By Aloma Jardine
Alex Usher believes there are generally three kinds of people who don’t repay their student loans: those who can’t afford to, those who choose not to, and those who don’t know or understand what their repayment responsibilities are.
Usher is the vice-president of the Educational Policy Institute in Toronto and has extensively studied student aid, access, and affordability.
Early last week New Brunswick announced it is owed $35 million in defaulted student loans.
Usher says the province wouldn’t see so many defaults if it served up a little financial education with its loans.
“I find it disturbing the number of kids who don’t know how much money they owe and who they owe it to,” he says. “These students loans are … very complicated financial programs and we are offering them to the least sophisticated market there is.”
He says policy makers have a hard time seeing things through the eyes of an 18-year-old.
“You cannot overstate the degree to which students are ignorant of how personal finances work,” he says. “You go to student loan websites that say calculate your monthly repayment. If you have never worked in your life, that you will have to repay $300 a month is entirely meaningless.”
Usher says it’s not a quick solution to the default problem, but says over the long term better financial education throughout high school and post-secondary will pay off.
He says a little communication might also go a long way to help students who find themselves in a position where they can’t repay their loans.
Atlantic Canadian students don’t carry more debt than other Canadian students, but they are not as likely to get permanent jobs right away, and their earning power is often less than their counterparts in the rest of the country.
Usher says there are measures in place to help students in the form of interest relief, which can delay payments for up to three years.
“The problem is only half the people that are eligible for that program use it,” he says, adding he has no concrete proof of why that is, but suspects the information simply hasn’t been well communicated to students.
“Probably a large portion of that $35 million doesn’t have to be outstanding,” he says.
Colin Curry, New Brunswick representative for the Canadian Federation of Students and president of the Fredericton chapter of the UNB Graduate Student Association, says many students are overwhelmed by the amount of money they have to pay back.
“They are having to make mortgage-sized payments in some cases,” he says. “It places a really heavy financial burden on students.”
Curry believes supporting students in finding work once they graduate would be a help, but says reducing debt loads would be even more effective.
He points out that average tuition rates are just under $6,000 a year, making the cost of a four-year undergraduate program near $24,000 – and that doesn’t include books and living expenses.
Curry advocates freezing and even lowering tuition fees. He says the federal and provincial governments should also be contributing more to post-secondary education.
“The mid-90s saw the deepest cuts to post-secondary education,” he says.
“Federally they are running a $30 billion surplus, but not a penny was put back into our post-secondary education system.”
Usher doesn’t support across the board tuition cuts.
“That is going after a gnat with a machine gun,” he says.
Usher says about half of students are using student loans, meaning half are getting by without a tuition reduction, and only about a third are having problems paying back their loans, which means more than 80 cents of each dollar in increased funding would not be helping those who need it most.
Neither is Usher 100 per cent behind the New Brunswick government’s $2,000 grants for every first year post-secondary student.
He says the first year of tuition is already essentially free for students from low income families through the Millennium Scholarship Fund and the federal government.
“What it means is that low income students in New Brunswick next year will be getting $7,000 in grants and then the year after they will not be eligible for very much,” he says.
Usher says the grant might be more useful if it were handed out at the beginning of the second year. He also believes the money should be targeted towards those who really need it, rather than a blanket credit for all students.
Usher says grants make more sense to entice and retain students to the early years of university while loans can be more heavily used with students in their upper years.
“In year three and four they aren’t dropping out because they don’t know if it is worth it, they are doing it because they don’t have the money,” he says. “Grants in the early years is a great idea, non-targeted, not such a great idea, end of the year, not such a great idea. They got the first idea right, but the rest of it needs some work.”
Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, also disagrees with the $2,000 grants.
“They try these one-of solutions and throwing money at the problem without taking a serious look at what exactly are the underlying conditions of the current situation,” he says. “Are there not better ways to manage the resources we have now as opposed to throwing more resources at them while you’re still bleeding on the other side?”
Cirtwill says the only way to make the student loan system better is to do an in-depth analysis of how it is working now and where the weaknesses are.
“It’s time to do an actual concrete analysis of what the performance of the various loan programs are: Are the defaults in a specific specialization? . . . Is it people who are only partially finishing a degree defaulting? I think we have to have that concrete analysis before you can make suggestions about where to go,” he says.
The province has promised to launch a commission examining post-secondary education in the province in the very near future.