Rethinking Student Debt
Why rethink student debt?
One of the justifications for raising tuition is that students can always borrow more money. After all, the only point of higher education is to get a better paying job later, so why not ‘invest’ in getting a degree?
The government is also promising more funds to the Quebec Student Loans and Bursaries program (AFE). But did you know that 98% of this new money will come from the tuition increase itself?1 And the size of students’ loans will still increase.
Here’s why we need to rethink student debt:
Student debt is not a result of irresponsibility
A lot of people will tell you that if you’re worried about your debt, it must be your fault. You should work more while you’re in school, spend more responsibly, make different choices. But the numbers just don’t add up. Half of Quebec students earn less than $12 200 per year:2 on this income it would be impossible to pay for tuition, rent, books, and other living expenses without going into debt. And our earning power has gone down over the years: in 1978 it took 4 weeks of full-time work at minimum wage to earn the cost of tuition, but if the tuition increases go through, by 2015 it will take almost 9 weeks.3
Student debt is an especially heavy burden on students from low-income backgrounds. While 65% of Quebec students graduate with debt, 86% of those from a family with an income under $40 000 do.4 And while politicians talk about ‘fair shares,’ those families are less well-off than they used to be. The poorest 50% of Quebec households work 22% more than they did 30 years ago, but earn 10% less.5
To avoid debt, students will work more
Being in debt means paying the bank a lot more in interest and fees on top of what you originally borrowed. So naturally, most students also work while they study to minimize their borrowing. However, this can harm learning. 63% of Quebec full-time students also work,6 and the average student works 16 hours per week.7 A variety of studies have found a negative impact on academic performance after between 15-20 hours of paid work per week.8 No wonder that 70% of students receiving Quebec financial aid reported difficulty or great difficulty balancing work and school.9
More student debt means more money for banks
While raising tuition and privatizing higher education is popular with politicians, they are usually eager to make up for this by making more credit available to students. Coincidentally, this creates a lucrative market for banks.
In Quebec, the majority of government financial aid consists of loans from banks. The government guarantees your loan and pays your interest charges to the financial institution of your choice until you graduate. It seems like a good deal for you, and it’s a great deal for the banks – but it’s not a very smart use of taxpayer money, and we are all taxpayers. Every year the Student Financial Aid Program spends about $175 million on banking fees.10 A loan system administered directly from public funds could save the average student $891 in interest charges.11
Consumer debt – including student debt – is not just bad for individuals, it’s bad for society
Canadians graduating with student loans are less likely to have savings and investments,12 less likely to be homeowners,13 and are less wealthy overall14 than students who graduate without debt. Since we know that students from low-income backgrounds are much more likely to take on debt, this means that student debt helps to carry economic inequality across generations. Societies with large income gaps are worse places to live by almost any indicator. On top of that, how does it affect all of us when people must choose their career path based on how much money they can make, rather than what they really want to do? When people are afraid to leave jobs because they will miss debt payments?
We can also look to the United States to see what happens when tuition, and therefore student debt, is allowed to climb and climb. Student debt has surpassed credit card debt in the U.S., and many experts believe that these loans are threatening to become another credit default crisis like the mortgage crisis of 2008.15 Interest rates are now at historic lows, but they won’t be forever.
Education is a social good, and should be equally accessible to all.
1 Gauthier, Laurent et al. “Guide Against the $1625 Hike in Tuition Fees.” Montreal: Fédération étudiante universitaire du Québec, August 2011. pp. 29.
2 Fédération étudiante universitaire du Québec. “The FEUQ Unveils the Results of the Vastest Survey Ever Conducted on Undergraduate Students.” 18 November 2010. Accessed January 2012. http://feuq.qc.ca/spip.php?article150&lang=en
3 Martin, Eric and Simon Tremblay-Pepin. Trans. PGSS-McGill. “Do We Really Need to Raise Tuition Fees? Eight misleading arguments for the hikes.” Institut de recherche et d’informations socio-économiques, 2011. pp. 13.
4 Campeau, Arianne and Louis-Philippe Savoie. “L’endettement Etudiant.” Fédération étudiante universitaire du Québec, 2011. pp. 47, 66.
5 Couturier, Eve-Lyne and Simon Tremblay-Pepin. Trans. Richard Hinton. “The Unsustainable Cycle of Household Debt.” In L’état du Québec, 2011. Boréal. pp. 2.
6 “L’endettement Etudiant.” pp. 91-92.
7 Béliveau, Julie and Papa Camara, et al. “Enquete sur les conditions de vie étudiants de la formation professionelle, de collégiale, et de l’université.” Enquête menée par l’Aide financière aux études (AFE) en collaboration avec la Direction de la recherche, des statistiques et de l’information (DRSI) du ministère de l’Éducation, du Loisir et du Sport, 2007. pp. 69.
8 Campeau, Arianne, et al. “Le travail rémunéré et les études universitaires.” Fédération étudiante universitaire du Québec, 2011. p. 24-25
9 “Enquete sur les conditions de vie étudiants.” pp. 43.
10 Hurteau, Philippe. “Le gouvernement du Québec devrait-il prêter lui-même de l’argent aux étudiant·e·s ?” Institut de recherche et d’informations socio-économiques. October 2009. pp. 8.
11 Ibid. pp. 18.
12 Luong, May. “The Financial Impact of Student Loans.” Perspectives (Statistics Canada). January 2010: Catalogue no. 75-001-X. pp. 9.
13 Ibid. pp. 10.
14 Ibid. pp. 12.
15 Carey, Kevin and Erin Dillon. “Drowning in Debt: The Emerging Student Loan Crisis.” Education Sector. 8 July 2009. Web. Accessed January 2012.