Trudeau Pledge, Debt Repayment and the Power of Choice
Choices: Chocolate or vanilla ice cream? I prefer chocolate. You?
Not all choices are always this painless. Today, younger generations face one heightened choice: The choice of how to repay OSAP in the midst of occupied vacancies and ridiculous interest rates. Let the financial headache begin!
Life seemed simple during childhood, livable. All I worried about was the next Sponge Bob episode or getting Barbie Veterinarian and a doll house and roller blades for Christmas or eating a ham and cheese sandwich without avocado — Clearly, I didn’t know the riches of life then. Seven months from now I will be an official adult, the kind that pays adult expenses in an adult world, a graduate. No, I did not include Starbucks in that budget, or shoes, scary. Seven months from now I will owe an overbearing heap of debt to the government, way to ease into adulthood. And do not forget about the owed cents! Those count too. In the boat of insolvency, according to Statistics Canada, I am not alone! 41% of Canadian students today graduate university with an average debt of $26,300.
Is debt good material for screw-ment? Probably. But not all is lost lads. During the recent elections, our now Prime Minister Justin Trudeau pledged to delay OSAP repayment for students who earn less than $25,000 per year, a chicken step above minimum wage. In the Liberal website, under the Post-Secondary Education division, Justin Trudeau promised students like me, and perhaps you, the following available options in his platform:
- To increase the Canada Student Grant to $3,000 per year for full-time low-income students and $1,800 per year for part-time students.
- To facilitate the requirements for more middle class families to qualify for other grants.
- To work with the provinces and territories to promote RESPs and Canada Learning Bonds.
- To invest $50 million in additional yearly support for the Post-Secondary Student Support Program, which assists Indigenous students in post-secondary institutions.
Juicy? I believe so.
Yet some students belted their OSAP frustration on Twitter. After the infamous Globe Politics account retweeted the Globe and Mail article on Trudeau’s plan, users disdained the effectiveness of his plan. The tweets point to the loopholes of the attractive, yet subjectively insufficient propositions. Most graduates struggle with the interest rates and the fact that, while the increase in grants is somewhat beneficial for current students, most graduates will not benefit from those grants and investments.
Beside the stinky pile of interest, the adjustments are mockery to many.
Were anyone to graduate under this scheme, regardless of their salary, students would still overpay for their degree. Of course, a higher salary means faster repayment, but not everyone finds the Max Lotto job on the first try. Thousands of students today carry the load of taxing interest rates, especially when these fluctuate. The amount one overpays depends mostly on the choice of repayment period. Alas, choices matter.
Our choices might depend on our priorities. Does one prioritize debt repayment over marriage, children, travel or other assets? Incurring an OSAP debt or any debt for that matter should not necessarily mean nodding ‘NO’ to all other personal aspirations. Still, all depends on circumstantial factors, individual goals and the unexpected expenses that come with life. But while we have life we have choice, and if well-valued, that choice could mean financial liberty — quicker. Some students such as Stephanie, Language Studies graduate of the 2012 class from York University, do not believe an OSAP debt hinders the potential for economic settlement.
“I see my OSAP loan as another bill I have to pay each month. So I include my monthly payments in my budget. My debt with OSAP won’t prevent me from getting married or affect the number of children I have. I will just ensure I’m making the monthly payments and making additional payments whenever possible.”
OSAP provides a debt calculator on their website with numbers on estimated monthly payments based on your choice of repayment period. OSAP considers three elements: Total repayable student debt, repayment period and interest rate. Students can select a flexible rate or a fixed one, which changes everything a few years into the repayment process.
Let’s say I graduate this year with the average debt of $26,300, and by the pinnings of diligence, I find a full-time position that compensates an annual salary of $25,000 after taxes, I would have to pay back the debt as soon as I finish school based on the Trudeau plan. If I choose three years for the repayment process with a fixed rate of 3.5% for comfortable payments, three years later, after the estimated monthly payments of $812, I would have overpaid $3,000 for the Bachelor of Arts I received from the University of Toronto. And while the amount might not appear menacing, I would have to live with a tight pocket budget for three years.
Are you up for the broke student budget?
A few questions after I scavenged the minds of present and former OSAP debtors, I discovered one commonality: Most pay their debt as soon as possible. And who wouldn’t? But nobody can assume that they will find a high-paying salary with flexible hours and an office with view to Lake Ontario after graduation. Dreams are valid, friend, but they come at a cost. What about a tight budget? Not all students live stress-free with pocket change. Individuals such as David, who graduated from Business Administration eight years ago still owe OSAP. David owes part of his $12,000 debt. When asked about the debt impact on his economic maturity, David commented the following,
“I had to get used to the monthly payment and to put it into my budget every month. But I had to work longer hours to pay my student loan.”
Not everybody can work additional hours, specially if there aren’t sufficient significant opportunities to develop the skill set and expertise required per field of work. For David, the additional work hours did not suffice in his repayment quest. Many other students face this conundrum, too.
Being educated and having no chance to exploit that education is a poignant characteristic of our generation. David did not find a job right after graduation. Which comes as a surprise because the last report on graduate income numbers and employment by the Council of Ontario Universities in September of 2014, declared that 87.4% of students found jobs in their field or a related one with an income of $42,636. Two years after graduation, 93% of undergraduates found relatively high-paying jobs with an annual income of $49,398. But people like David, who still owe OSAP, were not actually included in the survey.
According to the thorough study from the Higher Education Strategy Associates, conducted by Alex Usher, the survey does not reflect the fullness of the graduate spectrum.
“But the problem — apart from the fact that it’s not actually 93% of all graduates with jobs, but rather 93% of all graduates who are in the labour market (i.e. excluding those still in school) — is that the COU release neither talks about what’s going on at the field of study level, nor places the data in any kind of historical context.”
It is fair to say that students have a tougher time after graduation than what the Council actually admits; however, opportunities do exist all around us. You just have to look — a little harder, longer, further. When we recognize and seize these opportunities, much of the greatness stored in our tiny, fragile frames makes our lives a bit less complicated, and the world, an astoundingly better place. Christian, for example, graduated from Political Studies at Ryerson University in 2004, and right after he finished, the most affordable option for debt repayment was home. Yes, Christian stayed at home with his parents, and he survived too. While some view home as the cage for the free spirits, home is one of the places that save students loads of money, which then goes into debt repayment. Think about it. You do not have to purchase toilet paper, a crazy awesome deal.
When asked on the Trudeau pledge, Christian echoed the thought of many,
“It’s best to get it [debt] over with during your younger years when you have less responsibilities. Delaying repayment will just make it harder on people as they incur more expenses and responsibilities. I just kept the broke student mentality, managed to live off a small budget, and repaid as much as possible, while I did not have to pay a rent of my own.”
If it looks like we are being screwed from every side, top, front and bottom, what is left to do?
Will the Trudeau pledge solve the debt problem? No. Will the pledge alleviate some debt for present and future students? Maybe. But we can certainly do one thing: Decide. Decide what you will do after graduation. Perhaps you won’t know every minuscule detail, but nobody else will come offer you the five-step-guide to adulthood. Sketch out possible life scenarios and plan for disastrous events. Decide to be diligent in your job search. Decide, if debt repayment is a priority, to fit yourself into the minuscule budget box. Decide to find contentment with that budget. Decide to be smart with your money. And if you already graduated and you still have no job and no money and no career, yet, decide to be grateful for what you do have, after all, you are reading this post, so your life still brims with hope.
