All Posts Tagged With: "Student Loans"

Guess which universities get the least student financial aid

From Queen's Players "I go to Queen's!"

You know the stereotype that Queen’s University attracts rich kids? The one played up in this recent viral video in which a student jokes: “I don’t know what financial aid is, but Queen’s has it.”

Well, if the number of students receiving financial assistance is any indication, it’s very likely true.

Queen’s University has the lowest number of students receiving Ontario Student Assistance in the province: only 29.6 per cent of students.

Contrast that to Nipissing University in the relatively poorer north of Ontario, where twice as many—59.6 per cent—get loans. It’s almost as high at Trent University—59.3 per cent.

Continue reading Where the rich kids go

Why Canadian students graduate with more debt, not less

Too much debt? Photo by Zach Klein on Flickr.

Canadians are graduating with more debt than their American counterparts—despite the well-known higher sticker prices south of the border.

In the U.S., average debt at graduation rose to $25,250 in 2010, according to a Nov. 3 report by the Project on Student Debt. Here in Canada, students were graduating with an average debt of $26,680 according to a 2009 report released by the Millennium Scholarship Foundation. If anything, the Canadian average is higher now.

The numbers seem almost impossible: isn’t tuition ridiculously high in the U.S.?

Continue reading Is the U.S. tuition system more progressive?

Election promise: six more months of interest free loans

Photo courtesy of JenniferK on Flickr

Ontario Liberal leader Dalton McGuinty said he would give Ontario college and university graduates an extra six months of interest-free status for their student loans if they take a job in the non-profit sector upon graduation. That would be on top of the six month interest-free period that all students currently receive. ”We believe it’s important for young people to have an opportunity to help our broader society,” McGuinty told young Liberals in Sudbury on Saturday. Ontarians will vote on Oct. 6.

Dept. has “duty to detect waste, fraud and abuse involving education funds”

Kenneth Wright had a rude awakening Tuesday morning when a team of 15 officers sent by the U.S. Department of Education stormed through his California home, reported KXTV, the local affiliate of ABC News. Wright claims that the officers then placed him in handcuffs and forced him into a squad car where he remained for six hours.

Although it was originally reported that the raid was to do with the unpaid student loans taken out by Wright’s estranged wife, that claim has since been refuted by the Department of Education. Instead, it was related to some other fraud. However, a spokesperson confirmed to the Huffington Post that a search warrant was served by the agency’s Office of the Inspector General, which serves up to 35 search warrants each year.

It may seem a like overkill that the U.S. Department of Education has police authority to order full-scale raids, but they do. The department was given that right under the Homeland Security Act in 2002, according to the ABA Journal.

Last year, the Washington Post reported that the department purchased 27 shot guns. In a statement explaining their purchase, the department stated that they are “responsible for the detection of waste, fraud, abuse, and other criminal activity involving Federal education funds, programs, and operations,” and thus need the new rifles “to replace older and mechanically malfunctioning firearms.” When asked when the rifles might be used, the department did not offer any more details.

Students in other provinces pay little or no interest

The presidents of the University of British Columbia (UBC), the University of Victoria, Simon Fraser University (SFU) and the University of Northern British Columbia (UNBC), are asking their provincial government to substantially lower the rate of interest on student loans. B.C. students pay prime plus 2.5 per cent on the provincial portion of their loans after graduation, compared to a rate of prime plus one per cent in Ontario and nothing at all in Newfoundland and Labrador. (The federal rate is also prime plus 2.5 per cent.) The presidents also want a longer grace period for student loans and more scholarship money from the government. Andrew Petter, President of SFU told The Vancouver Sun that the measures are necessary to encourage enrollment by more people from under-represented groups,  like indigenous people, the disabled and the socioeconomically challenged. Advanced Education Minister Naomi Yamamoto responded with a statement that says changes may be in the works. ”The ministry has been working on a review of potential changes for student financial assistance in the future, including a comparison to other jurisdictions,” she wrote.

Students default rates often exceed 40% compared to 5% for public schools

Private career colleges in British Columbia will be getting a break after the province notified 10 schools that their students would no longer be eligible for student loans.

Under rules implemented four years ago, any post-secondary institution where at least 28 per cent of its students default on their loans, the school loses its designation. In addition to the 10 schools that lost their status in July another 14 private schools were told that they would be monitored during 2011. As the Vancouver Sun reported, in some cases default rates exceeded 40 per cent, compared to the five per cent default rate at public institutions.

