Paying back student loans harder thanks to fewer jobs

By Ashad Mukadam

Government student loans are one of the few programs not being cut because of the economic recession. However, students graduating with student loans may face a tough time with repayment.

With fewer summer jobs posted this year and many employers in Calgary cutting back on staff and other expenses, more students will be required to resort to student loans to help pay for their tuition and fees next year.

“Universities will have a tougher time due to lower government grants and therefore they will raise the tuition by the maximum allowed,” said University of Calgary School of Policy Studies Palmer chair Dr. Jack Mintz. “Students will tend to stay at home due to the costs. Parents will have more difficulty as well, since they might have to help more.”

It could mean that students take the recession as an opportunity to further their education, or simply as a reason to remain in school and avoid not being able to find a job. This includes the possibility of taking courses during the spring and summer semesters.

“More students will be trying to take more courses to stay in school,” said U of C economic professor Dr. Apostolos Serletis. “It will give them a chance to do a graduate degree and I also expect that enrolment will go up.”

Higher enrolment will encourage the government to invest more into post-secondary education, including taking measures to keep universities and colleges accessible to the whole population.

“This is the time to build human capital to create a stronger economy once the recession is over,” said Mintz. “As universities are counter-cyclical, they tend to experience higher enrolment [in times of economic difficulty]. Post-secondary education is readily available and it allows young people to gain skills that will be needed when the economy rebounds.”

As a result, the Alberta government will be prepared for the higher number of student loan applications, especially with newly unemployed workers expected to return to school.

“[This economy] doesn’t have any effect on our decisions regarding student loans,” said Ministry of Advanced Education and Technology spokesperson Kevin Donnan. “If there is an increase in enrolment, then there will be an increase in demand. We don’t turn away any students in need.”

However, there will probably be a decrease in student loans offered by the private sector.

“They will be less likely to take risks, as they are being more careful with how they lend money,” said Mintz.

Issues will arise when students with student loans graduate. Students in Canada are graduating with a combined student loan debt of $13 billion, with an average around $24,000 per student upon graduation according to the Canadian Federation of Students, a national lobby group. With fewer full-time jobs expected to be available to new graduates this year, that debt will be more difficult to pay off. However, there are methods of relief available to students.

In fall 2009, Canada Student loans new Repayment Assistance Plan will take effect, which is designed to make repayment more affordable for students. Payments will be capped at an “affordable level,” or waived if the payee has a “very low” income. For Alberta student loans, there are measures such as interest relief which defers repayment for six months, renegotiation of the loan terms, and a lower interest rate on the Alberta Student Loan.

“Our interest rate was lowered by 2.5 per cent last year and there are no plans to change that,” said Donnan. “It was a key part of the affordability framework that students asked for. We are always monitoring the framework, but because of it, we are in as good a shape as anyone on the planet to weather this storm.”