Challenge to students is 'overall debt,' not just loan interest, credit expert says
'Most students take the full 10 years to pay off this debt,' says Scott Hannah after B.C. budget announcement
As B.C. students celebrate the province's decision to eliminate interest on their loans, one credit counselling expert says more could be done to help them get out of debt.
In Tuesday's budget, B.C. Finance Minister Carole James announced that interest from all new and existing British Columbia student loans had been eliminated with immediate effect.
But interest is only a small part of students' debt load, says Scott Hannah, president and CEO of the Credit Counselling Society of B.C.
"It's great that the government has acknowledged the fact that students are struggling, but it's the overall amount of debt that has to be paid back that is the challenge", Hannah told Stephen Quinn, host of CBC's The Early Edition.
In a statement posted on its website, B.C. Federation of Students Chairperson Aran Armutlu said the budget announcement "will not only help current and future students, but also those who have completed their studies and are struggling to make loan payments."
The province says the move will save the average post-secondary graduate $2,300 in interest based on a combined federal and provincial 10-year loan of $28,000.
But the change only applies to the provincial portion of student loans, which Hannah says is typically smaller than the federal portion.
Lack of skills for financial planning
He says approximately 25 per cent of students go into default at one point while trying to repay their debt, which can impact their credit rating and their chances of borrowing for future purchases like a down payment on a home.
"Many students go into post-secondary education and taking on student loans [with the] thought that, 'I'm going to get my first career job right away,'" Hannah said.
"But the reality is most students take the full 10 years to pay off this debt."
Hannah says students could use more skills and training to make good money decisions.
"Here we are giving 18-, 19-year-olds thousands of dollars and for some it's the first time in their lives that they've got this much money and we're saying 'manage this effectively and prudently,'" he said, adding that he often has young adults come into the Credit Counselling Society who are already dealing with other forms of debt.
Hannah's advice for students is to take some time before starting their degree to think about how they will manage their school expenses like tuition and books, and related expenses like housing.
Listen to the full interview with Scott Hannah below: