Quebec’s Private Student Loan Moment

Although we tend to think of student loans as either being something done by banks for profit or by governments to correct for market failures, there is a third type of student loan: namely, private, not-for-profit companies using a mix of private and public funds for charitable reasons. Probably the most globally significant institution pursuing this path is the Dominican Republic’s FUNDAPEC, which has its origins in a private sector effort to establish higher education in that country during a period of extreme political uncertainty and violence in the period after the overthrow of the Trujillo dictatorship (the group also runs a university, known as Universidad APEC). Basically: if you can’t count on a government education or funds to support students, some kind of organization will come about to provide it on a charitable basis, even if the scale will be insufficient to societal needs.

Anyways, while this kind of organization is pretty common in Latin America (its members meet regularly through the organization APICE), it came as a surprise to me when I recently discovered that there was at one point an equivalent in Canada: a private, no-interest student loan scheme based in Quebec, called Le prêt d’honneur. (I am indebted here to Nathalie Savaia, whose 1994 UQAM Master’s thesis on the subject forms the basis of this blog post).

So, the year is 1944. Francophone Quebecers, to put it mildly, do not have a lot of access to post-secondary education, particularly in STEM and health fields. Higher education in the province receives very little public funding, and such private funding as exists tends to come from the anglophone community and is devoted to McGill and, to a lesser extent, Bishop’s.  

Enter the Societé St. Jean Baptiste de Montréal (SSJBM). They had noted, with some envy, the way other ethnic groups in Quebec banded together to find ways to help their members advance their lot in life (notably: the Hebrew Loan Fund, which existed in many cities in North America at the time and had an active Montreal Branch providing interest free loans for a variety of purposes, including education). And so, they came up with the bright idea of creating a student loan fund, known as the prêt d’honneur, that would permit bright, poor Francophones to access higher education.

Every year, the SSJBM would go out and raise funds from Quebecers. It would then solicit applications from students – undergraduates in universities, students in “colleges classiques” and, in some cases, in technical secondary schools as well – who needed assistance in paying their tuition fees and were felt to have significant academic potential. The method of selecting students was fairly haphazard. There were no hard income-cut-offs to establish need and no hard academic criteria to establish merit. There was just a committee, appointed by the SSJBM which flipped through applications and made decisions based on what felt right. It was, in this sense, a pretty pre-modern kind of affair. The selected students would be given a loan, and were required to pay it back, interest-free, within fifteen years. Thus was the creation of a new Francophone elite to be subsidized.  

The really interesting part of the story, however, was how the whole project came to be funded. How do you raise money for a student aid program? Well, there were the usual appeals to business and philanthropists and so forth (which, interestingly, generated more money from Anglophone businesses than Francophone ones, mainly because the latter were smaller and more precarious than the former). The originators of the concept had hoped to get church backing, but the Bishop of Montreal and the SSJB were at odds in the late 1940s, and it took a while. 

In the end, what happened was that the SSJB started running a very large and very public charity drive every November. There would be celebrity endorsements (for example from Canadiens players like Jacques Plante and Jean Béliveau). Radio stations and newspapers would donate advertising time/space to announce it. And, most spectacularly of all, there was the Grande Visite Étudiante, in which thousands of students, mainly from Université de Montréal, would go into parishes around Montreal and start fundraising at masses and other events put on by the Catholic church. The Grande Visite ended up being the source of about half of the prêt’s revenue, so in many respects the prêt was a matter of students working to subsidize other students.

Thanks to the Grande Visite, the loan system got a lot bigger. Funds raised rose substantially, and the SSJB was able to offer hundreds of loans a year instead of just a few dozen. Additionally, buoyed by the success of the Montreal chapter in raising funds for education, many of the other SSJB branches began participating as well (the fact that a third Francophone university had just opened in Sherbrooke probably had a lot to do with the movement’s success in the Eastern Townships). And, starting in the early 1960s, some financial engineering started coming into play as well. Inspired by some examples of similar funds in Massachusetts and New York, the funds raised ceased being used to offer loans directly to students but rather came to be used as a loan guarantee fund under which one dollar from the SSJB turned into five dollars lent to students from a local bank or, more often, a credit union. By the mid-1960s, therefore, the loan fund supported over a thousand students a year, roughly 20x what it had been at the end of the 1940s.

But even so, with the Quiet Revolution and the expansion of higher education access in Quebec, the prêt couldn’t keep up with demand. And students, while grateful for the loans, began to see them as an impediment to the creation of a genuine public student aid system. And so, after several years of arguing in the pages of the Quartier Latin, the Université de Montréal’s student newspaper, the student union in 1966 withdrew its support for the prêt d’honneur. Shortly thereafter, the newly-elected Union Nationale government of Daniel Johnson passed legislation creating a significant and quite generous student aid program which more or less eliminated the need for a private student loan program in the first place. Public donations fell, as did the number of student volunteers. La Grande Visite was briefly replaced as a fundraising tactic by a direct mail campaign, but the results were disastrous. By 1970, fundraising for loans stopped, and what was left in the kitty was used to fund grants for post-doctoral research.  

There is no need, really, to mourn the prêt d’honneur’s passing: the system of government loans and grants that replaced it was superior in almost every way. But I think that remembering it today, more than fifty years after its passing, is still valuable for two reasons. First, from a narrow geographical point of view, it’s useful to remember that Quebec wasn’t always the most statist province in the country – in fact, as recently as 60 years ago, it had a civil society capable of organizing and fundraising for change in ways not seen anywhere else in the country. And, more generally, perhaps, it’s a reminder that even though government expenditures might be the most efficient and economical solution to certain social/economic problems, there’s no need to wait for government to present a solution. Non-profit citizen efforts can play a role, too.

In the absence of government action, it is possible determined policy actors in the field of higher education can still find a way to organize and thrive.