Julie Bradley, executive director of the B.C. Career College Association, says the rules unfairly target entire institutions when the reason for default may be a student’s socioeconomic status, or poor career prospects for particular programs. “Why penalize an entire school if it’s just one program?” she said.

To address objections from the sector, a Monday announcement from the Ministry of Science and Universities, said that changes are to take place in the fall that “will allow more specific examination of programs and may allow an institution to maintain its designation overall but not allow [financial aid] to a specific program.”

Using ID to get a piece of paper to get more ID, to get a loan

A couple days ago I made an appointment to get my student loan for this semester. I needed a piece of photo ID, but apparently my health card expired three weeks ago so I couldn’t use it as proof that I’m, well, me.

And I wasn’t allowed to use my student card, supposedly because it would be easier to forge than government-issued photo ID.

So instead I used my student card to renew my health card, and then used the piece of paper they issued me at the OHIP which proves I’ve applied for a new card, to get my student loan for this semester.

Seriously.

Coming soon and you heard it here first

A friend of mine turned me on to a recent piece in the New Yorker on the state of higher education in America. The author is responding to the supposed crisis in the education sector and essentially debunking it. Now you’re welcome to review the article, written with the style and in the elevated prose that one would expect from such an esteemed publication, but the piece also rests on what I consider to be an unimaginably ignorant premise. The system must work, or so we should believe, simply because so many people are lining up for school. If the educational system were broken, people would presumably be opting out of it.

Now, bearing in mind that this article takes an American context, there’s already one huge problem. Many people are opting out of the public system down there. If one allows that education includes any kind of organized learning at all then sure, I suppose it’s easy to establish that lots of people are in favour of receiving that. But in America it is increasingly delivered by private or partly private institutions. So taking all forms of education and throwing them into one big pot only confirms one of the most basic facts about today’s modern society that everyone knew already. We all need to spend more time learning, and while we may have some choices over what and how we learn it’s hardly an option at all to simply opt out of education entirely.

More critically to the Canadian experience, this article also omits any real attempt to grapple with the ballooning cost of modern education and the resulting debt that often follows. And here is where I’ll introduce a concept that we all need to hear and think more about. It’s the idea of sub-prime education. Degrees that we are putting out on the market that are unlikely to pay off. Education that doesn’t actually create higher pay or better jobs or new opportunities. Sub-prime education.

The sub-prime mortgage crisis is often referenced but rarely understood. I’m not an economist but allow me to give a primer. American politics and American citizens bought widely and deeply into the narrative of home ownership. Home ownership was seen as the route to both private and public prosperity. So huge government programs were created to get as many people buying homes as possible and many citizens gladly mortgaged themselves to the hilt in order to buy as much property as they could possibly afford. And for a while it seemed to work. Unfortunately, many of the home loans put out there so that people could afford these mortgages were sub-prime. Prime is the rate at which a lending institution loans money to individuals it considers to be a good bet. Sub-prime is a higher rate, reflecting the fact that the lending institution considers the borrower to be a worse bet. Spread the risk over enough weak borrowers and the extra tax helps cover the occasional default. That’s the basic premise. It gets more complicated when banks start trading these loans and packaging them as investment vehicles, but that’s the basic premise.

What banks did not count on is that when the property market started to tank it created a cascade effect. Lack of faith caused the value of everyone’s investment to plummet. It’s a classic market bubble. When it bursts it drags everyone down. Only in the market you catch investors who, with adequately good sense, have protected themselves through diversification. When you catch homeowners you catch everyone. Ordinary people who put all their eggs in this one basket not because they are bad investors but simply because they bought into the narrative that home ownership is the route to prosperity. Time was that everyone believed that as an article of faith. No longer. But not until we had a whole lot of wreckage to teach us otherwise.

Now let’s look at education. In Canada, the floating rate of interest on the federal portion of a student loan is prime plus 2.5 per cent. That is, in the most literal terms imaginable, the very definition of “sub-prime.” Our government is publicly acknowledging that investment in education is a sub-prime lending risk. That doesn’t mean it never pays off. That doesn’t even mean it’s a bad bet for everyone. That just means that spread out over a wide sample group it simply isn’t a very good bet, on average. And private lending institutions aren’t even eager to participate at that rate. Contrast that with the rates that professional students can expect on their student loans if they go to private banks. For degrees in law and medicine — education that banks consider to be good bets — students can expect to access sizable loans at straight prime rate or at prime plus 0.5 per cent. That’s what it looks like when the market believes in the value of an investment.

