All Posts Tagged With: "student debt"

Gets house arrest instead of jail

A student pleaded guilty in a North Bay, Ont. court—and received house arrest—after he was caught with a hefty load of marijuana in his car, an estimated $47,000 worth. Jameson Fletcher’s lawyer argued that his client, a Laurentian University commerce student, was selling drugs to help lessen his $40,000 school debt load, reports the North Bay Nugget. Fletcher was given a punishment of six months served in the community when it’s common to receive jail-time, said the deciding judge, Justice Jean-Gilles Lebel. Despite the light sentence, Lebel noted that many young people carry student debt and most manage to pay it down without committing crimes.

Why our leaders shouldn’t dismiss the Occupy Movement

Occupy Winnipeg photo by marygkosta on Flickr

Jamie Weinman has a post on Maclean’s.ca suggesting that student debt is fuelling the Occupy Everywhere protests. Weinman quotes this Washington Post article by Ezra Klein who writes that “college debt represents a special sort of betrayal.” He says he began supporting the protests after seeing a photo on the Tumblr site, “We are the 99 percent.” It was of a handwritten sign by a student that said: “I did everything I was supposed to and I have nothing to show for it.”

Their point is this. While many of the people hurt by the financial crisis should have known better—people who took out mortgages they knew they couldn’t afford and bankers who invested in financial instruments they knew were overrated—students who took on debt are different. They went into debt because they had been told repeatedly by parents, teachers, politicians and the media that educational debt is a sure route to higher paying jobs. Now that we know that’s often untrue, can we really blame them for being angry?

Continue reading Are young Canadians really better off than young Americans?

Revenues are declining and students are paying for it unless administrations start taking necessary initiative

Deloitte Canada issued a damning report about the financial state of Canada’s universities on Tuesday.

Pressed by declining government revenue, declining private donations, rising pressure on students to make up the difference, universities across Canada are being forced to take a hard look at their accounts.

According to the report, the top 10 financial challenges universities will face in the coming year are:

1. Over budget and under-funded: As funding declines, cost management is key
2. The rivalry intensifies: Competition to attract the best students heats up
3. Setting priorities: The danger of making decisions in the dark
4. Moving at the speed of cyberspace: Technology upgrades are needed across the board
5. Rethinking infrastructure: A renewed focus on asset optimization
6. Linking programs to outcomes: Where training and market demand intersect
7. The best and the brightest: Attracting and retaining talented faculty
8. A sustainable future: Enhancing environmental performance
9. Education for all: Tackling diversity, accessibility and affordability
10. Regulations and reporting: New responsibilities require better disclosure

The problem is that governments and private donors are free to reduce their contributions to universities when times are tough. Students are not. When income declines and — as the report notes — costs of program delivery climb, students are on the hook for the remainder.

What universities need to do is start taking a stern look at their expenses, figuring out who is paying for them and cut where necessary. No longer can schools be all things to all people. Streamlining of core programs, focusing efforts — even at the cost of the peripheral programs — is going to become increasingly necessary.

“Despite the merits of a world-class liberal arts education, there is a danger in supporting a curriculum that is too theoretical. Today’s fast-paced world needs construction crews, hospital workers and people to build cellphone towers. Institutions must respond to these realities by ensuring their educational agendas are in sync with forecast marketplace demands,” Arsh Maini, a senior consultant with Deloitte India wrote in the report.

While there will undoubtedly be a massive outcry as universities keen on research and engineering cut their arts programs, other schools are likely to cut expensive science and engineering programs in favour of robust arts programs. This is a good thing, a healthy thing, as each school becomes the best at what they do.

This streamlining — a complete overhaul of how higher education is financed in Canada — is necessary to the continued survival of our diverse education system.

Students may not always be as educated as they should be when it comes to financial aid

(Editor’s note: In the opening paragraph of this post, it is claimed that Canada Student Loans requires $149.5 million to cover “60,000 additional defaults.” In fact the $149.5 million is needed to cover loans deemed unrecoverable, as per the Financial Administration act, see 2010-11 budget estimates, page seven. The money would have been originally budgeted last spring. It is the delinquency rate, the percentage of loans in arrears, that has been growing, rising to 13 per cent in 2010-11 from 10 per cent the year before.)

