial and territorial governments that are partners in the delivery of the CSLP will be affected indirectly. They will retain the flexibility to decide whether to align their policies with those of the federal government. In addition, Canadian society will be affected indirectly given that post-secondary education helps to mitigate overall income inequality.

Key data sources for the cost-benefit analysis included CSLP administrative data (e.g. number of student borrowers or CSL amounts in past years), literature on persistence in post-secondary education, and forecasts provided by the Office of the Chief Actuary (e.g. number of students who will access CSLs in future years) based on demographic information, economic conditions, and the policy parameters of the CSLP as of May 2020. In addition, a review of academic literature helped to identify the impact of various challenges on CSL borrowers pursuing post-secondary education, such as student parents, students with disabilities, students with medical illnesses, and students with mental health conditions.

Cost-benefit statement

Monetized costs

The costs to the Government of Canada for providing medical and parental leave from student loan repayment obligations are due to forgone interest revenues and additional borrowing costs.

Forgone interest revenues represent the interest that the Government of Canada would have received in the absence of the regulatory amendments. In addition, the Government of Canada must bear the cost of keeping these loans in its portfolio for an additional period of up to 18 months. This analysis assumes that, during that period, the Government of Canada must borrow in the capital markets to finance its other fiscal obligations. The total monetized costs are estimated at $27.1 million (net present value) over the next 10 years.

(in millions of Can$)
Impacted stakeholder Description of cost Base year 2020–21 Second year 2021–22 Final year 2029–30 Total (present value) Annualized value
Government of Canada Forgone interest revenues $0.5 $1.0 $7.3 $25.0 $3.6
Government of Canada Borrowing costs $0.2 $0.2 $0.3 $2.1 $0.3
All stakeholders Total costs $0.7 $1.2 $7.7 $27.1 $3.9

Monetized benefits

Under the regulatory amendments, interest on CSLs held by borrowers approved for leave will not accrue for up to 18 months. This represents a direct transfer to student borrowers, which is equal to the forgone interest revenues identified as a cost to the Government of Canada.

In addition, student borrowers will not have to pay down principal for up to 18 months. These principal payments are simply delayed until the student begins making regular repayments. By allowing student borrowers to not repay the principal immediately, they could consume more of their preferred goods and services or could invest the non-paid principal and earn interest. Assuming that financial markets are competitive, this social time preference rate is equal to the borrowing cost faced by the Government of Canada. The students’ utility gains or interest earnings therefore effectively represent a transfer of purchasing power from the Government of Canada to students. The total monetized benefits are estimated at $27.1 million (net present value) over the next 10 years.

(in millions of Can$)
Impacted stakeholder Description of benefit Base year 2020–21 Second year 2021–22 Final year 2029–30 Total (present value) Annualized value
Student borrowers No interest payments $0.5 $1.0 $7.3 $25.0 $3.6
Student borrowers Postponement of principal payments $0.2 $0.2 $0.3 $2.1 $0.3
All stakeholders Total benefits $0.7 $1.2 $7.7 $27.1 $3.9
Summary of monetized costs and benefits
(in millions of Can$)
Impacts Base year 2020–21 Second year 2021–22 Final year 2029–30 Total (present value) Annualized value
Total costs $0.7 $1.2 $7.7 $27.1 $3.9
Total benefits $0.7 $1.2 $7.7 $27.1 $3.9
Net monetized impact $0.0 $0.0 $0.0 $0.0 $0.0

Quantified (non-monetary) and qualitative impacts

Positive impacts

Small business lens

The small business lens does not apply to these regulatory amendments, as there are no impacts on small businesses.

One-for-one rule

The one-for-one rule does not apply to these regulatory amendments, as there is no change in administrative burden on businesses.

Regulatory cooperation and alignment

The regulatory amendments are not related to any commitment under a formal regulatory cooperation forum. The ICCSFA is a federal-provincial-territorial body for student financial assistance in Canada, but this organization does not focus on regulatory cooperation. However, the CSLP has consulted with provincial and territorial partners and they have been generally supportive.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

The regulatory amendments will support various vulnerable groups of borrowers and are expected to have significant benefits from the perspective of gender and diversity. In particular, these amendments will provide financial relief for borrowers with high needs and lower incomes when they are particularly vulnerable.

Parental leave will considerably benefit women; the CSLP administrative data shows that student parents are predominantly women (75%, compared to 59% of the overall CSLP student population). In addition, these student parents are also low-income students (81%) and tend to be older students (66% of student parents are over the age of 30). The literature finds that student parents are more vulnerable as they have added familial responsibilities and costs, and they are more financially insecure compared to other students. The regulatory amendments will benefit new parents by providing financial relief from their student loan repayment obligations, at a time when they are caring for their new child and unable to continue their post-secondary education.

