INDEPTH: PERSONAL FINANCE
Students in Debt
– Profiles of Struggle
by Lani Krantz, CBC News Online | September 20, 2004
Debts, and the payments that go with them, are forcing many
former students to delay the usual rites of passage of young
adulthood – buying a home, a car, even having children –
while they deal with a problem they may not have even seen coming.
There's no such thing as underemployment insurance
Mary Webster (Photo Credit: Cristina
King) |
Mary Webster graduated from the University of Western Ontario
in 1999 with a bachelor of arts in media information. Every
year, she needed student aid to make ends meet. Then she entered
a post-graduate program at Fanshawe College – another year,
and another loan.
She finished it all in 2001. Six months after she left school,
the first loan payment was due and the interest clock began
to tick. Since she was earning below what the National Student
Loans Service Centre considered a minimum income, she got some
interest relief. When she eventually took an entry-level position
with a small digital network, she started to feel like her education
was finally paying off.
But the first thing to start being paid off was her student
loan.
Over five years, Mary had received almost $20,000 in student
loans. She was thankful for the help.
But now, she has to make almost $200 in monthly payments. And
even then, her debt won't be paid off for 10 years. And she
also owes $10,000 on another loan co-signed by her father.
It hasn't been easy. Mary's shiny new job nets only $1,800 per
month.
With her loan payments, rent and utilities, she has almost $1,400
in monthly expenses. With the other $400, she must pay for transportation
($100), groceries ($150) and any other incidentals that may
arise. And that same $400 is also supposed to be the source
of personal savings, monthly contributions to an RRSP and spending
money.
Saving for a down payment on a home isn't anywhere on her horizon.
"Sometimes I feel really positive about my future, but other
times it feels bleak. I don't know how I'm going to do it, but
I have to hope there will be some way."
Stuck in a rut
Andrea Wilson and her boyfriend are trying to kick-start a future
together.
Working as a registered massage therapist, Andrea has spent
the past two years building her clientele in Toronto. She's
been successful and has established a reputation for herself
in the field.
Andrea attended a private massage therapy school in London to
get her qualifications – an education that cost her $15,000
a year for two years.
Now she has a $16,000 student loan to pay back to the government.
And she's had difficulty dealing with the National Student Loans
Service Centre. Her loan is now in arrears and the NSLSC has
sent it to a collection agency.
She's understandably worried.
Her gross monthly income seems good – it hovers just over
$2,500. But RMTs are self-employed, so out of that, she pays
for supplies, rent, utilities, insurance, transportation and
other expenses. She also has to make tax instalments.
Andrea's immediate future is foggy, but she tries to stay positive.
"If I can make larger payments, I'm hoping that I can clean
up my credit in order to qualify for a mortgage before I'm 32,"
she says.
Didn't education used to mean 'easy street'?
According to University of Toronto Financial Aid Services, 20
per cent of the university's undergrads leave school with debt
levels exceeding $15,000. Two per cent had debt in excess of
$30,000.
For these students, each year of education has cost between
$9,000 and $16,000, depending on their program and whether or
not they live at home. For those coming from families where
money is tight, much of this expense has to be funded by loans.
Part of the problem is a lack of education during students'
academic careers. They are encouraged to place emphasis on success
in their studies, but they are given little, if any, financial
counselling.
According to Andrea Wilson, "the woman who took care of the
loans told you when instalments were coming and when the forms
needed to be signed. I thought you had a year's grace to start
paying. I didn't know about arrears. I had no idea how it was
actually going to work."
Most schools do offer financial counselling for students who
ask for it. But the basic process of getting a loan often involves
only a line-up thick with other students, a flash of identification,
a signature or two and a short wait for the cash to come rolling
in. Before they can say "credit," their tuition is paid, as
is their first month's rent. They may even have a new pair of
shoes.
If the school year lasted a month, there would be nothing to
worry about.
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