While generations of students have relied on student loans to fund their education, the recent revelation that the Canada Student Loans Program is facing a $149.5 million shortfall because of 60, 000 additional defaults in 2010 may suggest that students don’t always know what they’re getting into when they decide to take on a loan.

“A lot of times student’s don’t necessarily look past the four years of their degree, they are just kind of worried about getting through their degree program,” says Rory Tighe, vice-president student life of the University of Alberta Students’ Union, who helps manage the Student Financial Aid Information Centre at the U of A. “Thinking about the long term effects of the debt that they’re accumulating is sometimes a bit of an issue.”

A study published by the Canadian Alliance of Students Association in 2010 found that many students were “very poorly informed about the details of the government financial aid system.” The study challenged over 20, 000 students across the country to a financial aid literacy test, which almost three quarters of the participants failed.  Many of the students surveyed didn’t understand the details surrounding repayment of their student loans, with almost half not realizing that individuals are required to begin repaying their loans six months after graduation, and only 23 per cent understanding that their loans begin accumulating interest immediately after graduation.

In an email, Amélie Maisonneuve, a spokesperson for Human Resources and Skills Development Canada, stated that the $149.5 million needed to write off the unrecoverable student loans “is consistent with past trends and had been forecast by both HRSDC and the Office of the Chief Actuary.”

When asked why so many students don’t seem to understand the details of the federal government’s student financial aid system, Maisonneuve pointed said the government recognizes the need to “modernize” the system and pointed to the department’s CanLearn website, where students can find of information on the Canada Student Loans Program and the details of their own loans, including transaction history of payments, and how much they have left to repay.

Tighe felt that the federal government already does a reasonable amount of information provision about the program, “it’s just a really complicated program and it’s not something that’s engrained in our education system.

“Trying to get through your degree, you have enough stresses just trying to get enough funding to progress year to year. There’s definitely information out there, it’s just that students don’t necessarily go out and find it all the time.”

Doug Hoyes, a licensed bankruptcy trustee who testified before the Senate Standing Committee on Banking, Trade and Commerce on changes to legislation on student loans and bankruptcy in Canada in 2008, said that it was essential for students to keep track of how much they’re going to owe once they graduate, explaining that there were plenty of debt calculators available for students to use online.

“If students actually saw that number, they’d realize ‘oh my goodness, I’m going to have to pay $400/month on my loan, but I’m only making $1500/month’ . . . that may make it more likely that students are working a part-time job, where otherwise they wouldn’t have been,” Hoyes said.

In his experience, Hoyes said it was “quite common” for clients to file bankruptcy because of unpaid student loans, explaining that 14 percent of clients at his firm, Hoyes Michalos & Associates, have outstanding student loan debt at the time of their insolvency. According to the firm’s website, the average age of these applicants is approximately 35 years old, since student loan debt is only dischargeable in bankruptcy if the applicant has not been a student for seven years, after new student loan bankruptcy laws passed in Canada in 2008.

“The classic case that we would see would be someone who went to school but was not able to get a job in their chosen field [ ... ] If you go to school to become a doctor and you get a job as a doctor, you’ll probably be able to pay back the loans. It’s when you go to school and aren’t able to get a job earning enough to pay back the loans, that’s when you run into problems,” Hoyes said.

For some students taking on debt is not necessarily a negative. Ashley Gaboury, an English major at the University of Manitoba, said she was nervous about taking out a federal student loan for the first time to help pay for her last year of university. However, she felt that student loans weren’t necessarily a bad form of debt, considering it’s going towards an education that will hopefully lead to a job.

“It’s just another thing that you’ll have to cover. I already have a credit card that I have to budget for and a cell phone, so I think it’s just something that you have to see if it . . . will fit into your life.”

Photo: Getty Images

Despite a conventional PSE platform, the Wildrose Alliance might still have a radical edge

When talking about higher education, Alberta’s Wildrose Alliance leader Danielle Smith rarely sounds like the “libertarian” she is commonly believed to be, and certainly sounds nothing like the “extreme” right winger the current government tries to paint her as.

In her view, high student debt “is untenable” because “it discourages kids from seeking higher education.” She slams the University of Alberta and the University of Calgary who have, in the past, circumvented a tuition cap by raising non-tuition ancillary fees because “We don’t think that is fair to students.”