Medical leave will have benefits for borrowers who face health problems, through the provision of a temporary leave from student loan repayment obligations. The literature finds that people with disabilities face significant financial barriers, take longer to complete their post-secondary education and acquire higher debt loads. footnote 14 In terms of gender, the CSLP finds that there are more female students with permanent disabilities in the program. Therefore, this measure may benefit more women with permanent disabilities; of the 7% of students with permanent disabilities in the program, 60% are female. In terms of medical conditions, the Public Health Agency of Canada finds that 44% of adults aged 20 and older have at least one of the 10 most common chronic conditions. footnote 15 Within student populations, mental health problems are prevalent, with substance use, anxiety, and mood disorders being most common. footnote 16 Statistics Canada finds that young people, aged 15 to 24, are more likely to experience mental illness and substance use disorders than any other age group. footnote 17 Students with medical and mental health conditions face significant challenges when it comes to pursuing education, have lower educational attainment and face higher debt loads. The regulatory amendments will provide financial relief for borrowers who are facing adverse medical and mental health issues, through the provision of a leave from student loan repayment obligations when these borrowers are unable to continue their post-secondary education.

The regulatory amendments are expected to benefit Indigenous borrowers and LGBTQ2+ borrowers when they require a temporary leave from studies for medical or parental reasons. Within the CSLP’s population, there are Indigenous borrowers who may be affected by this measure. Statistics Canada finds that Indigenous youth are particularly at risk for poor mental health and face significant barriers when it comes to post-secondary education attainment. footnote 18 More generally, First Nations people, Métis and Inuit are less likely than non-Indigenous people to report very good or excellent health. footnote 19 Furthermore, while the CSLP does not collect information on sexual orientation or gender minorities, LGBTQ2+ people are over-represented among low-income Canadians, and LGBTQ2+ youth are often subject to violence, discrimination, and marginalization in schools. footnote 20, footnote 21 LGBTQ2+ people face pervasive health disparities and barriers to high-quality care. In terms of mental health, LGBTQ2+ people are more likely to report unmet mental health needs, and LGBTQ2+ youth have an increased risk of suicide, substance abuse and isolation, and of experiencing sexual abuse. footnote 22 The regulatory amendments seek to alleviate the financial burden that student loan repayment places on Indigenous borrowers and LGBTQ2+ borrowers, who are more likely to face adverse medical and mental health conditions, and may take a leave from their studies.

The availability of medical and parental leave from student loan repayment responsibilities will benefit these groups of borrowers who often have low incomes and, in some cases, are less likely to pursue post-secondary education. The relief from student loan repayment and interest accrual comes at a vulnerable period in these borrowers’ lives, when they are unable to continue their post-secondary education due to medical reasons or due to welcoming a new child, allowing for a significant financial relief.

Implementation, compliance and enforcement, and service standards

Implementation

The regulatory amendments come into force on October 1, 2020.

Work with the third-party service provider who operates the National Student Loans Service Centre to implement these amendments is well underway. Existing federal-provincial-territorial and stakeholder forums have been used to notify all partners and stakeholders of the changes, and to explain how they will support making student financial assistance more accessible and affordable. Social media, web platforms, and news releases will be used to communicate the new measures to student borrowers and other interested stakeholders.

Compliance and enforcement

To support effective management and accountability to Canadians, the CSLP will continue to be monitored to ensure effective program performance and integrity. The Canada Student Financial Assistance Act (CSFAA) requires that the Minister table an actuarial report produced by the Office of the Chief Actuary at least once every three years. This report provides an estimate of program costs and revenues, a 25-year forecast of future program costs and revenues, and an explanation of the methodology and actuarial and economic assumptions used to produce the figures presented in the report. The CSFAA also requires that the Minister table in Parliament an annual report on the CSLP, which provides detailed statistics on the program (including the value of the portfolio) and outlines key objectives, initiatives, and accomplishments achieved over a given academic year.

The CSFAA provides sufficient authority for the CSLP to ensure that interest-free and payment-free leave from student loan repayment obligations is not granted to borrowers who are not eligible. Subsection 17(1) provides for a fine of up to $1,000 for borrowers who knowingly provide any false or misleading information in an application or other document. Section 17.1 allows for any such borrower to be denied additional student financial assistance as well as certain other CSLP benefits, including, but not limited to, repayment assistance and interest-free or interest-reduced periods.

Service standards

When the online application process is fully implemented, most applications for medical and parental leave will be processed in three business days, although some complex cases and applications with incomplete information will take longer. The application process is being developed with a focus on streamlining requirements and reducing the administrative burden for students.

Contact

Milena Gulia
Director
Policy and Research
Canada Student Loans Program
Employment and Social Development Canada
200 Montcalm Street, Tower II, 1st Floor
Gatineau, Quebec
J8Y 3B5
Email: EDSC.PCPE.MED.PAR.REG-MED.PAR.REG.CSLP.ESDC@hrsdc-rhdcc.gc.ca