- Reforming the Student Loan Repayment Process to Restore Fairness and Address Youth Unemployment
Reforming the Student Loan Repayment Process to Restore Fairness and Address Youth Unemployment
The motion proposed a new student loan system with the intent of assisting new students and all citizens currently carrying incurred student debt. If this motion passes it may make the second operative of policy G06-p26 moot, since the operative calls for a committee to study a new funding scheme, while this policy motion would already establish a funding scheme. Passing this motion would also require a change and some additions to Vision Green. Currently Vision Green states that lending rate be set to the prime rate. Vision Green does not propose one-time charges and higher minimum income threshold. It must also be noted that the two Vision Green policies just mentioned are not based on member voted policy, but are based on an interpretation of the policy.
Whereas successive federal governments have dramatically reduced funding toward post-secondary education over the past several decades, and the difference in funding has had to be made up by students themselves, in significant measure through student loans; and
Whereas the number of former students carrying student loans, and the dollar value amount of student loan debt being carried by students has increased dramatically over the past several decades; and
Whereas this debt has burdened these generations of students and former students with increasingly difficult to repay debts, impacting their ability to make key life choices and delay or abstain from key life milestones, including the option of embarking on risky but innovative and/or entrepreneurial ventures; and
Whereas interest-bearing student loan debt exacerbates wealth inequality by making the cost of education higher for those unable to either forego student loans or pay their loans off quickly than for those with more advantageous familial or other circumstances; and
Whereas education is a public good that enables Canada to remain competitive in the global economy; and
Whereas existing Green Party policies and most policy approaches to student debt only propose to address funding and/or repayment for future students, failing to address the millions of Canadians who continue to carry existing incurred student debt, which impacts our economy and society, and is a matter of justice to these Canadians; and
Whereas other countries, including Australia and New Zealand, have successfully designed student loan programs that are fair, virtually free from default and eliminate the most detrimental aspects of student loan debt;
THEREFORE BE IT RESOLVED THAT a Green government will implement a new student loan system modeled closely after the current Australian example, with characteristics that include one-time charges in lieu of perpetual interest charges, a higher minimum annual income threshold before repayment is required to occur, and repayment amounts calculated based on a small but progressive percentage of annual income; and that it will immediately transfer all existing student loans to the new system.
Since the mid-1990s, the burden of funding for education has increasingly shifted substantially from government to students, often paid for through student loans. Since that time, the percentage of postsecondary students graduating with student loan debt has increased significantly, as has the average debt load students are graduating with. Average Canadian student debt estimates hover in the mid- to high-$20,000 range. The Canadian Federation of Students pegs it at $27,000. Moreover, the proportion of students owing $50,000 or more tripled from 2% to 6% between 1995 and 2005, and is likely even higher today. Though this is a small proportion of people, the impacts on their future development and opportunities can be substantial and detrimental.
Current student debt loads are a burden on today’s graduates, who are looking to get a good start on their lives. While postsecondary education plays a major role in helping these students launch into their futures, many of these students are being hamstrung at the start of their adulthoods by overbearing student debt. Because those with student debt have, on average, lower assets and net worth than graduates without student debt, student debt continues to affect graduates’ finances and personal options for years after graduation, hindering many graduates from building their savings and investments. These impacts can be considerably compounded for those with high student debt loads, forcing many to delay or forgo major life milestones, such as owning a home; starting a family; starting their own businesses, creative ventures, or innovative enterprises. Moreover, high student debt loads lead many away from careers serving their communities, and prevent many from build career-related volunteer experience or taking lower paying work in their desired field to get a “foot in the door”. The challenges to those just getting started in their professional lives and professional careers, may play a significant role in the high unemployment rate experienced by youth in Canada: pegged at 13.9 per cent in January of 2014, according to Statistics Canada.
In addition to holding young graduates back in getting their lives started after graduation, the student loan regime that has been in place over recent years is holding many former students back for substantial portions of their adult lives. The average length of time it now takes graduates to pay back their student debt is 14 years. For some, particularly those with high debt loads, this may prevent them from being able to save for a home or retirement or feel secure enough to start a family while that is still a possibility. Others are forced into bankruptcy, many years after graduation, significantly impairing their ability to access credit for starting businesses or purchasing homes. Those with the largest debt loads are most severely impacted. These debtors are often those who were unable to live with family during their schooling or access enough other familial support or well-paying employment opportunities on summer breaks or for part-time work during their studies.
An important part of addressing this problem is to restore government funding to postsecondary institutions, to relieve students of too onerous a burden, but this approach misses those whose lives have already been impacted by high student debts due to past government policy and decisions. Other countries have found progressive solutions to this issue. For example, in Australia an up-front charge of 25% is assessed to student loans, but further interest does not accrue, and repayment is only required to begin once annual income exceeds $45,000, and then is limited to 4% of annual income, or no more than 8% of annual income at higher income levels. This approach ensures fairness for all students, regardless of means and circumstances, and furthermore has been found to be virtually default-free.