However, there is one policy plank that, depending on how it is implemented, could be one of the most radical departures in Canadian post-secondary education policy in decades. When unveiling the platform at the University of Calgary in October, she advocated for “sending a good chunk of government funding directly to students and allowing it [to] follow them wherever they choose to go.”

The plan, she told the audience, “would have the effect of adequately funding the schools and the programs that are in the highest demand while at the same time creating competition between schools to offer those programs at reasonable rates.”

While the idea remains underdeveloped, Smith’s choice of words have signaled to some observers that she favours a voucher system, albeit a relatively modest one. A pure voucher program would involve entirely replacing operating grants to universities and colleges with direct transfers to students who would then take their money, in voucher form, to any school of their choice. Smith has not proposed anything so bold. A “good chunk” is not the whole envelope.

Nonetheless, her comments prompted the Council of Alberta University Students to request clarification from the party on this peg of their platform. Aden Murphy, a student executive at the U of A, says that the worry over transferring education funding in voucher style is that it could cripple universities, unless it is modified enough to take into account multi-year enrolment projections.

“An institution isn’t as agile as a small business,” he says.

When asked about her university funding plans Smith is reluctant to actually use the word “voucher,” instead stating that the proposal “is more like our charter school system.” When a “student chooses to go to that charter school, the funding, on a per capita basis, flows directly to that school,” she pointed out in an interview. “There is some value in considering this approach in post-secondary education as well.”

If her comments were simply intended to refer to per capita student funding, already incorporated to a degree in Alberta, then her plan may be similar to other elements of the Wildrose higher education platform, that is, it may involve modest tweaks rather than slashing and burning.

Of course, Smith could be hedging on this question to avoid appearing immoderate. In the past she has openly advocated for a voucher program in the K-12 system. A report she coauthored for the Fraser Institute concluded that, “Schools must be given the freedom to innovate and the requirement to do so. The way to do this is to introduce competition into the school system through a voucher scheme.”

An article that appeared in the Georgia Straight last spring wondered if Smith has been preparing to put her old education ideas into practice. For primary and secondary education, the Wildrose Alliance is only officially committed to supporting “School Choice” legislation.

In addition to enforcing rules that index tuition to the rate of inflation, the more fleshed out, and conventional, parts of Smith’s higher education platform includes plans to forgive student debt for graduates who stay in Alberta, remove parental income as a factor in loan eligibility, and to streamline the credit transfer process.

She would also change election rules so students living in residence could vote in their university riding, rather than in their parents’.

“We seem to have no problem setting up polling stations in other facilities where we have temporary residents, like prisons for instance, like nursing homes for instance,” she says. The current Progressive Conservative government, Smith adds, has “no reason to find a way to facilitate the vote [for students],” because they tend to be more “left-leaning.”

So far her platform is receiving cautiously optimistic reviews from student leaders. Murphy says that a year ago students he spoke to were worried that Smith would promote privatizing elements of the university and college sector.

“That fear hasn’t come to pass,” he says.

He does note that any debt relief scheme shouldn’t supplant current programs, and that upfront grants would be preferable to tuition tax credits. But on balance he is hopeful that if Smith were to become premier after the next election, her focus, at least when it comes to higher education, would involve tweaking the current system rather than anything particularly revolutionary.

“They showed they are serious about developing a constructive higher education policy,” he says.

Where Smith is more comfortably conservative is on her already notable distrust of the federal government. She dismisses any legislation to enshrine higher education standards across the country—as has been proposed by the federal wings of both the NDP and the Liberal party—as unconstitutional.

“There is just no way that we would support an increased federal role so that they can start meddling in this area. I don’t see how that would benefit Alberta taxpayers or Alberta students,” she says. “I would anticipate that that would just be another mechanism to transfer wealth out of Alberta.”

Photo: Canadian Press

If schools teach students to plan ahead, why don’t they practice what they preach?

While the future of tuition in Nova Scotia is still a little uncertain, the New Brunswick government seems to be taking the opposite approach. N.B. wants to develop a four-year post-secondary funding plan to help students more easily plan how they will pay for school.

The ironic thing is that New Brunswick is saying they were inspired by the very memorandum of understanding that is currently up for debate in Nova Scotia. That province announcement today showed that the three-year tuition freeze is no longer a priority and tuition will be rising next year. By how much will likely vary from institution to institution and from year to year. Not something that is all that helpful to students trying to planning ahead.

