The federal government is working to retrieve defaulted student loans, and new legislation means that 7,000 actions will be issued in Alberta courts before March 31 in order to keep their debts alive.
The provincial statute of limitations has just been changed, reducing from six to two years the length of time a debt can be collected by creditors without acknowledgement by the student.
The court actions will allow government and independent creditors to pursue debt collection from unresponsive defaulters for the next 10 years. The lawsuits affect around 7,000 people and roughly $28 million in loans which were defaulted under the old system.
Before 1995, loans were paid to the banks and guaranteed by the federal government in case of default. The lawsuits will not affect people paying their debts, only those who have not made an effort to contact or negotiate with the government in loan repayment in the last two years. People receiving notification from the government will be given a total of 15 days to respond and establish a repayment system. No response will lead to a losing case, and students will be required to pay court costs.
Bernard St. Martin, Director General of Accounting Operations for Human Resources and Development Canada, said the government and the independent credit collection agencies they work with use several different methods to notify defaulters of the change, including letters and phone calls. St. Martin, however, acknowledged the difficulty of reaching people who may have moved residences or provinces since their university days.
The court action in default cases is not something new in the process of debt collection, but St. Martin said the reason for the high-traffic action this month is the shorter two-year deadline.
"It normally happens throughout the year, but the reason for the increase now is that we're doing the backlog quickly," he said.
University of Alberta Students' Union Vice-president External Naomi Agard said the high number of defaulters is due partly to the increasing debt load with which graduating students are burdened.
"This is a reflection of the high debt loads students are facing," she said. "Making large loan payments can compromise your ability to pay back your loan."