By Mary Teresa Bitti - from the Financial Post
In 2006, Nereid Lake was a single mom with an undergraduate degree in French linguistics from Simon Fraser University and well on her way to a master’s degree in linguistics when Canada Student Loans informed her she had exceeded the lifetime lending limit of the federal program and would have to leave university — without her degree.
At the time, she had accumulated about $60,000 in student loans.
“Even though I had an armload of academic awards, I was forced to leave,” she says. “My aspiration was to work in the field of voice recognition cognitive science, getting computers to understand human language. Instead I had to take the first job I could, as a low-earning court clerk. Now I’m nearly 40 just barely making ends meet and still owe more than $50,000 in student debt. I naively thought student loans would be the great equalizer. Instead I’ve plunged into a student debt nightmare.”
Ms. Lake is not alone. Nearly two million Canadians have student loans. That debt is worth about $20-billion and includes federal and provincial government loans and personal debt in the form of credit cards, family loans and lines of credit all used to finance post-secondary education. And that number is only set to grow as student loans owed to the government of Canada alone increase by $1.2-million a day. At the same time, the amount of unrecoverable student loan debt now sits at $149.5-million.
“That figure is absolutely growing,” says David Molenhuis, chairman of the Canadian Federation of Students in Ottawa. “Next year even more money will have to be lent out in record amounts, while monthly deliquency rates continue to trend up.
“People are finding it more difficult to make payments, budgets are becoming more strained and we are seeing more reliance on food banks and the use of emergency bursaries offered by student unions,” he says.
“We have an entire generation of people who now more than ever have to complete some form of post-secondary education just to get a job interview, with more than 70% of all new jobs requiring some degree or diploma. We are on the verge of bankrupting a generation before they even enter the workplace.”
Part of the problem is the dramatic increase in tuition fees, which have jumped to an average of $4,724 in 2008-09 from $2,591 in 1999. This doesn’t bode well for young people financing post-secondary education. Borrowing rates have already increased to 57% in 2005 from 49% in 1995. This is set to grow as a tough job market means more young people are opting out of the workforce and staying in school.
“The percentage of youth attending school on a full-time basis ranged from 56% to 58% over the 1995 to 2009 period, but shot up to 63% in 2010,” says Roger Sauvé, president of People Patterns Consulting and author of the 10th edition of Canada Job Trends Update 2011. “I suspect that the second consecutive year of youth job losses convinced or forced students to stay in school full-time.”
In the meantime, the number of young people with debt loads of $25,000 or more when they leave university and college is also on the rise, sitting at 27%, up from 17% in 1995. By 2009, the average debt for university graduates was $26,680.
“The debt picture will only worsen due to the lower availability of part-time work for students who are attending school in the fall,” Mr. Sauvé says. “The percentage of full-time students with jobs during the October to December months declined to only 37% in both 2009 and 2010 — the lowest in a decade.”
The reality facing graduates isn’t much better. There have been many attempts to estimate what the return on investment is for students. This is a tricky game, Mr. Molenhuis says.
“The Rae review in Ontario a few years ago created a myth that the lifetime return on investment for a post-secondary education is $1-million. We find the average ROI to be closer to $20,000 — as does the OECD. A post-secondary education is not a value add any more. It is the going fare to get in the front door.”
And this points to a bigger problem, Mr. Molenhuis says. “Canada does not have a national vision for its post-secondary education system. For the billions of dollars we pour into the system, we do so without a vision for outcomes. We don’t know what it is we want to get out of our colleges and universities in order to meet the needs of the 21st century.”
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