1、May 19, 2021 COST ANALYSIS OF A POST- SECONDARY STUDENT RELIEF PACKAGE Powered by TCPDF (www.tcpdf.org) The Parliamentary Budget Officer (PBO) supports Parliament by providing economic and financial analysis for the purposes of raising the quality of parliamentary debate and promoting greater budget
2、 transparency and accountability. This report is in response to a request by Members of Parliament Leah Gazan (Winnipeg Centre) and Lindsay Mathyssen (London-Fanshawe) to examine the cost of a set of post-secondary education measures outlined in Private Members Motion M-75, Implementation of a Post-
3、secondary Student Relief Package. Lead Analysts: Robert Behrend, Advisor-Analyst Mark Creighton, Analyst This report was prepared under the direction of: Xiaoyi Yan, Director, Budgetary Analysis Nancy Beauchamp, Carol Faucher and Rmy Vanherweghem assisted with the preparation of the report for publi
4、cation. For further information, please contact pbo-dpbparl.gc.ca Yves Giroux Parliamentary Budget Officer RP-2122-006-M_e Table of Contents Executive Summary 1 1. Introduction 3 2. Cost Estimate 4 2.1. Data and Methdology 4 2.2. Results 5 3. Alternate Debt Reduction Scenarios 8 3.1. Scenarios and C
5、osting Assumptions 8 3.2. Results 8 Notes 11 Cost Analysis of a Post-secondary Student Relief Package 1 Executive Summary This report is in response to a request by Members of Parliament Leah Gazan (Winnipeg Centre) and Lindsay Mathyssen (London-Fanshawe) to estimate the cost of a set of post-second
6、ary education measures outlined in Private Members Motion M-75, Implementation of a Post-secondary Student Relief Package.1 Specifically, it presents PBOs cost estimate for implementing four modifications to the Canada Student Loans Program (CSLP). First, a moratorium on loan payments starting April
7、 1, 2021 until July 31, 2022. Following this, effective August 1, 2022, the non-repayment period would be extended from six months to five years, interest payments would be removed, and an income contingent loan debt reduction plan of up to $20,000 per student borrower would be introduced. Summary T
8、able 1 shows the estimated total cost of all the proposed modifications combined, including the impact of the Student Loan Interest Credit. The estimated total cost is $98 million for the first full fiscal year (20212022), rising to $1,250 million for the last year of projection (2025- 2026).2 Estim
9、ated combined total cost of all measures Total Cost ($ millions) 2021- 2022 2022- 2023 2023- 2024 2024- 2025 2025- 2026 Proposed scenario: with debt reduction of up to $20,000 per student borrower 98 712 898 993 1,250 Source: PBO calculations Notes: Totals may not add due to rounding. Figures repres
10、ented in nominal (then- year) dollars. Positive numbers subtract from the budgetary balance, negative numbers contribute to the budget balance. Under alternate scenarios, shown in Summary Table 2, the proposed measures with an income contingent loan debt reduction plan of up to $10,000 per student b
11、orrower would reduce the estimated cost to $913 million in 2025-2026. On the other hand, the cost with a debt reduction plan of up to $30,000 per student borrower would increase to $1,415 million in 2025-2026. Summary Table 1 Cost Analysis of a Post-secondary Student Relief Package 2 Estimated combi
12、ned total cost of all measures: alternate debt reduction scenarios Total Cost ($ millions) 2021- 2022 2022- 2023 2023- 2024 2024- 2025 2025- 2026 Alternate Scenario 1: with debt reduction of up to $10,000 per student borrower 98 -48 600 700 913 Alternate Scenario 2: with debt reduction of up to $30,
13、000 per student borrower 98 1,085 1,044 1,137 1,415 Source: PBO calculations Notes: Totals may not add due to rounding. Figures represented in nominal (then- year) dollars. Positive numbers subtract from the budgetary balance, negative numbers contribute to the budget balance. Note that the distribu
14、tion of outstanding loan balances contributes to the varying differences in the estimated total cost between the proposed and the alternate scenarios. Thus, the difference in the amount of federal loans forgiven when moving from a debt reduction plan of up to $10,000 to $20,000 per student borrower
15、is greater compared to moving from a debt reduction plan of up to $20,000 to $30,000. Note further that the estimated saving in 2022-2023 under the alternate Scenario 1 is due to the amount of loans forgiven being less than the saving generated by the elimination of the RAP. Summary Table 2 Cost Ana
16、lysis of a Post-secondary Student Relief Package 3 1. Introduction This report is in response to a request by Members of Parliament Leah Gazan (Winnipeg Centre) and Lindsay Mathyssen (London-Fanshawe) to estimate the cost of a set of post-secondary education measures outlined in Motion M-75, Impleme
17、ntation of a Post-secondary Student Relief Package, placed on notice on March 18, 2021.3 This report presents the estimated costs of the various relief measures in the Motion, including the following which are to go into effect August 1, 2022: Extending the non-repayment period for federal student l
