Don Cayo: In my opinion

Budget breakdown: People are owing huge amounts of money at the start of their careers — and that isn’t good for any of us

Allowing students to take on more debt doesn’t help them — or anyone else for that matter

Acouple of analyses that landed on my desk count students among the winners in federal Finance Minister Joe Oliver’s first budget.

The Canadian Federation of Students begs to differ.

“Students are graduating with record levels of debt, and there are already over 200,000 graduates struggling to make payments each month,” said Jessica McCormick, who chairs the federation.

“Weighing Canadians down with enormous debts as they start their careers drags back economic growth.”

She’s right. And it’s hard to see how yet another budget provision that simply makes student loans easier to get — in other words, that will mean more debt carried by more graduates — is a win for either students or the broader economy.

Canada’s student debt picture is dismal, and it is getting worse. Three years ago, an SFU survey pegged the average debt for the 50-plus per cent of its graduates who have loans at just under $25,000. A year later, the students’ federation estimated the average for those now in school will be $28,000. So either the number is rising or — hard to believe — students are getting off more lightly in B.C. than in other parts of Canada.

B.C.’s youth unemployment rate is inching down from percentages in the teens during and just after the 2008 recession, but it’s still in the double digits. And the federation estimates underemployment to be 27.7 per cent — well over one in four, even in a recovering economy.

These numbers no doubt contribute to equally alarming stats compiled by CIBC in 2013. It noted 14 per cent of students who took out loans under the Canada Student Loans Program — 63,000 of them in the last four years — have defaulted on a total of $295 million.

Oliver’s budget announced two student-related measures — spending $119 million to reduce parents’ contribution to student loans, and providing loans for a wider range of programs, particularly short-term ones. Both will add to, not subtract from, the staggering total carried by graduates who are just launching their careers and the adult phase of life.

Student loans have been around for decades, of course, as have student gripes. But times have changed. The job market has tightened. The nature of entry-level jobs has shifted to internships and contract positions with no security or benefits. And the proportion of education costs covered by tuition has soared from 10 per cent in the 1960s and 1970s to 50 per cent today.

“The federal government predicts tuition fees will rise at a rate of 2.5 per cent above inflation annually over the next 25 years,” the federation said in a report last year. “At this rate, it is expected that fees will increase from an average of $5,959 in 2014-15 to $19,900 in 2035-36.”

It cites a TD Economics calculation that a student who started studying in 2011 would spend $55,000 to get a degree if living at home, or $84,000 if living away from home. However, children born in 2011 can expect to pay $102,286 for their post-secondary education if they live at home, or $139,380 if they don’t.

The federation recommends redirecting the $2.2 billion it costs Ottawa to provide tax breaks for RESPs and tuition payments to boost student grants. This sounds to me like a recipe to ensure more families won’t save for their children’s post-secondary education and more students will need help or be saddled with debilitating debt. But it’s scarcely a worse idea than Oliver’s plan to simply lend out more money — essentially the philosophy that got the U.S. into such trouble with its subprime mortgage loans.

I doubt there’s a single or a simple policy to address this issue, but it is clear that tinkering doesn’t work. Oliver made families and seniors the priority in his first budget; students deserve the same attention if he gets to deliver a second one.

Canada’s student debt picture is dismal, and it is getting worse.… I doubt there’s a single or a simple policy to address this issue.