Friday, September 24, 2010

Canada's student loan system is in crisis

In a story that largely flew under the radar earlier this month but deserved much more attention than it got, the government had to take immediate action to ensure that tens of thousands of students heading to university and college campuses this fall would be able to pay their tuition:

The recession-fuelled rise in postsecondary enrolment has maxed out the federal student loan program at $15-billion, forcing Ottawa to hastily change the rules to keep the money flowing as classes resume for the fall.

Without the last-minute boost for the cap on total student debt, the federal government estimated, 50,000 students would have been denied about $300-million worth of loans.
It seems with the recession, many more people than expected are heading to campus to upgrade their skills and be better positioned to enter the workforce as the economy improves. But while the economic situation pushed the system over the top this month, forcing the last-minute boost, there is a deeper, more systemic problem illustrated by the need for this action: rising tuition and related costs, and rising levels of crippling student indebtedness.
Canadian university students are taking on higher debt loads than ever before, more than doubling the amount they borrowed 20 years ago, according to a new report from the Canadian Council on Learning.

According to the CCL, the average debt for a university graduate more than doubled between 1990 and 2000, rising to $24,706 from $12,271. By 2009, that number had risen to $26,680 for university graduates.
As the report indicates, these rising debt levels could have major societal and economic repercussions as graduates struggle to get themselves out from under these mountains of debt. Couples will wait longer to have children (and could ultimately have fewer, exacerbating population declines.). They'll put off buying a house longer, which has ripples throughout the economy. They'll rent longer (instead of building home equity) and many graduates are moving back in with their parents. And they'll delay retirement planning and savings, which will have major repercussions down the road, with our public pension system already in need of major reform.

Gone are the days when you could work the summer at a great-paying job, and earn enough to pay for your year's education expenses. Those high-paying summer jobs just aren't there anymore, and a look at unemployment numbers during the recent recession shows students suffered far more than the rest of the workforce. Even with summer jobs and part-time work during the year, students are still emerging with large debt-loads. Those high-paying jobs also aren't automatically there any more after graduation, particularly in this economy. A degree is increasingly a necessity to get in the door.

The questions we need to be debating as a society is do we place value on having an educated workforce, how are we faring compared to other countries, what are the consequences of falling behind as a country, and do the benefits to the economy, society and country of an educated populace merit an increased level of government support?

I believe it does. A more educated workforce earns more money, paying more taxes to the government. It spends more, putting more money into the economy (and paying more taxes). It creates more business and jobs, who all earn money and pay taxes. In short, government investment in education pays for itself many times older. There's no better investment we could make than in ourselves.

By relying on a loan system that leaves students with crippling debt loads we're stifling that innovation potential. It's time we undertake a comprehensive overhaul of our post-secondary education models, with an eye toward shifting the reliance from loans toward grants and bursaries.

And we should go further, towards universal access. As Michael Ignatieff has said, if you get the grades you should get to go. Now that could take many forms, and will require a re-think of the entire system. Should the wealthy really get low-cost access? Perhaps not. There are many details to be debated, and many different forms that the system could take.

It is time, though, for the debate to begin. In fact, it's long overdue. The system is broken, and we're falling further behind every day.

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jkg said...

One of the most annoying things I saw in my undergraduate days was the abuse of assistance money (in Ontario, it is called OSAP).

I may sound stringent, but if you take OSAP money and use to fund a vacation during Spring break, then you are not in dire need of the money. That money could have been freed up for someone else who was rejected.

Some parents, as a matter of pride, refuse to give their children money for university, yet on OSAP, you have to declare you parents' income. If they make too much money, you may not get assistance. Secondly, they only count those members of your family who are in university. Thus, they don't take into account debt accumulated from those who already graduate, who had to take a student loan.

I know Conservatives, at least the young ones on campus, would like to remove the cap on tuition, citing that with more money, the university can offer more quality and assistance. However, I think that is a zero sum game. At best, tuition should be kept with inflation, and the full time designations should be modified so that students can get more work if they are unsuccessful in applying for awards. I am told there are many awards for people, but I always found that bursaries tend to be few and far between, especially since most of them were very specific in criteria and you had to compete with others who probably demonstrated more financial need.

Unknown said...

Jeff said:

Couples will wait longer to have children (and could ultimately have fewer, exacerbating population declines).

From your language, it seems that you believe that population declines are somehow a bad thing. An increasing population is at least in part responsible for the decrease in jobs (there aren't many more jobs, but there are a lot more people to fill them) and the decrease in university spots (how many more university openings are there since the time of 'great-paying summer jobs'? Not as many more as there are students who want them!).

If population declines are a problem, there are plenty of overpopulated countries in the world whose escape valve we could be, rather than encouraging/enabling a higher birthrate among people who are already here.

The world is already drowning in people. Let's not pretend otherwise.

marie said...

Canada is already drowning with buliies such as yourself that cannot tell the difference between black and white, truth or fiction and everybody else regardless of their preference to leaders or parties that doesn't agree with them have to be liberals. Let's not pretend otherwise and thats so sad that having Harper can and has created so much hate towards their fellow Canadians.

The one thing Harper did accomplish is having his parrots having created them with the mentality of the school yard bully which is nothing I would be too proud of or brag about.

I have Completed your sentence Wilson, There is nothing about you that I have seen that makes you qualified to even express your opinion let alone believe you.

Its best to keep Politics and the Con mentality out of your posts.

Michael said...

There may many complaints about the Canada student loan system but at least they have a student loan program to help many students today and they will adjust as needed. Change takes time and you just can't turn a titanic as quickly as a row boat here. Canada gets it done for their people and they will get the student loan problem fixed in due time.