Easy credit blamed for high post-sec­ondary stu­dent debt

Calgary Herald - - CITY + REGION - JU­RIS GRANEY

ED­MON­TON Post-sec­ondary stu­dents in Al­berta are con­tin­u­ing to ac­cu­mu­late debt at an “alarm­ing rate” thanks in part to cheap lines of credit tar­geted at stu­dents and poor fi­nan­cial lit­er­acy, a con­sumer in­sol­vency ex­pert has warned.

Freida Richer, a li­censed in­sol­vency trustee with Grant Thorn­ton Ltd., said so­cial-value spenders and im­pul­sive over-spenders are ob­vi­ously at greater risk, but even stu­dents with some fi­nan­cial in­tel­li­gence are fac­ing chal­lenges af­ter they grad­u­ate.

The two big­gest traps for stu­dents are credit cards and stu­dent lines of credit, Richer said.

Typ­i­cally a stu­dent line of credit comes with an in­ter­est rate of prime plus one per cent and in many cases, stu­dents need only re­pay the in­ter­est while at uni­ver­sity.

That’s great un­til the stu­dents hit the work­force.

“Stu­dent lines of credit are very at­trac­tive to stu­dents be­cause it’s es­sen­tially a per­sonal loan from the bank, but it is re­volv­ing credit,” she said.

In Al­berta, a stu­dent who grad­u­ates from a four-year pro­gram can be sad­dled with up to $25,000 in con­sumer debt on top of an av­er­age of $23,000 in stu­dent loans.

“The trap is that some stu­dents think they will im­me­di­ately jump into that ideal job with that ideal pay, and I think that’s a mis­con­cep­tion,” she said. “That in­abil­ity to get into that ideal job and ideal rate of pay means it is tak­ing longer and be­com­ing much more of a chal­lenge for peo­ple, post-grad­u­a­tion, to pay down that debt.”

On av­er­age grad­u­ates are given 10 years to re­pay their stu­dent loans and can work with re­pay­ment-as­sis­tance pro­grams to help pay down their debt.

But banks and other fi­nan­cial in­sti­tu­tions are less for­giv­ing.

“The stu­dent loan debt is man­age­able be­cause it’s usu­ally at a lower rate of in­ter­est,” she said.

“It’s the other debt that makes the bur­den heav­ier on that in­di­vid­ual.”


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