Direct-lend Initiative Makes Student Loans Cheaper

College and university students will pay hundreds of dollars less in interest on student loans as the result of a direct-lending initiative by the province.

The new initiative will shave two percentage points off the interest rate students would have paid under the existing program.

The result is Nova Scotia will have one of the lowest student-loan rates in the country.

"This change is a big win for students," said Education Minister Karen Casey. "Lower interest rates will result in significant savings to students, and any government savings will be reinvested into the student assistance program."

Nova Scotia student loans are currently administered by a bank. Starting this summer, the province will obtain money through routine treasury operations and lend it directly to students, thereby lowering the interest rates student borrowers have to pay.

The direct-lending initiative is expected to save the average student borrower several hundred dollars over the life of a loan.

The direct-lending initiative will begin Aug. 1, the start of the next academic year.

Students enrolled in school or who began paying off student loans after Oct. 31, 2007 will be the first to benefit from the program.

Other student borrowers will still deal with their bank.

Any government savings from the program will be reinvested into student assistance programs.

The Department of Education has just completed consultations with students and others as it works to improve the Nova Scotia Student Assistance Program. The subsequent report will help guide government on how to invest any savings.

Nova Scotia Student Loans will be administered by Resolve Corp. Resolve is a Toronto-based business-process outsourcing company, which has offices in Bridgewater and Halifax. It employs 500 Nova Scotians. The Halifax location will provide some of the service for the program.

Resolve handles student loan programs for a number of other provinces and was awarded the contract to service the new federal program, beginning March 1.

"Resolve is pleased to have been chosen as the service provider for the Nova Scotia direct-lending student-loan initiative," said Lawrence Zimmering, president and CEO of Resolve.

"We will leverage our experience and expertise to ensure that our service delivery meets the expectations of the government and their student borrowers."

The new initiative is expected to increase the province's 2008-09 borrowing program by about $120 million. This will not increase the net direct debt of the province.

The province issues about 9,000 student loans annually, worth about $40 million.