18、oans repayment from six months to five years (60 months); Removing student interest payments on federal student loans; and An income contingent debt reduction plan of up to $20,000 per student borrower for federal student loans in repayment, with alternate scenarios of debt reduction up to $10,000 o
19、r $30,000 per student borrower to be considered. This report also includes the costing of: Placing a moratorium on student loan payments from April 1, 2021 to July 31, 2022. This report presents the PBOs estimates for implementing the above proposed modifications to the Canada Student Loans Program
20、(CSLP)4. The cost estimates cover all aspects of CSLP associated with the repayment of federal student loans, including payments to provinces and territories that do not participate in CSLP.5 Costs are broken down separately for each of the proposed modifications to CSLP. The combined policy cost is
21、 calculated with their interactions incorporated. The impact of non-refundable Student Loan Interest Credit is also considered. The costs are presented on a fiscal year basis. Cost Analysis of a Post-secondary Student Relief Package 4 2. Cost Estimate The costs of proposed modifications to CSLP are
22、estimated using the PBOs Student Financial Assistance Model. The model projects CSLP revenues and expenses, reflecting current CSLP policies and parameters. The long-term outlooks used in the projection are consistent with the annual reports from the Office of the Chief Actuary. The model tracks stu
23、dent loans in a loan year, which runs from August to July of the following year. For more information on PBOs model, see PBO report “Projecting the Revenues and Expenses of Canada Student Loans Program”.6 What underlies CSLP revenues and expenses is the lifecycle of student loans. The lifecycle cons
24、ists of three periods: the study period when the student is in school, the six-month non-repayment period after the end of studies, and the repayment period. Throughout each period, the federal government incurs expenses and revenues that are dependent on the amount of outstanding student loans and
25、student borrower repayment patterns. 2.1. Data and Methdology The PBOs Student Financial Assistance Model is calibrated to reflect recent program data available at the Office of the Chief Actuary.7 It is brought up to date by incorporating the recent change to CSLP announced in the 2020 Fall Economi
26、c Statement, which eliminated interest on repayment of federal student loans for the duration of fiscal year 2021-2022. The PBOs model is used to independently estimate the net expense of CSLP under the current policy and the proposed modifications. The cost differences between the baseline model an
27、d the proposed changes are reported as the impact of the policies on all aspects of CSLP. The costs of all proposed modifications are estimated using this model except for the income contingent debt reduction plan. To estimate the cost of a debt reduction plan, PBO used Statistics Canadas data and s
28、imulation model SPSD/M, along with data from Employment and Social Development Canada to determine the percentage of federal student loan balances in repayment eligible for income contingent debt reduction.8 Because of data limitations, PBO made assumptions on linkages between household income and l
29、oan amounts in repayment. The universe of CSLP administration data is available to determine historical student loan disbursements and program costs. These are projected using a top-down approach to modelling loan repayment behaviour. Historically, such behaviour exhibits a certain degree of randomn
30、ess; therefore, the value Cost Analysis of a Post-secondary Student Relief Package 5 of future federal student loan balances could be influenced by this randomness as well as by the labour market and the broader economy. However, these cost estimates do not account for any behavioral or distribution
31、al changes resulting from the proposed measures. PBO assumed that default rates, the portion of student borrowers that need assistance from the Repayment Assistance Plan (RAP), as well as repayment behaviour would follow historical trends. The estimated impact to the non-refundable Student Loan Inte
32、rest Credit is estimated accordingly, referencing the annual Report on Federal Tax Expenditures by Finance Canada published in February 2021.9 2.2. Results When estimating the cost of extending the non-repayment period from six to 60 months, PBO assumes that only student borrowers entering repayment
33、 on or after August 1, 2022 will be eligible. Under this proposal, interest does not accrue during this 60-month non-repayment period. It is also assumed that the status quo repayment period of 114 months (9.5 years) would remain in place and that repayment would start following the conclusion of th