Students work more to pay for tuition increases, but it is limited to the summer

Concerns that rising tuition, by forcing students to work more, will compromise academic performance are unwarranted, according to a new study published in the Canadian Journal of Higher Education.

Authored by Ryerson economist Amy Peng and independent researcher Ling Yang, the paper challenges previous theories and assumptions about the relationship between tuition fees and labour force participation. Consistent with other research, Peng and Yang do find that on an annual basis students work more when tuition increases. However, their study goes further than previous research by analyzing student labour force participation on a monthly basis. They conclude that the  increase is limited to the summer months, suggesting minimal impact on student performance.

“If students participated more and worked more in summer periods than during in-school periods due to higher tuition fees, the effect on their educational experience during their in-school period was less and their success in university (persistence) did not seem to be compromised,” the study reads.

The researchers took labour force participation rates from Statistics Canada’s Youth in Transition Survey and focused on the years 1999, 2001 and 2003 where student loan and other financial data was available. In total, the paper considers survey results from 8,490 students. Tuition data was drawn from the Survey of Tuition and Living Accommodation Costs. Sixty-three universities, and 13 disciplines comprising 1,140 different tuition fee rates, were included in the study. Peng and Yang then controlled for factors such as parental education, the local unemployment rate and whether students studied while living at home or moved away.

When tuition increased by $1,000, Peng and Yang found that students worked an average of 38 hours more over the course of the year. Of those extra hours, 36.6 were concentrated during the summer months. “When the analysis was limited to only those periods in which individual students were registered in a university, tuition fees no longer had a significant impact on working hours,” the paper read.

Peng and Yang further argue that the fact that there is a correlation between higher tuition fees and increased hours worked, even in the summer months, suggests that there are inefficiencies in the credit market. “An increase in tuition should not have a large effect even on summer working hours, since it would be more efficient for students to borrow additional funds during the year and pay back their loans after graduation,” they write.

In an interview with On Campus, Peng explained that one of the inefficiencies in the credit market may be the difficulty in applying for a loan in the summer, when students are more likely to study part-time. “If you want to take courses in the summer, you have to fund yourself,” she said. “Instead of just enjoying their summer, taking extra courses, taking up a hobby or doing something else . . . [students] are devoting more time to working.”

The findings also show that students are not likely to work in fields related to their studies, with approximately 50 per cent working in the service industry at $7/hr, implying that working while in school does not typically contribute to post-graduation earnings.

Government student loans are changing. Get schooled on how they affect you

You may get a surprise in the mail this year. Upon opening that fateful letter that tells you how much student loan funding you’ll receive, you might find yourself the recipient of a non-repayable grant from the Federal government that you never asked for. If free money seems to good to be true, fear not: it’s part of a new Canada Student Grant Program that is being implemented for the first time this semester and means that you will receive extra dough you won’t have to pay back later.

In the 2008 budget, the federal government announced big changes to federal student aid, including a new national grant program, the scrapping of the Millennium Scholarship Foundation (the previous source of national bursaries and scholarships) and new programs to help student loan borrowers having trouble repaying their loans after graduation. So how exactly do these changes affect you?

Starting this year, when you apply for a national student loan, you are automatically applying for a grant as well. Full-time students who are deemed by the Canada Student Loan Program to be from low-income families will receive an extra $250 per month up to a maximum of $3000 per year. Those from middle-income families will receive $100 per month up to a maximum of $1,200 per year. To find out what your family’s income level is click here.

An important distinction between the previous bursary program and the new grant program is that grant funding is determined according to your family’s income, not your need (expenses minus resources). This means that no matter whether you have savings from your summer job or you borrowed money from your uncle, you will get the grant as long as your family’s income is low enough. It may seem like an inconsequential difference, but it affects who gets these grants.

In other words, while getting a part-time job or otherwise improving your financial circumstances decreases the amount of funding you qualify for in the form of student loans, it does not affect your grant funding. Take this example: Student A is from a low-income family and, after subtracting his meager savings from his total university costs, he needs $3,500. He will receive $2,000 in grants and $1,500 in student loans. Student B is also from a low-income family and, having sold her car and working her butt off during the summer, she only needs $1,400. She will receive a $2,000 grant and won’t have to take out student loans. If you qualify, you get the grant—simple as that.