I have a recurring fantasy that one day, I’ll wake up and my student debt will be gone. I think about what I would do. If I’m being very honest, the first thing would be to go to the liquor store and buy a case of champagne to drink at the raging party I’d throw later that same day. But after that, I’d make some plans. I’d make two new lines in my budget — one labelled “travel,” the other “mortgage” — and I’d start saving the money that currently goes toward paying back my consumer proposal. I’d take the trips I’ve planned in my head: Tokyo, Santiago, Tofino. At some point, I’d have enough for a down payment on a condo, for me, or maybe for my parents, if the day ever comes when they need more accessible housing.
In five years or so, that fantasy could become a reality — if I’m both lucky and diligent. After I finish paying back my consumer proposal, I’ll have to start paying down the principal and interest on my government student loans, the ones I couldn’t include in my consumer proposal because of the discharge exemption. And I’m more fortunate than many. After years of scrimping, I’ve gotten to a place where I can comfortably pay off my loans, while also taking care of rent and bills and building up a bit of disposable income. But there’s little room to save or to plan. And if I don’t get enough freelance work, or a job contract isn’t extended, my debt-payment timeline extends significantly.
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Debt is a hard burden to bear. As the Canadian Federation of Students reported in 2015, “Starting out with massive debt and facing a weak labour market, many graduates are struggling to fully participate in the Canadian economy. Student debt impacts career choices, even among professional faculties such as medicine and law. Unpaid internships, affecting an estimated 300,000 young people who work without pay, privilege those who have the financial support to work for free. Those with high levels of debt now often find themselves underemployed outside of their field of study because of pressures to repay loans.” The CFS cited research that found that people with student loans were less likely to be homeowners and had fewer financial assets than those without student loans.
Getting post-secondary education has clear benefits. According to Erika Shaker, the director of education and outreach at the Canadian Centre for Policy Alternatives, graduates are not only more likely to produce economic benefits through employment — they’re also more likely to vote and be involved in their communities. But who has time to volunteer if they’re working three jobs to meet their financial obligations?
In the last 10 years, mechanisms have been introduced that make the loan repayment process more painless. In 2008, the exemption on discharging government student loans was reduced to seven years (five, if you can demonstrate financial hardship). In 2009, both the Repayment Assistance Plan and the Canada Student Grant program were introduced. (Despite these measures, the government still writes off a significant number of loans — in February 2018, CTV reported that over $200 million in loans will be written off by the federal government because they can’t be collected, the third time in four years such an announcement has been made.)
Osgoode Hall Law School professor Stephanie Ben-Ishai, who in a 2006 research paper argued that the then-10-year time exemption for discharging debt from government-backed student loans should be abolished, revisited her position after the government changed the exemption time limits and introduced new relief measures. Ben-Ishai says the seven-year exemption period lines up better with the available relief measures, giving borrowers additional options before having to consider bankruptcy.
The other good news, for Ontarians at least, came in February 2016, when the annual provincial budget included measures that would provided grants, some more than the cost of tuition, for students whose families make less than $50,000 — in effect, free tuition. (These grants are administered by DH Corp. through its federal contract.)
Shaker believes there is reason for cautious optimism about Ontario’s grant program. “I think we need to be really careful about what that means and how it is going to play out,” she says. New Brunswick, Shaker adds, introduced a similar program, and tuition almost immediately increased. (New Brunswick’s provincial government did recently introduce a tuition cap, although not all the schools agreed to it.)
Ontario currently has a tuition cap of 3 per cent a year — whether that changes will largely depend on the outcome of the election in June. But if there is a move toward deregulation, the majority of students could become wholly dependent on loan regimes to fund their education.
When students are left with high tuition and not enough income or government loans to cover it, there is really one option left: lines of credit. You need only to look at the professional schools — law, medicine, and dentistry, for example — to see how hefty these loans can get. Students at the University of Toronto’s law school can borrow up to $150,000 through lines of credit offered by Scotiabank and TD.
We’ve already examined how private companies make money off the administration of the Canada Student Loan Program. But banks also make money from private lines of credits and from the loans students have to take out to cover their education if government-backed loans aren’t enough. This is a well-documented phenomenon in the United States, where tuition is much higher and student loans are a huge market: according to Rolling Stone, the student-loan market was valued at about USD$200 billion in 2016. Some American observers even fear that a collapse of the student-loan market could cause the next financial crisis.
Lines of credit are traded on Canadian securities markets. As of March 2018, unsecured lines of credit made up 2.6 per cent of the Canadian asset-backed-securities market. (Jamie Feehely, managing director of Canadian structured finance at credit rating agency DBRS, said in an email that its only gets information that a line of credit exists, not what kind it is — so we can’t say how much, if any, of that 2.6 per cent is made up of professional-student lines of credit).
Government-backed student loans, though, aren’t treated the same way. Jocelyn Sweet, the deputy spokesperson of Finance Canada, told me in an email that loans issued via the CSLP are funded from general revenues, not through specific borrowings or securitizations. However, the federal government does generate revenue from interest paid on student loans. According to the CBC, it made $662 million in 2016/17 from student-loan interest.
That prompted the CFS to start a petition this month calling on the federal government to make all CSLP loans interest free. “The rate charged on Canada Student Loans – prime+2.5% for a floating rate, is higher than many mortgage products and means that those who can’t afford to pay for their education up front end up paying thousands more than those who can,” it reads. “It doesn’t have to be this way. If the federal government can issue interest-free loans to Bombardier, they can also give them to students.” Some provinces already have eliminated interest on the provincial portion of the loans. As part of the Ontario NDP’s election platform, it, too, has promised to eliminate interest on provincial loans, as well as to convert all future loans into grants.
Shaker has argued for the elimination of tuition fees. “There is no question that the upfront investment that would be required to make our post-secondary institutions fully public and eliminate tuition fees is certainly a significant investment,” she says. “The question is whether or not it pays off in the end, and of course it does, but rhetorically it’s a different argument that I think a lot of governments aren’t positioned or prepared to make right now.”
That doesn’t mean, however, that the perception couldn’t change. The tuition-free or nominal-tuition approaches adopted in Germany and the Nordic European nations are often cited as possible models for Canada — but there are a few examples closer to home. Last year, New York State made tuition free at its state university system and at the City University of New York for students whose families make under $125,000. In Newfoundland and Labrador, grants fully cover students’ tuition, which is already much lower than in the rest of Canada.
So whom do we hold to account for the state of Canadian student loans? Do we point the finger at Finastra, or DH Corp., or Resolve, or CIBC? Which government could we possibly point to? The Liberals, both in Ontario and at the federal level, are just the latest government to deal with a system that has been built — layer by layer, cut by cut — by different politicians since the 1960s.
Or do we blame ourselves? Don’t for one minute think that I — or anyone else dealing with debt — don’t feel immense personal guilt over my financial situation. If I had it to do over, I would do everything differently.
I keep coming back to Joel Harden’s CCPA on the case for renewal in post-secondary education, in particular this line about how university and college education was framed during the 1990s: “Post-secondary education was often framed as an individual investment, a private service for which students must bear a far higher cost.”
Shaker argues that we need to revisit what it means to own something collectively — after all, public doesn’t mean free. In this case, it could mean debt-free graduates who are able to jump right into participating not only in economic life — mortgages, car payments, taxes, etc. — but in community life as well. “The social returns really allow us to explore what people do for society as a result of having more education,” she says.
Rethinking education funding is no easy matter — but this, to me, seems like a good place to start.
H.G. Watson is a journalist based in Toronto. She is the managing editor of J-Source, the Canadian Journalism Project.