Student debt -- it's societal self-abuse

Posted 02.25.13

SHAWVILLE, QUEBEC | As economists try to make sense of Canada's stuck-in-the-mud resource economy, one interesting consideration is the dampening effect of over $15 billion taken out of the economy by outstanding student debt. Some $15 billion is owed to the federal government -- much more is owed to the provinces, the banks, family coffers, and to credit cards by the graduates, 15 percent who are unable to find work.

The experts point out that university graduates don't buy homes (40 percent of them), will delay starting a family (36 percent), and even put off marriage (23 percent) as long as they are mired in this debt. It means about $27,000 debt for each student upon graduation.

This chills the economy, which depends on internal consumption as much as selling resources to other countries. This high debt, combined with high family debt levels, dumps cold water on economic growth. The student debt crisis affects not just students and their families; it smothers the economy.

Nor can we look at student debt as money in the bank for the government, since non-payment rates are so high.

In 2012, 171,000 graduates made no payment on their debt, and since only 2011 the feds have had to write off $543 million in uncollectible student debt. In 2012, they expect $173 million to be written off. Is this sound financial management?

There are countries around the world that do not charge for university education -- the Scandinavian nations, even Scotland - and they are not economic basket cases. Are we being protected from a larger national deficit -- by transferring costs from the government to families? Is that smart?

So when we ordinary voters look at the election signs (coming next year), we're told one party has guaranteed us ‘sound economic management’ (comparing Canada to Ukraine, I assume) and another party claiming to be the voice of the next generation because they have a wealthy young man as leader who has promised to de-criminalize marijuana, we might wonder who really grasps the steering wheel.

It's not only macroeconomics.

"Graduates cannot enter the new home market", we're told, as if graduates ever were players in new home purchases; "and graduates aren't saving via RRSPs," as if graduates ever were big players in the investments field. Where is our sense of reality?

Students and grads are big players in the consumer marketplace, but they have never been major in real estate or in finance and investment circles -- not because of debt, but because they are young.

We want and need a well-educated work force. Our economy -- your job, my pension, his health care, her entrepreneurial start-up -- requires smart people doing smart work, being well paid for it, and paying into social programs like Canada Pension.

To get there, the next generation needs not only a good education but also the skills and habits which will aid them throughout their life: Good communication skills, good judgement calls, a vision further than today's entertainment fashions, and so on.

Our kids should not expect to buy a new home upon graduation -- that's crazy! Shouldn't they be traveling the world, meeting stimulating people, studying new and unusual solutions to old conflicts and old social potholes? This is how real outside-the-box thinking begins -- this is where opportunities are discovered, and where compassion grows toward the other human beings sharing our planet.

Big student debt slows us all down. But to expect students to become corporate automatons or to slide into a nine-to-five of obligations and responsibilities at age 20 is self-abuse by our entire society.


Copyright © 2014 Fred Ryan/Log Cabin Chronicles/02.14