Marilyn More, N.S.’s minister of advanced education, said the government will be capping tuition increases at three per cent. This means the government still doesn’t have a long-term strategy for post-secondary education; they just want to ensure it doesn’t balloon up out of control again.

It’s no secret that university tuition is high, and growing faster than it ever has. A little stability will make financial planning for students a lot easier. While this proposal is a good start, the problem comes in four years when the deal is up and the province’s whims change again.

And students always lose in that scenario.

Why is increasing student debt more important than lowering tuition?

A series of adjustments made to the Ontario Student Assistance Program this week are really just raising the bar to service enjoyed in other provinces and doesn’t even come close to the assistance provided in the rest of the country, Newfoundland and Labrador, in particular.

While it’s great to see Ontario’s student assistance finally standing in line with the rest of the country, having six months interest-free after graduation is not going to make much a difference when you’re already going to be repaying debt for many years.

In August 2009, the Newfoundland and Labrador government eliminated interest on student loans entirely. The province later said that students in repayment during the first year of the program collectively saved $5 million.

“By eliminating interest rate charges, the provincial government has responded to a call by students and graduates who are struggling to pay off their student loans,” Daniel Smith, Newfoundland and Labrador chairperson of the Canadian Federation of Students, said in a press release on Aug. 2. “Increased funding to improve access and reduce student debt is a sound investment in the collective future of our province.”

A tuition freeze as well as non-repayable grants are also a reality in Newfoundland and Labrador. That, to me, seems like a province taking their future seriously.

Meanwhile, the Ontario government’s post-secondary plan has been a little contradictory this year.

Back in March, the government announced it would allow tuition to continue to rise at the maximum of five per cent for the next two years. Now they are pretending to help students pay for it by making it easier for them to take on debt.

Rather than earmarking an additional $81 million for student aid in the province, Ontario might have taken a progressive stand on the matter and introduced another tuition freeze for less than that amount. Not to mention using the extra money that “streamlining the process will save,” which is estimated at “more than 10,000 work hours in student aid offices, improve efficiency in evaluating and processing applications, and reduce back-to-school line-ups.”

In a province with the highest average tuition in the country, bringing the initial price tag in line with the rest of the country should be a bigger priority than making it easier to increase student debt.

Students are paying for a significant portion of their education

There have been some really interesting statistics on students and universities coming out of Quebec over the past few days.

On Thursday, the province’s largest student lobby group released the results of a major study (in French) on student finances. On Monday, the Conference of Rectors and Principals of Quebec Universities posted a lot of statistics, on things like enrolment and finances at every university in the province, on their website.

The Fédération étudiante universitaire du Québec study is definitely more interesting, some of the numbers posted by the Conference were hard to find but they were all available.

The scope of the FEUQ study is notable. Eight per cent of students in the province participated and it’s got some bonafides. It was sponsored by the Millenium Scholarship Foundation and Desjardins Foundation, the charitable arm of Quebec’s largest chain of credit unions. It was also carried out by a third-party market research company.

The main take-away is the importance of working, the average full-time student works 18 hours a week and that accounts, on average, for over 50 per cent of their finances. For part time students work accounts for over 80 per cent of their finances.

Parents also account for a large portion of student financing, especially for full-time students, more than any other source except for work.

The other thing that really struck me is that over 20 per cent of part-time students have children of their own and most of them say they’re struggling to maintain a balance between their family and their studies.

New legislation may be needed to increase financing limits to meet demand for loans

The federal government rushed through a last-minute change in its student loan funding in order to make sure 50,000 post-secondary students would have enough money to go to school this fall. Legislation caps the amount Ottawa can have outstanding at any one time at $15 billion, and that limit was about to be breached this month, federal documents showed.

So Human Resources Minister Diane Finley quietly and quickly used an order-in-council on Aug. 20 to have the wording of that limit changed. “Had this amendment not been made, the economic and social implications for those who would have been unable to pursue post-secondary education as a result could have been quite significant,” the minister’s analysis statement says.

