Students at Simon Fraser University are celebrating the university's decision to back away from a controversial new private loan program.
FirstStudentLoan, a company based in Toronto and Vancouver, had approached SFU officials earlier this year with a plan to provide eligible students with nearly instant credit-based loans of up to $25,000 a year.
But concerns about the easy access to the loans coupled with the high interest rates and associated risk premiums charged to students led the university to announce recently that it was halting discussions with FSL.
Chris Giacomantonio, president of the Simon Fraser Student Society, said FirstStudentLoan "has nothing to offer students except crushing debt loads and punitive interest rates."
"We're pleased the administration took students' concerns into account and made the right decision on this issue," he said.
While private for-profit loans are not in SFU's immediate future, the University of British Columbia continues to press ahead with a pilot project in partnership with FSL that would see the university putting up an undisclosed sum to guarantee private loans to students.
David Fleming-Saraceno, external relations officer at SFU's student society, is worried that a "domino effect" could result from UBC's actions and that other Canadian universities and colleges may already be quietly negotiating deals with FSL.
"While pressure from students and responsible decision-making by the university administration stopped FirstStudentLoan at SFU, the privatization of student debt remains a real threat in Canada," Fleming-Saraceno said.
He said if SFU had accepted the FSL proposal, student debt would have ballooned.
"Private loans don't help students, they just lead to higher debt and provide a rationale for increased tuition fees," Fleming-Saraceno said. "Grants and tuition fee reductions, not more loans, are what students need."