Students sentenced to debt
TORONTO (CUP) — For
Aaron McMaster, $60,000 in student
debt started with a MacBook.
Walking into a campus bookstore for the first time, he made the $2,000 Apple product his first official purchase as a student. That was back in 2001, when his bankbook first lost its balance.
Now, he is hoping a job will eventually save him from his growing debt.
During the last nine years and counting in the post-secondary system, McMaster easily built up his personal debt.
Tuition cost about $5,000 per year where he earned his undergraduate degree in commerce and philosophy.
He is currently enrolled in the penultimate year of the University of Toronto's graduate law program and paying more than $22,000 per year.
"I rest on the assumption that I'll pay it off," said McMaster. "As a law student, you meet a lot of people with the same financial problems. I've been told not to worry about it too much."
Although McMaster is trying to stay optimistic, he admits that paying off his debt worries him from time to time.
Statistics suggest he is not alone.
The Canadian Federation of Students reported that Ontario students graduated with an average debt of $26,680 last year. According to Statistics Canada, Ontario students pay an average of $6,300 in tuition fees, the highest in Canada. In 2009, 1,215 graduates defaulted on their loans.
The CFS is expecting tuition and the total annual debt to rise in 2010 and 2011.
This leaves some financial planners worried that students are not seriously planning how they will pay back their loans once they graduate.
"When the debt load gets too big, you see a lot of 30-year-olds and under declare bankruptcy," said Rose Minasi, a registered representative at a Toronto investment firm. "Not being cognizant of how much you're in debt can send you into a dangerous spiral."
Due to the nature of his program, McMaster said he cannot find time to work a side job.
While that doesn't help him financially, he discovered an advantage: Because he does not make a steady income, he is not obligated to pay off his student loans immediately.
"I don't have to pay interest on any (student loan) payments. Since I'm not making anything, I don't owe anything right now," said McMaster. "If I'm able to get a halfway decent job with a firm, I could make between $55,000 and $100,000, and pay everything off in a few years."
Minasi said that students who are in debt should immediately begin strategizing how to pay it off before they sink any deeper.
Catch it early like a virus, she said, and it will not come back to haunt students in the long term.
While some programs convey students smoothly into the workforce, the future of some undergraduate students is not as clear.
Ange Bartolini, in her third year of information technology management at Ryerson University, is sinking under the weight of a $26,000 debt.
"I was stuck with a line of credit before my first class, paying deposits on residence. And I've got one more year to go," she said.
Bartolini believes her debt would have shrunk significantly if she was a commuter, rather than a resident in downtown Toronto.
Someone puts a roof over her head, but like many other students, she pays for it. Had she listened to her parents and driven to and from Brock University for school, she would have had the financial luxury of commuting — in a new car, no less.
"I lived in Niagara Falls, so my parents wanted me to go to Brock. They told me, 'If you go to Brock, we'll buy you a car.' I never got that car," Bartolini said. She added that she would not change her mind if given another chance.
Bartolini's content with student loan policies on loans and said that it has treated her well. But she thinks Ryerson complicates it more than other schools.
"The money in my bank account isn't mine. It's not a good feeling. But (loans) take care of my tuition, so I don't have to save up money for that," she said. "At the start of every year, there are huge winding lineups in the lower gym. I know in other universities the process isn't that long and painful."
Sarah Lucas, a third-year journalism student at Ryerson, says the Ontario Student Assistance Program has not been kind to her.
As an employee at Rogers, she earns about $1,400 a month, but OSAP takes a big bite out of her paycheques and leaves little for regular living expenses.
Although this is Lucas' first year using OSAP, she is still required to start repaying her loan because of the money she is making at Rogers.
"I owe $1,200 monthly to OSAP, then I spend usually $740 on rent, $300 for food, and I'm already in the negative," said Lucas. "I'm just struggling to get by once a month."
Minasi warns that outstanding debts will affect a student's ability to get further financial help after completing school.
Banks determine whether someone can or cannot carry additional debt for car loans or mortgages. Those who the banks determine cannot be trusted with extra debt will not get help later on. Those who meet the criteria, do.
"They will have built a good credit rating if they start paying off their debts and within a short amount of time," Minasi said. "That could be to their benefit because they will have shown their responsibility in paying debt off."
A former Ryerson student herself, Minasi felt how difficult it was to save and spend money after graduation, although she was lucky enough to avoid debt.
