One of the emergency measures to support low and modest income earners during the pandemic is an increase in the Goods and Service Tax Credit (GSTC) this year, doubling the maximum GSTC amount, providing an average boost of $400 for single individuals and close to $600 for couples. While this measure will bring much needed relief to those who qualify, we are concerned that this tax credit will not reach those whose student loans are in default and in collections. We have similar concerns for the Emergency Care Benefit, which will also be administered through the CRA.
Emergency funds like the increased GTSC and the Emergency Care Benefit are intended to help those who are financially hit the hardest and are most vulnerable during the pandemic, in addition to providing a boost to the economy. If the benefits are garnished and returned to the government, it would defeat the intended purpose. For these reasons, we are requesting that the garnishing of tax credits and tax refunds to repay student loan debts be suspended so individuals can fully benefit from the emergency financial measures that have been put in place during these trying times.
We would also like to encourage you, when this crisis is over, to think about helping people pay-off their student loans either by eliminating the accrued interests on the loans or forgiving the debts altogether.
For many individuals, accumulated interests over the years make the loan prohibitively expensive to pay back, even if the individual is now in a more financially stable place than when they had initially failed to make student loan payments, and in a position where they wish to pay back their loans. If they have not made a payment in a long time, they have to pay back all outstanding interest accumulated to “rehabilitate” their loan. Many do not qualify for rehabilitation at all.
There are constituents in our ridings who have carried their student debt into retirement, and being on fixed income, they will never be able to repay even the interest portion of the loan. Others have student loans that have grown from a principal loan that was a few thousand dollars, but with accumulated interests, the loan has grown to tens of thousands of dollars. Many of these constituents express a strong desire to pay back what they have borrowed and to be free of debt, but the accumulated interests make it prohibitively difficult to do so. Some express frustration and despair that the tax credits and tax refunds garnished over the years have exceeded the principal amount, but with interest, the debt continues to grow rather than diminish.
We’re sure that you will agree that putting people into a hopeless cycle of interest and debt is not the desire of the government and the student loans program. In the meantime, it is important that we are able to suspend the practice of garnishing tax credits and refunds so people can fully benefit from the emergency measures put in place to help Canadians. When the crisis is over, I hope we can revisit the issue of improving the student loans program and eliminating the barriers to Canadians paying off their student loans, including the option of forgiving the loans.
Thank you for your attention to this important matter.
Jenny Kwan, Vancouver East MP
Peter Julian, MP, New Westminster - Burnaby
Cc: The Hon. Jean-Yves Duclos (Vice-Chair)
The Hon. Navdeep Singh Bains
The Hon. William Sterling Blair
The Hon. Patricia Hajdu
The Hon. Mélanie Joly
The Hon. William Francis Morneau
The Hon. Carla Qualtrough
The Honourable Kirsty Duncan