Student-loan system is broken, says report to Ottawa

OTTAWA — The risk of student loan defaults and delays has been on the rise, and the “system is broken,” officials warned the federal government in a presentation earlier this year.

Federal student debt alone is $17 billion and the government has to regularly write off millions of dollars in loans it will never collect, say the documents, obtained by the Canadian Press under the Access to Information Act.

The presentation, dated five days before the government tabled its 2019 budget, said the costs for post-secondary education have increased at rates “above wage growth and inflation” over the last decade, while the cost of living has also jumped, creating an affordability crunch for new and graduating students.

Nonetheless, post-secondary education remains a must for many entering the job market, the documents acknowledge. As a result, there are “rising perceptions of student loans as ‘anchors’ on the economic mobility, risk tolerance and aversion, and quality of life for the first decade of students after graduation.”

The presentation makes recommendations for how to address the problem, but they were blacked out in the documents. Student groups say they have ideas of their own, including more non-repayable grants and waiving interest payments on student loans.

The Canadian Federation of Students and the Canadian Alliance of Student Associations are each readying to launch getout-the-vote campaigns on campuses to get students to cast ballots in the Oct. 21 federal election.

They hope to replicate the high turnout of voters aged 18 to 25 during the 2015 election, forcing federal parties to think about student debt as one of several issues to address in their platforms if they hope to woo young voters.

About half of graduating students leave school with some degree of debt, with the average sum about $26,000, the groups say.

Borrowers typically take between nine and 15 years to fully pay off their federal loans. The documents noted that debt payments can eat up 13 per cent of a recent graduate’s income.

The documents echo the affordability message federal party leaders have started to lay out as a fixture of the fall campaign.

The presentation said a “boomerang generation of millennials” has felt the financial pain from loans they took out to go back to school when the recession hit a decade ago, limiting “their ability to afford housing and other essentials in a youth job market.”