The Royal Bank of Canada has confirmed with the Department of Education that it will no longer participate in the Provincial Student Loans program, effective December 31, 1998.
The Royal Bank rejected the province's offer to increase the rate of the loan ‘risk premium' paid to lenders by the province from five per cent to 10 per cent. Royal Bank officials stated their rate of loan losses is 15-20 per cent.
The Royal Bank's decision will require students who hold Provincial Student Loans with the bank to make arrangements to transfer their files to the Canadian Imperial Bank of Commerce, PEI's Credit Unions or The National Bank, beginning in the new year. Students who have loans under the separate Canada Student Loans Program will continue to be able to borrow funds from the Royal Bank for the federal loan program only. The changes will affect approximately 1,100 Provincial Student Loans at the Royal Bank. Only students cashing provincial student loans after December 31, 1998 will be affected by the change.
"Given the late confirmation received from the Royal Bank to withdraw as a lending partner, the department felt it was critical to communicate with all students as quickly as possible over the holiday period," says Chester Gillan, Minister of Education. "I am pleased that negotiations with the Credit Unions of PEI has resulted in their willingness to extend loan services to current credit union members, or their children who are attending school. The addition of The National Bank as a lending partner, together with the Canadian Imperial Bank of Commerce's commitment to remain active in the provincial loan program, will help with the transfer of students' files from the Royal Bank." Minister Gillan also thanked the UPEI Student Union, the administration at UPEI and Holland College and private trainers for their assistance to quickly communicate news about the loan changes to students.
The attached fact sheet will be distributed to students when they pick up their student loan agreements at their education institution in January. The fact sheet contains special instructions for students and will be complemented by print ads and a direct mail campaign to maximize students' awareness of the changes to the provincial program.