By Spencer Graham, Gen Squeeze Contributor
My mom always used to tell me that there are two kinds of debt: bad debt and good debt.
Bad debt is what you’d typically associate with those careless purchases on your high-interest credit card, which result in monthly payments and can lead to bankruptcy, if you’re not careful. Good debt, she told me, means making an investment in your own future.
Good debt means taking a calculated risk with higher odds of reward in the long run.
Most people associate student loans with “good debt” – you’ll be much better off with an education under your belt. With a degree or diploma, you can build your dream career, all with the help of your newfound knowledge, skills, experience, and network. Wham-bam. You’re paying off your five-digit student loan in a few years.
But I’ve been starting to think that student debt isn’t so “good” after all.
In Ontario, for example, the average student debt now sits at well over $20,000/student. That’s a 56% increase since 1998. While students’ debt levels aren’t of mortgage proportions, they do represent an incredible setback for young people. More and more often, students must rely on making low monthly payments with higher long-run interest, or worse, defaulting completely. The federal Canada Student Grants Program has slipped in its ability to combat student debt since it was introduced. Each year, funding for students in need remains stagnantly low as tuition and costs of living dramatically rise.
Why should the older generation care? Well, student debt is a significant burden to the economy. In the booming decades of the 1950’s, 60’s and 70’s, young people were buying things. Young couples were purchasing their first homes. Young grads were able to afford a car to get to work. Those days are nearly gone.
Millenials are now being labeled as the “Cheapest Generation”. We don’t buy things like cars or homes because we can’t afford them. Some months, knowing you’ll have enough for rent is good enough. We spend less on extras because the basics take a deep cut of our monthly budgets. Even if it’s not a new suburban home or an automobile, there are plenty of perhaps more socially appetizing products that we simply cannot afford in today’s economy. And that’s bad for everyone.
Of course, no article on student debt would be complete without a comment on the labour market for young people. When you tack on a youth unemployment rate sitting well above the national average, young people are heading for some seriously troubled waters. It’s a tough world out there, even for the university or college graduate. Organizations want experience over ability, which make the entry-level graduate feel hopeless (at the best of times). Many students are turning to professional programs, which are seen as a way into the job market, but the average debt for professional students is even higher.
So what to do? We continue putting pressure on our federal government to improve the underfunded Canada Student Grants Program, so that education is more affordable for young people. We continue asking our provincial government for a tuition framework that shares the financial burden more equally across stakeholders. And we ask that our postsecondary institutions step up and offer hands-on skills and experiential education so that entry-level candidates are more employable.
And if you’re a current student, get involved in your student union – there are plenty of advocacy opportunities available, where your voice and passion will directly result in action and results.
Let’s change the direction on student debt – from bad to good.
Spencer Graham is a graduate and former student union leader at McMaster University, currently living in Toronto