Student Debt in Canada

The Landscape of Student Debt in Canada

Getting an accurate measure of the total student debt in Canada is challenging. As of the 2016/2017 academic year, Canada Student Loans (CSL) was managing a portfolio of $18.2 billion in loans for over 1.7 million borrowers. In that year alone, CSL disbursed $2.6 billion in loans to 490,401 students.

While the loan disbursements dipped in the most recent year, over the past decade, CSL has disbursed 47% more in loans to 31% more students than in the preceding ten years. This increase in student debt is primarily due to rising tuition costs and the increasing reliance on student loans to finance post-secondary education.

Despite the introduction of initiatives like the Canada Education Savings Grant program and tax-sheltered Registered Education Savings Plans (RESPs), over 40% of post-secondary students finance their education through loans, either government-backed Student Loans or private student debt.

The Impact of Rising Tuition Fees

The average tuition fee for a Canadian university is now $6,838, marking an annual increase rate of 3.7% over the past decade. In Ontario, the average tuition is now $8,838, up an average of 4.6% per year over the past decade. This surge in cost has led to an increased reliance on student loans to finance post-secondary education.

However, the burden of this debt lingers. Only 34% of bachelor degree graduates manage to fully pay off their student loans within three years of graduation. According to Canada Student Loans, students typically take between nine and 15 years to pay off their student loans in full. However, some are unable to reach this milestone and end up declaring insolvency.

The Ramifications of Defaulting on Student Loans

The repercussions of defaulting on student loans are severe. Both Canada Student loans and private lenders report late payments to credit bureaus, which can have a damaging effect on the credit score of the borrower. This negative credit score can make it difficult for the borrower to qualify for mortgages, car leases, or other types of financial loans in the future.

If a borrower fails to make the required loan repayments on student lines of credit or credit cards, the bank can apply to the court to garnish their wages. Both federal and provincial governments also have the power to take tax refunds and garnish wages if loan repayments are not made.

Student Loan Repayment Assistance Programs

The Canadian government provides some respite to borrowers struggling with student loan repayments through the Repayment Assistance Plan (RAP). If the borrower can demonstrate financial hardship, they are entitled to interest relief under Stage 1 for up to 60 months. After this period, if the borrower continues to struggle, they may be entitled to both principal and interest relief.

However, despite these assistance programs, many insolvent student debtors either do not qualify under the stringent hardship provisions or find that the postponement of payments does not help when they are also struggling with other forms of debt.

The Gender Disparity in Student Debt

A concerning trend in the student debt crisis is the gender disparity. In 2018, 61% of student debtors were women. This ratio aligns with Canada Student Loan figures – in 2016/2017, 61% of grants & loans were distributed to women. Additionally, 65% of RAP recipients are also female.

Female student debtors, on average, owe more in student debt than their male counterparts. Furthermore, women filing for insolvency are more likely to be single parents than men, further complicating their ability to balance childcare costs and student loan payments on a single income.