The change fiddles with the wording of the $15-billion lending limit so that it no longer includes risk-shared loans that the government used to disburse in the 1990s. So now, Ottawa has room to lend out an extra $2 billion as students head back to school next week. Federal officials figure they’ll only need about $300 million of that — enough to fund about 50,000 students, the government documents say.

But the documents also make it clear that the change is not a long-term fix for inadequate funding set aside to cover growing demand for student loans. New legislation may be necessary, the documents say.

The sudden increase in demand for student loans was not foreseen. In an actuarial analysis of the Canada Student Loans Program, tabled just two months ago, officials did not expect to bump up against the $15-billion cap until 2015. The actuaries’ report foresees a gradual rise in demand for loans, partly because tuitions are increasing, and partly because there are more students — especially in the wake of the recession.

But the report does not mention a sudden surge this summer. Nor does the order-in-council explain why federal officials saw outstanding loans spike from $12.3 billion on July 31, to more than $15 billion less than two months later.

Officials pointed to the recent recession prompting more people to return to school for training as part of the reason for the unanticipated rise in loans outstanding. Despite the last-minute reprieve for students, the Canadian Federation of Students is upset. Issuing more loans on an ad-hoc basis does nothing to resolve the growing financial burden placed on students, and is only a temporary fix, says David Molenhuis, the association’s national chair. “They’re trying to sweep the situation under the rug,” he said. “It’s telling that it was done at the absolutely last minute.”

He would rather see government make post-secondary education more affordable than increase students’ already huge debt loads. “It’s a situation that’s increasingly unsustainable. It’s bad policy begetting bad policy,” said Molenhuis.

A spokesman for Finley, however, says the raising of the loan cap is just one more thing the federal government is doing to foster a better-educated workforce. “As a result of the programs that our government has introduced, more students now have access and the flexibility they need to government programs so they can attend post-secondary education,” said spokesman Ryan Sparrow.

The Canadian Press

Sask to help medical school grads pay down loans

Saskatchewan needs doctors. The province announced yesterday that it would be providing $450,000 to help medical residents with their student loans.

The province’s funding covers interest on student loans for medical residents over an eighteen month period, while government looks into longer-term strategies to ensure medical residents are assisted while completing their residencies.

“Keeping Saskatchewan-trained medical residents working in the province is a top priority of this government,” McMorris said. “As part of our ongoing retention and recruitment efforts, we are pleased to assist medical residents during their residencies. We can be proud that Saskatchewan is leading the way among the provinces by offering this short-term funding.”

“Our top priority is Saskatchewan’s post-secondary students,” Minister of Advanced Education, Employment and Immigration Rob Norris said. “I’m pleased that we have been able to develop a solution to meet the Federal legislative requirements of the student loan program while supporting Saskatchewan’s objectives regarding the recruitment and retention of physicians.”

“Postponing repayment will allow residents to continue to lay down roots in the province that they will hopefully one day practise within,” Vice President of the Professional Association of Interns and Residents of Saskatchewan Sue Sidhu said. “We are all extremely grateful that the province has taken action so quickly.”

I’m not really sure what to make of this announcement. Doctors need financial aid? Then again, the life of a resident can be miserable. Its not just the long hours, but the pay. To be sure, full fledged doctors aren’t exactly starving, and should be more than capable of handling their loans, even if they are  brushing up against, and sometimes exceeding, $100,000. But for the first few years after graduation, when they are doing their residency, med-school grads earn salaries closer to those with arts degrees. In Saskatchewan the starting wage is around $47,000/year. So after spending eight intense years in university training for one of the most in-demand professions, med school grads can expect the same, or similar, salary as the sociology student who spent three years taking multiple choice exams and who probably has loan payments a third the size.

So there is a credible argument for loan payments to be reduced. But postponing repayment, as residents are still earning a salary, might be too generous.

What is more aggravating is the fact that provincial governments so often market what is essentially a bribe to keep doctors, or anyone of any use, within its borders as a student aid program. Any tuition rebate scheme falls into this category. Presumably the province is having difficulty keeping doctors from leaving after they complete their training. What’s to stop them from leaving anyway? If Saskatchewan is losing doctors to better paying jurisdictions, the province could always raise the rates doctors are paid per appointment. But, then the government would no longer be helping young debt addled grads, but established doctors who will already be earning an upper level income. Alternately, doctors could be fitted with ankle bracelets to keep them from fleeing to Alberta.