Wednesday, September 6, 2017
What Happened to the Poor Student? The Business of Student Debt
Life has changed drastically for the post-secondary student in the past 30 years. University used to be a place where the best and brightest honed their minds in pursuit of intellectual stimulus. For some reason, post-secondary education turned from that amazing idea into a money-generating free for all. During that time the student has been left behind. They have traded much more than four years, for their education. Often times the price of a college degree is far greater than time and even money. Often, gaining that diploma leaves you mentally and emotionally scarred. The burden of crippling student debt has turned the poor student into the heavily indebted student. This stain has left students battling their debt burdens for many years to come after school has ended. In this post, I will talk about 3 things that have changed in regards to the student financial picture and in turn give solutions to these problems. There is a way out of the student debt dilemma, but it does take some planning and sacrifice. It will also require students to fully understand the situation they are in and not be willfully ignorant to the crisis taking place. Let’s get started.
1) Tuition costs are outrageous and there is no end in sight
The cost of a university education has risen at an alarming rate. The Canadian Centre for Policy Alternatives released a study in 2016 that showed to cost of tuition for undergraduate students has climbed dramatically since 1993. The study showed that the price tag has jumped anywhere from 35 percent in Newfoundland to 248 percent in Ontario during that time frame. Average tuition in my province, Ontario, has risen from $3,503 in 1993 to an absurd $8,134 in 2016. What is more disturbing is that this trend is not expected to slow with the predicted cost being $8,496 in 2019. This is disturbing to me on many levels. First, it appears as the need for a post-secondary education has grown, those in charge have used that as an opportunity to raise costs. That bothers me. Secondly, education in most other forms in this country is free, so higher learning logically should follow suit. Pledges from politicians to have a supremely educated populace don’t seem to coincide with the reality. Lastly, government funding for universities over that period has fallen 22%. This shows an utter lack of commitment to higher learning. This hurts students as well as professors. There needs to be a commitment from our government towards higher learning, and it needs to happen immediately.
What can be done?
Students need to be extra vigilant when planning to go to college. Student loans need to be thought of strategically and not taken willy-nilly. Parents need to help kids with this planning and show them the dangers of debt, even debts that are thought of as “good debt.” In my opinion student debt isn’t good debt and the reason is that it guarantees you nothing except a bill at the end. It also can’t be discharged and will follow you wherever you go in life. The only good debts are ones that provide a guaranteed profit so proceed with caution. If it takes spending a year or two to save money instead of going into college right after High School, so be it. Take the steps to make your transition as smooth as possible.
Canadian Tuition Has Tripled In 20 Years, And Still Headed Up: Study – Huffington Post
2) The ease of access to debt is scary
Another troubling occurrence during this time frame is the accessibility of young people to acquiring debt. Seemingly hand in hand the rise in tuition costs and the institutions more than willing to hand out loans have skyrocketed. Seems like an odd coincidence doesn’t it? Not to me! It is no surprise that the average amount of debt held by students has also risen to alarming amounts. A 2017 Vice Money report shows that the burden of student debt in Ontario has climbed from just over 20k in the year 2000 to roughly 27K in 2010. It has led to a whopping 28.3 Billion dollars worth of collective student in Canada. This number is very scary to me, as it also coincides with the stalling of the high-skilled labor market. This has left many college graduates having a hard time finding meaningful work after graduation. Also, Credit Card Companies seem more than willing to sign up students for crippling credit cards that carry outrageous interest rates sometimes in the 20% range. Banks are no better creating “friendly” Student Lines of Credit that give the student the flexibility to rack up debt anyway they choose. This is creating a grave situation for the student.
What can be done?
Students have to limit what kinds of debts they take on. While some student loans have good terms, others do not. Any debt taken on during post-secondary education should promise an interest-free period during school. Also look for a grace period after school to allow you to find employment. Things like Credit Cards and Line’s of Credit should be shunned and not widely used by students. Furthermore, students should try to acquire any free money they can including grants, bursaries, and scholarships. This will allow you to not accumulate costly consumer debt while in school.
Here’s the state of student debt in Canada – VICE Money
3) Financial Literacy is at an all-time low
While costs are rising and the ability to acquire debt is as well, our education on the perils of debt is at an all-time low. Go back a generation, and debt is seen as shameful. Fast forward to modern times and debt is almost seen as fashionable. I hate to get all Orwellian on everyone but the strange rise in costs, coupled with the rise in debt levels and lack of education almost seems on purpose. While more people than ever are graduating from college, they are doing so without the basic knowledge of personal finance. It appears that we wish to educate the masses, but not in things that would actually be helpful to them like maintaining a positive monthly cash flow.
What can be done?
This one is simple, education. We must teach ourselves the perils of student debt. We must help our children when it comes to reckless spending. This also includes setting a good example for them in this regard. Indebted parents often beget indebted children, it’s a fact. The ship must be righted immediately and there are no more excuses. The internet is full of great resources to help any student fully understand what they are up against so the time to act is now.
I fear not what I can see, only what I cannot. This system of imprisoning our youth with crippling debt is now plain as day for us all to see. There is no more reason for another generation to fall victim to this terrible dilemma. Those who can effect change, now have a responsibility to do so. For students who may fall by the wayside, it is important to take matters into your own hands. It is no longer acceptable to be in such a precarious spot. You must take it upon yourself to ensure that you don’t allow the business of higher learning to ruin your future. No one will save you, you must save yourself.
Thank you for reading my post today and don’t forget to tune in tomorrow when I discuss items that students can drop from their budgets to make their lives easier. If you wish to start saving and paying back costly student debt please email me at joe@budgetboss.ca. Have a great day friends!
“Learn how to prioritize all your debt. Did you know student loan debt is the most dangerous debt any of us can have?” – Suze Orman
Email – joe@budgetboss.ca
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