34、e extended non-repayment period. The upfront savings of this proposal are due to reduced RAP costs. These are partly offset by the cost of deferred interest revenues. The full impact of this proposal, however, will not be observed until 2026-2027 when RAP costs begin to rise. This is due to the firs
35、t cohort of beneficiaries completing the five-year non-repayment period and entering repayment. Removing student interest payments on federal student loans begins August 1, 2022. To that end, interest for all current and future federal student loans in repayment are set equal to zero. As interest wi
36、ll no longer accrue, the main source of cost for this proposal is reduced interest revenues. Under the proposal for income contingent debt reduction, students become eligible for debt reduction as soon as student borrowers start to repay their loans. Following current program parameters, this occurs
37、 following the six- month non-repayment period. The total amount of eligible debt reduction is based on students household income and the projected federal student loan outstanding after leaving school. Because of data limitations, eligible debt amounts are not adjusted for household characteristics
38、 other than income. Nor are household income thresholds indexed. It is assumed that an income contingent debt reduction plan would replace the existing RAP. The main cost of this proposal are the upfront and annual costs of debt write-downs. These are partly offset by savings generated by the elimin
39、ation of the RAP. The moratorium on student loan payments is assumed to start on April 1, 2021 and last until July 31, 2022. Repayment of federal student loans are Cost Analysis of a Post-secondary Student Relief Package 6 paused for these 16 months and would resume at the conclusion of this period.
40、 Accordingly, interest would not accrue either. The time remaining on a borrowers federal student loan repayment is extended to account for the length of the moratorium. RAP payments by the federal government would also be paused for the duration of the moratorium. The main source of cost during thi
41、s period is deferred interest revenues and increases in loan provisions, offset partly by reduced RAP payments. At the conclusion of the moratorium, annual ongoing costs are decreased, driven principally by higher student interest payments than projected under the baseline model. The costs for each
42、proposed modification to CSLP is separately shown in Table 2-1. It is important to note that the full impact of the proposed measures will not be observed until 2026-2027, the first year that a cohort of beneficiaries of these policy changes completes a five-year non-repayment period and becomes eli
43、gible for the loan debt reduction plan. Estimated cost of individual measures (no interactions) Cost ($ millions) 2021- 2022 2022- 2023 2023- 2024 2024- 2025 2025- 2026 Extending non-repayment period from six months to five years - -107 -148 -124 -37 Remove student loan interest payments - 221 382 4
44、65 553 Reducing up to $20,000 in student loan debt - 4,527 1,885 1,627 1,682 Placing a moratorium on student loan repayments 98 43 -71 -68 -65 Source: PBO calculations Notes: Totals may not add due to rounding. Figures represented are in nominal (then- year) dollars. Positive numbers subtract from t
45、he budgetary balance, negative numbers contribute to the budget balance. “-“ = PBO does not expect a financial cost Table 2-2 considers the estimated total cost of the proposed modifications combined, including the impact of the Student Loan Interest Credit. It is estimated at $98 million for the fi
46、rst full fiscal year (20212022) and $1,250 million for the last year of projection (2025-2026). There are significant interaction effects when all policies are considered at once. These effects are driven by differences in timing. All policies are impacted by this to some degree, but the proposed de
47、bt reduction is the most significantly affected. When it is considered on its own, it occurs six months after a beneficiary enters repayment. Combined with other proposals, debt forgiveness occurs 60 months after loans entering repayment due to the proposed extension of non-repayment period. This ca
48、uses a decrease in the amount of loans forgiven in 2022-2023 and a shift to future years. Table 2-1 Cost Analysis of a Post-secondary Student Relief Package 7 The lengthened non-repayment also provides time for the average beneficiarys income to increase. A beneficiary household income will likely b
49、e higher five years after leaving school than after six months, resulting in less debt being forgiven. Finally, the moratorium on payments from April 1, 2021 to July 31, 2022 increases the amount of loans remaining in repayment, thus increasing the total amount of loans forgiven. Estimated cost of m
50、easures combined $ millions 2021- 2022 2022- 2023 2023- 2024 2024- 2025 2025- 2026 Cost of proposed measures combined 98 725 917 1,016 1,277 Student Loan Interest Credit - -13 -19 -23 -27 Total cost 98 712 898 993 1,250 Source: PBO calculations Notes: Totals may not add due to rounding. Figures repr
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