How the Ontario government is handling student debt: What students and new graduates think of it and should interest be removed from student loans?

Debt is a four-letter word many students and recent graduates dread. The Ontario government said that between 2012 and 2013, a graduate from a four-year university degree had at least $22,207 in student loans to pay back. Similarly, a college graduate from a two-year diploma program has collected $13,083 in student debt.

Ontario NDP leader Andrea Horwath visited Brock University students in St. Catherine and listened to their concerns about student debt near the end of September.

“One young woman told me that she was working three part-time jobs while trying to go to classes full-time just because she didn’t want to graduate with massive debt,” Horwath said.

During a recent Legislative Assembly of Ontario Question Period, Horwath asked Ontario Premier Kathleen Wynne if the Ontario Liberal Party would remove interest from Ontario student loans.

Wynne responded by stating the free tuition grant for families with an annual income of $50,000 or less, will be starting September 2017. She also mentioned the 30 per cent off of tuition grant, and that the Ontario NDP Party voted against the free tuition motion during last year’s provincial budget.

“I would think that would be something the leader of the third party would support,” Wynne said during the question period about the free tuition grant.

Horwath said the Ontario NDP Party is supportive of “making student loans easier to understand for students, but we do not support calling these changes ‘free tuition’ as it is misleading.”

She added that if the Ontario NDP were elected a majority or minority government in the 2018 Ontario election, they would remove interest from student loans immediately.

“Removing interest from Ontario student loans won’t solve every problem, but it is a good first step in ensuring that everyone who works hard will be successful in building a great life in our province.”

London North Centre MPP and Minister of Advanced Education and Skills Development, Deb Mathews, recognizes that college and university graduates are struggling to pay off their student loans.

She said that the Repayment Assistance Program would provide further assistance. As of Nov. 1, graduates will only have to pay back their student loans when they are making $25,000 or more a year, and will not be required to pay more than 20 per cent of their family income towards the student loan.

When asked about whether or not the Ontario Liberals will take off interest from student loans eventually, Matthews said that the current options are helping students who wouldn’t be able to afford it otherwise.

“Of course there will always be people who are asking for more, but this is what we can do and I am very proud of it.”

Is removing interest the best idea?

Matthew Farrell, a political science professor at Fanshawe, said that while he can see the Ontario NDP removing interest from student loans the task would be costly.

“That would mean raising taxes in another area,” he explained, adding that the Ontario Liberal Party is “not too keen to do that. They’re already under fire for the hydro rates. I don’t think, in terms of licensing fees, people want to pay any more for license plate stickers.”

Darren Chapman, an economics professor at Fanshawe’s Lawrence Kinlin School of Business, also said that other people would have to pay if students weren’t required to pay interest, and feels there are other ways around it, such as surtax.

“The portion of the income that goes up goes to pay an additional tax to pay your student loan. The more that you make, the faster you pay your loan off,” he explained. “The benefit there is that it leaves more money in student’s pockets when they graduate.”

Meanwhile, Chapman said that students should spend time in between programs to either find a job relevant to their studies or future career plans, to make an income and to pay off some of the debt from student loans.

However, he acknowledged that if graduates were unable to find a job after their first program, they would return to school to earn more credentials to land them a job. However, Chapman said that accumulating more debt results in a higher monthly payment towards student loans.

“Students have to be mindful that they have to measure off the benefit of their education, and if they’re going to be making that money on graduating to be able to pay off the extra cost of the debt,” Chapman said.

How do students and new graduates feel about the financial assistance programs so far?

Fanshawe students had mixed opinions. Amber Rankine, a second year student in Internet applications and web development, said her mom is paying for her schooling. While she is glad the Ontario government is doing something, she felt it doesn’t change the fact that people are struggling with student debt.

“My sister and her husband want to buy a house and they couldn’t because his student debt’s too large right now,” she explained. “It’s education. It’s to get a job so we can give back to the community so we can actually do something with our lives. We shouldn’t have to go into debt for that.”

Shawn Anderson, a second year broadcasting-television student, is paying for school with OSAP. He is also pleased with what the Ontario Liberal Party has put in place, but said that the province and the rest of Canada are “behind other countries where tuition is free”.

First year photography student, Eryck Gardiner, is paying for tuition with OSAP as well. “It’s been easy getting the money, it’s just that paying it back is going to be stressful,” he said.

However, Tara Urekar, a Western University and Mohawk College graduate, said the Ontario government’s efforts towards decreasing student debt could be better.

“With the free tuition grant being offered next fall it is unfair that my peers will still be struggling to make ends meet five years from now when the incoming freshmen will be able to actually have fulfilling lives upon graduation.”

Sarah Jonasson, another Western alumna and Mohawk television and communications media student, started paying back her student loans in October 2014 after graduating from Western that spring. She said the National Student Loans Service Centre (NSLSC) asked her to pay about $500 a month, and her bank wanted her to pay about $400 for the line of credit.

“At that time, I had just moved back home from Toronto because my full-time seasonal job was over, I’d managed to get a part-time job in my home town, but my paychecks would maybe be enough to cover half of it,” she said.

Although she still pays $100 in interest to her bank, she won’t have to pay the NSLSC until after graduation from Mohawk. Jonasson currently lives with her parents rent free, as she cannot afford to rent anywhere. She had mixed feelings about how the government is handling student debt, including the free tuition grant.

“It’s great for those who can take advantage of it when it starts, but that doesn’t help the thousands of graduates who are struggling daily,” she said.

Urekar works full-time and will receive a raise soon. She added the Repayment Assistance Plan will help people like her who have a permanent disability.

However, she said that like many graduates in her position, she has to wait until her loans are paid off for other investments. “I can’t picture myself owning a house or condo, taking time off work to travel, or even being able to save money for retirement, all because of student debt.”