When it comes to pursuing higher education, there are various reasons the students take loans. The student debt loan scenario in Canada is no less satisfying; it has been estimated that nearly $15 billion in student debt has risen significantly from 2010 to $18.2 billion in 2017. However, this number is only the minimum case when it comes to reported debt the students fund themselves from the government. It has also become a worrying case for the officials since almost 22,000 ex-students have filed for insolvency across Canada. 

According to national reports, it has been discovered that approximately 60% of their CSL assessed financial need is funded by the government through federal student loans for students who have taken up full-time courses in accredited universities in participating jurisdictions. In comparison, the current province or territory where they have been admitted for higher education covers the remaining 40%. But these numbers were staggering in recent years, which indicates that 27% of students relied on non-government lenders to fund their education. Another 25% of the students invested in both federal student loans and privately funded lenders to pursue their academic ambitions. 

Another disturbing trend among Canadian students is that apart from seeking financial support from federal government schemes, they have also utilized student credit cards, student lines of credit, and personal bank loans. Thus, indirectly increasing the average student loan balance up to $44,200. A future scenario that has been estimated among Canadian students is that 68% of them will be directly financing their education through private money lenders. 

1. Rise of the Tuition Fee And Underemployment That Has Contributed to the Increase in Student Debt in Canada

According to the statistics provided by the Canada student loan, it has to be noted that the cost of tuition fees has risen over the period time, making educational expenses expensive for the average student. $6,838 is the average undergraduate tuition fee figure in accredited Canadian universities. Over the last decade, it has increased by a 3.7% figure in Ontario. The average tuition fee is estimated to be $ 8,838; this means it has increased by 4.6% over the period. Thus, all this has led to students trying to pay off their debt by fifteen years maximum. Still, most of the time, they are unable to cross this timeline and declare insolvency, file for bankruptcy or make a consumer proposal to the creditors. 

When they file for insolvency, students still owe an average of $14,729 in debt representing 32% of all their unsecured liability. It has also been noted that graduating students mostly end up with unpaid internship programs and part-time positions on minimum wages. Thus, they cannot support the high-interest rates and monthly repayments and manage their lifestyle expenses. About 84% of the student population who file for insolvency are employed in jobs that pay them less than their capacity. Hence there are more cases of defaulters among the younger generation. 

2. Where Can They Get a Loan From?

The government of Canada has facilitated additional financial capital for students through the federal system. The Canada Student loan program allows them to waive off 60% of their tuition fees with a hefty interest or without. The government loan program allows a six-month grace period to students while they plan to repay the loan. An interest rate of 2.5% is normally applied to the student loan given by the federal government. 

While applying for a private loan through banks and lenders, the students need to co-sign their parents. The interest rate charged by these private lenders is exorbitant and usually takes a long term to repay. Students are known to apply for the home-equity line of credit to back their higher education financially. 

With the value for higher academic rising, it has been estimated that there are more than 1.7 million students applying for a loan in the year 2017. 

3. Which Category of Students Has Higher Student Loan Debt in Canada?

The government records have estimated that Ph.D. graduates own a higher debt rate of over $33,000. Then come the students who have applied for bachelor’s and master’s degrees; they account for over $28,000 in debt. The college students have a statistical standing of $15,300 on an average in debt. 

Medical students, on the other hand, have a high debt rate, but they get lucrative jobs once after graduation and hence can pay off their dues on time. It has been estimated that medical professionals own up to $69,122 in debt. This number is staggering for the average social science student who is expected to pay off $ 58,611 in debt. Business school graduates, too, have equal responsibility of repaying the federal student loan program once they get out of their business schools. 

4. Which Regions Have Seen an Increase in Student Debt Defaulters?

It has been estimated that Canadian students from the provinces of Quebec and Atlantic have higher defaulters when it comes to paying off the loan. Since the chances of finding employment in the Ontario province is favorable, it has been noted that students from this region pay off their loan at a higher rate. 

According to a recent survey of students from Canada – nearly 68% have agreed that they have financial issues to bear when it comes to paying their yearly tuition. Thus this means that more students will be taking private loans with higher rate interest in the future. 51% of them believe that this scenario is expected to worsen after the pandemic situation and its impact on education. When a survey was conducted in the year 2020, it was reported that nearly 54% of students have financial anxiety over the COVID-19 outbreak and its correlating economic effects on student debt. 

Conclusion

The Canada Student Loans Program was established in 1964, and through this program, thousands of Canadian students have benefited from completing their education each year. It is worth noting that the fiscal policies of the federal and provincial governments have resulted in a staggering increase in trusteeship fees. Students and their families have borne the brunt of these cuts, which have led to massive increases in student debt.