The Wall Street Journal released a publication about a month ago indicating that student debt has surpassed credit card debt in America*. This led me to question how Canada’s school of IOU fares. Tuition costs have doubled in the last decade and consequently, a majority of Canadian students seek government assistance in order to pay for their schooling. But, is it really worth it? Students who choose to pursue a post-secondary education realistically have two choices, to board at home or move into residence (or some sort of student housing). Tuition costs alone are in the $5,000 to $8,000 range, and that’s if you decide to stay at home. For those going away to school, you can throw in a meal plan for about $2,000, housing for another $5,000 and you’re looking at a $12,000 yearly education cost. That means for a three year education the cost would be about $36,000 and for a four year education, you can expect a $48,000 bill. On the other hand, us students who aren’t quite ready to leave mom’s apron strings are forking over anywhere from $15,000 to $25,000 for our education, and that’s not including books, transportation or any other indirect expenses. With these total costs, it seems as if taking out student loans has become inevitable. In that case, we can also expect to be making monthly payments towards these loans for the next decade, maybe even longer!
The concept of student loans is a very solid idea as they offer many unique benefits compared to other financing options. Student loans have significantly lower interest rates, they defer the repayment schedule until the student graduates and lastly, they are usually backed by the government or insured. This means that you save a lot of money using student loans over other methods. Student loans have very desirable features and are comparable advantages over credit cards and consumer loans, which is why they are the superior product. With all these benefits it is hard to imagine why student loans are in a crisis. It’s because the problem does not concern the product itself, but the procedures for administering it.
Getting into and staying in debt seems too easy and has become the norm in Canadian life, as 43% of graduates receive government issued student loans**. “Record high tuition fees have caused student debt to surpass $15 billion," said David Molenhuis, who is the National Chairperson of the Canadian Federation of Students.”*** Think about this, 1) almost half of our yearly graduates received student loans and 2) we have $15 billion dollars (that’s $15,000,000,000.00) in outstanding student debt. Any bells ringing? From an economic standpoint, these two facts yield the question, why aren’t Canadian students learning financial literacy? We have thousands of Canadians taking on student loans each year, which can hold serious implications down the road, yet they aren’t educated on how to use this money responsibly. For many of us, we have little to no debt experience. This means we are saddled with a loan, which has life altering repercussions, without having any habits or skills to draw upon. This disparity is why it’s so important, now more than ever, to really invest in post-secondary education and address Canada’s student debt crisis. Clearly, we are in need of implementing a nationwide strategy. It will be a lot easier and efficient to implement a sustainable system that effectively teaches students financial literacy, than it will be to deal with the spiraling amount of student debt. This strategy should help us by giving us the tools and knowledge to get out of debt quicker or avoid it all together. It should boast initiatives that lower tuition fees, increase grants/bursaries, and increase budgets for Canada Summer Jobs programs. We need a system with a solid foundation because there is no better investment than an investment in ourselves.
References:
* http://blogs.wsj.com/economics/2010/08/09/student-loan-debt-surpasses-credit-cards/
** http://www.statcan.gc.ca/daily-quotidien/040426/dq040426a-eng.htm
*** http://www.newswire.ca/en/releases/archive/September2010/22/c4100.html
