Student debt is negatively impacting the economy, according to a recent report from the Canadian Federation of Students (CFS).
The report said the increasing cost of tuition and lack of funding for students are causing high student debt, which is problematic for the economy.
Students who graduate with a large debt can’t afford items such as cars or houses, and this means graduates can’t immediately contribute to the economy.
Jessica McCormick, national chairperson of CFS, said in an email it takes graduates roughly 10 years to pay back a student loan.
“That’s ten years of putting off even saving for major purchases,” she said. “Often, it also results in graduates going further into debt to afford buying a car or home.”
McCormick noted student debt not only affects recent graduates, but older generations as well.
“A large number of baby-boomers’ retirement plans include selling their homes. If a generation of young Canadians is unable to afford these purchases due to mounting student debt, both new graduates and older generations suffer,” she said.
Dane Rowlands, director of the Norman Paterson School of International Affairs at Carleton, argued some elements of the report were “questionable.”
He said graduates who are unable to purchase houses or cars do not cause the level of economic problems suggested in the report.
“It’s not as severe as I think the [report] makes it out to be,” Rowlands said.
The report also stated certain programs, such as medical degrees, leave students with debts of over $100,000.
But Rowlands said higher levels of debt for doctors and lawyers is fine because these careers pay higher and graduates will be able to pay back their debt quicker.
“Is anybody going to be upset that doctors graduate with $100,000 debt? No, because doctors make a lot of money and they will be able to pay it back,” he said. “For high earning professionals, levels of debt like that are not really going to be seen as a huge disincentive.”
The study found many graduates are forced into “underemployment” and work jobs they are overqualified for in order to pay off their student debt.
High levels of unemployment and underemployment among youth have already caused billions of dollars in lost wages, according to the report.
However, Rowlands said some university degrees lead to more profitable careers than others.
Rowlands said his advice to students worried about job pay is to “choose the disciplines which are going to have a payoff.”
But McCormick argued graduates are increasingly underemployed in Canada.
“An engineer or someone with a Masters or PhD working in a grocery store is not in a position where they can make use of their skills or earn a fair wage,” she said.
McCormick added the report highlights years of student aid and post-secondary underfunding issues.
“Debt follows graduates for many years after they leave school and prevents any meaningful contributions to Canada’s economy,” she said.
Rowlands said he agrees government policy and financing for students can be problematic.
“If you’re graduating with a bunch of debt, you probably want to try and set up your repayment scheme in the easiest form as possible,” he said. “Be flexible, get out, and start earning money as best you can.”
