Addressing a generation of student debt

Across the country, 18-25 year-olds are stretching their resources for a higher education. Many are taking on significant levels of debt they can’t afford.

But with rising tuition fees – a 2015 study by Statistics Canada says the national average price of a higher education has increased by about 155 per cent in the past two decades when accounting for inflation – most students have no choice but to borrow.

Last year, Statistics Canada found that between 50 and 60 per cent of the time, those across all levels of study rely on student loans, private loans, bank loans and family to deal with debt from post-secondary education.

The result is a national borrowing binge with student-loan debts totalling about $16 billion, according to federal documents obtained by The Canadian Press last year.

But March’s federal budget promises to change that.
The map below displays the degrees of debt across Canada’s provinces accounting for the total cost of four years of tuition as well as the average annual student-loan debt in each province.

Source: Statistics Canada

Ontario is making college and university more affordable for low- and middle-income students and their families through a major overhaul of the Ontario Student Assistance Program (OSAP).

The province will replace a number of existing provincial student assistance programs with a single, targeted, non-repayable Ontario Student Grant starting in the 2017-18 academic year.

Ontario estimates these changes to OSAP will provide 150,000 eligible low- and middle-income post-secondary students with free tuition and another 170,000 will pay less than they would under the current system.

Worth the investment?

How much are Canadians currently dishing out for post-secondary education in 2016? That depends on a few variables …

Students leaving home for school can expect to pay upwards of about $68,933 for a four-year university program, while those staying at home would pay closer to $28,819, according to a policy report from researchers at Heritage Education Funds last year.

Statistics Canada estimates the average annual increase in tuition costs to be about 4.83 per cent which means a university degree in 2033 could cost up to $122,000.

“All the data shows that, in the long run, education is still a strong investment. It’s probably one of the best investments an individual could make towards their future and that society could make in an individual.” — Patrick Snider

What about a college diploma versus a university degree? Statistics Canada estimates going away for a two-year college program costs about $22,000 – substantially less than university.

No matter the cost though, it may pay off later.

Statistics Canada calculates a university graduate earns an average annual income of about $48,648, whereas a college diploma equals closer to $32,736 a year. This varies of course by occupation. Nano-technologists, economists and nurses offer impressive returns on investment while some others do not. A college-trained chef on the other hand can earn about 10 per cent more than a university trained one, according to Statistics Canada.

The return from higher education remains positive and well worth it, says Patrick Snider, senior policy analyst for the Ottawa-based Canadian Alliance of Student Associations (CASA).

“All the data shows that, in the long run, education is still a strong investment,” says Snider. “It’s probably one of the best investments an individual could make towards their future and that society could make in an individual.”

Students pay for long hours of studying. Photo © Matea Zeko

Still, student-loan debts have some reconsidering the value of their degrees.

Emily Greiss, a recent criminology graduate at Carleton University says she lost several nights sleep over her student loans and contemplated dropping out in second-year, afriad she would be crushed with debt upon graduation.

“It’s kind of like a dark cloud hanging over your head. I couldn’t not think about all the money I owed. Those thoughts followed me everywhere, whether I was studying, picking up extra shifts at work or getting drinks with friends. I could be drinking coffee on any given afternoon and my mind would drift elsewhere – back to this lump of money I owed,” says Greiss, referring back to her second year.

However, Snider says it’s only in the short run where primarily lower-income students run into problems due to the limited financial resources of them and their families. Without financial support, lower-income students initially have a harder time enjoying the benefits to a long-term education, says Snider.

Directed funding

“The most important thing we can do right now is make sure there is funding for groups that really need it and will receive a positive impact from gaining access to higher education,” says Snider, referring to the federal budget’s loan and grant changes that he says should reduce student debt levels over the next few years.

The result could be students from families with incomes of $50,000 or less receiving free tuition. Half of students from families with incomes of $83,000 will qualify for non-repayable grants for tuition and no student will receive less than they can currently receive.

There are more than two million students enrolled in post-secondary institutions across Canada, according to Statistic Canada’s latest data from 2014. The Canadian Student Loans Program (CSLP) calculates most of these students take about 10 years to pay off their federal debt.

Photo © Matea Zeko

Up-to-date federal government numbers are hard to come by, but in 2012-2013 the CSLP handed out $2.6 billion in loans to 472,000 full-time students across Canada – a six per cent increase in students from the year before.

Snider says that 40 per cent of students with student-loan debt do repay their loans fully and within the specified time-frame. That leaves 60 per cent who run into difficulties that takes them five, sometimes 10 extra years, to repay.

“There is a picture of widespread repayment challenges in Canada. But thankfully, the new draft aims to even out debt levels for students across the board – especially those from lower and middle-income backgrounds,” says Snider.

Changing education grants

Snider insists reworking existing grant programs is key to decreasing loan repayment challenges. Currently, students from low-income families are eligible for $2,000 in federal grant money per year, and those from middle-income families are eligible for $800. Under the budget’s plan, Snider says these numbers jump to $3,000 and $1,200 respectively.

Low-income graduates earning below $25,000 will also be able to defer interest on their student loan payments.

It will be a while until post-secondary students can reap the full benefits of the federal loan and grant system.

“It’s a process that won’t see too many changes applied for another three years,” says Snider.