"I think each post-secondary institution, in every program, should offer a mandatory personal financing course," she said. "When that happens, I'll get off my soapbox."
Walking into a campus bookstore for the first time, he made the $2,000 Apple product his first official purchase as a student. That was back in 2001, when his bankbook first lost its balance.
Now, he is hoping a job will eventually save him from his growing debt.
During the last nine years and counting in the post-secondary system, McMaster easily built up his personal debt.
Tuition cost about $5,000 per year where he earned his undergraduate degree in commerce and philosophy.
He is currently enrolled in the penultimate year of the University of Toronto's graduate law program and paying more than $22,000 per year.
"I rest on the assumption that I'll pay it off," said McMaster. "As a law student, you meet a lot of people with the same financial problems. I've been told not to worry about it too much."
Although McMaster is trying to stay optimistic, he admits that paying off his debt worries him from time to time.
Statistics suggest he is not alone.
The Canadian Federation of Students reported that Ontario students graduated with an average debt of $26,680 last year. According to Statistics Canada, Ontario students pay an average of $6,300 in tuition fees, the highest in Canada. In 2009, 1,215 graduates defaulted on their loans.
The CFS is expecting tuition and the total annual debt to rise in 2010 and 2011.
This leaves some financial planners worried that students are not seriously planning how they will pay back their loans once they graduate.
"When the debt load gets too big, you see a lot of 30-year-olds and under declare bankruptcy," said Rose Minasi, a registered representative at a Toronto investment firm. "Not being cognizant of how much you're in debt can send you into a dangerous spiral."
Due to the nature of his program, McMaster said he cannot find time to work a side job.
While that doesn't help him financially, he discovered an advantage: Because he does not make a steady income, he is not obligated to pay off his student loans immediately.
"I don't have to pay interest on any (student loan) payments. Since I'm not making anything, I don't owe anything right now," said McMaster. "If I'm able to get a halfway decent job with a firm, I could make between $55,000 and $100,000, and pay everything off in a few years."
Minasi said that students who are in debt should immediately begin strategizing how to pay it off before they sink any deeper.
Catch it early like a virus, she said, and it will not come back to haunt students in the long term.
While some programs convey students smoothly into the workforce, the future of some undergraduate students is not as clear.
Ange Bartolini, in her third year of information technology management at Ryerson University, is sinking under the weight of a $26,000 debt.
"I was stuck with a line of credit before my first class, paying deposits on residence. And I've got one more year to go," she said.
Bartolini believes her debt would have shrunk significantly if she was a commuter, rather than a resident in downtown Toronto.
Someone puts a roof over her head, but like many other students, she pays for it. Had she listened to her parents and driven to and from Brock University for school, she would have had the financial luxury of commuting — in a new car, no less.
"I lived in Niagara Falls, so my parents wanted me to go to Brock. They told me, 'If you go to Brock, we'll buy you a car.' I never got that car," Bartolini said. She added that she would not change her mind if given another chance.
Bartolini's content with student loan policies on loans and said that it has treated her well. But she thinks Ryerson complicates it more than other schools.
"The money in my bank account isn't mine. It's not a good feeling. But (loans) take care of my tuition, so I don't have to save up money for that," she said. "At the start of every year, there are huge winding lineups in the lower gym. I know in other universities the process isn't that long and painful."
Sarah Lucas, a third-year journalism student at Ryerson, says the Ontario Student Assistance Program has not been kind to her.
As an employee at Rogers, she earns about $1,400 a month, but OSAP takes a big bite out of her paycheques and leaves little for regular living expenses.
Although this is Lucas' first year using OSAP, she is still required to start repaying her loan because of the money she is making at Rogers.
"I owe $1,200 monthly to OSAP, then I spend usually $740 on rent, $300 for food, and I'm already in the negative," said Lucas. "I'm just struggling to get by once a month."
Minasi warns that outstanding debts will affect a student's ability to get further financial help after completing school.
Banks determine whether someone can or cannot carry additional debt for car loans or mortgages. Those who the banks determine cannot be trusted with extra debt will not get help later on. Those who meet the criteria, do.
"They will have built a good credit rating if they start paying off their debts and within a short amount of time," Minasi said. "That could be to their benefit because they will have shown their responsibility in paying debt off."
A former Ryerson student herself, Minasi felt how difficult it was to save and spend money after graduation, although she was lucky enough to avoid debt.
"I think each post-secondary institution, in every program, should offer a mandatory personal financing course," she said. "When that happens, I'll get off my soapbox."
