OTTAWA, Nov. 3 (UPI) -- Canadian college graduates who owe on student loans may soon be able to dip into their travel reward points to repay their debts.
While there is no official partnership between the Canadian federal government and Higher Ed Points yet, one could be imminent. Already Higher Ed Points is working in the Canadian provinces of Alberta and Ontario to apply travel reward points to student loan debt. The venture to take the plan nationwide could reflect a new approach to a growing problem.
In some ways, Canada's student debt crisis parallels that in the United States. Canadian borrowers owe an estimated $12 billion in U.S. dollars (CAD16 billion) in federal student loans, with the average student owing $21,000 in U.S. dollars (CAD28,000). In the United States, borrowers owe about $1.2 trillion with the average of about $30,000.
"From a government perspective, this provides a no-cost method of repayment and another source of debt reduction to help students pay down their student loans more quickly," government officials said.
The outgoing Conservative government gave the go-ahead months ago for federal lawmakers to work out a deal with Higher Ed Points, which works with Aeroplan, one of Canada's most popular travel rewards programs. As the Liberal party takes the reigns in the coming days, an official agreement must be outlined for the program to begin.
But some student activists are calling the idea "absurd." The redemption amount is 35,000 Aeroplan points for a $191 credit (CAD250). As a means of comparison, 55,000 Aeroplan points could get a person a one-way business class ticket from North America to Europe, which could be worth more than $3,000 (CAD4,000).
The amount of travel or branded credit card use needed to earn the 35,000 points necessary could be substantial.
"I highly doubt that the more than 200,000 graduates who were unable to make any payments on their student loans last year would have spent the tens of thousands of dollars necessary to access the $250 deal," Bilan Arte, national chairwoman of the Canadian Federation of Students, said.
The main difference between Canadian and U.S. student loan debt is in options given to borrowers. In Canada, borrowers can file bankruptcy to eliminate the debt or can be released from the debt in six years under certain circumstances.
In the United States, federal law prohibits student loans from being dismissed in bankruptcy. Students who default on their loans face wage garnishment and possible legal action.