How student loans keep some people in debt
When Samuel Bonne received $15,000 in student loans to pay for college, he didn’t expect to have to pay it back. But just two years later — in the middle of the pandemic — those grants turned into loans.
At the end of his sophomore year at the University of Toronto, the Ontario Student Assistance Program (OSAP) asked Bonne, originally from Mauritius, for his parents’ financial documents, but they were unable to provide them.
“My father works in Kenya and my mother does not work,” said Bonne. “So I ended up with $15,000 in loans that I knew nothing about.”
Bonne, who was granted permanent residency on humanitarian grounds in 2018, says the fact that his parents were not Canadian citizens and did not have the relevant documents was not taken into account.
Moreover, the interest on OSAP loans rose from 4.7 percent when Bonne entered college in the fall of 2018 7.95 percent this spring when he graduated with a degree in biological chemistry.
“Then the interest starts to take over,” Bonne said.
Bonne was grateful to be able to find summer work and get a research grant, which gave him a head start on his payments.
“I’m just not comfortable with the idea of taking that [debt] for the rest of my life,” he said.
But he’s not free yet. Bonne will be attending medical school at McGill University in Montreal this fall — and, pending other scholarship funding, is considering taking out a line of credit with a bank, which offers medical students loans of up to $350,000 to finance their medical education.
Bonne is not yet sure in which field of medicine he wants to continue. But he wants to serve immigrants and other marginalized groups in Quebec, recalling a time after his family first came to Canada in 2009 when his sister fell ill and she did not have a doctor or a clinic they can go to.
“That’s a problem many immigrants face these days. I don’t even have a GP; I’m still on a waiting list,” he said, obscurely noting that he may be a GP before he has one himself.
As one in five Canadians struggle to find a family doctor, CBC News set out to find out what drives so many from their jobs, and visits a community that may have found a solution.
Bonne says he will take the funding he needs, but no more, noting that in Canada he also has no family support to fall back on in a crisis.
“One bedroom, one desk – that’s really all I need.”
‘Gateway Debt’
Bonne is far from alone in his struggle with student debt; 1.9 million Canadians owed the federal government a total of $23.5 billion in student loans as of July 2022 – a number that only grows when provincial loans and private debt are included. More than half of those who took professional programs, such as medicine, took out bank loans or lines of credit a 2020 Statistics Canada report.
Erika Shaker, the national bureau director of the Canadian Center for Policy Alternatives, says this “gateway debt” perpetuates social inequality and prevents people from achieving financial independence.
“That debt you graduate with lingers,” she said. “It comes down to putting off the choices you can make, whether or not you can buy that house, whether or not you can buy a car, whether or not you can start a family.”
It’s a reality Ari Black knows well.
“I don’t have any financial goals. I can’t,” says Black, who teaches American Sign Language at Carleton University in Ottawa. “My financial goal is to make sure I pay all my bills, that I don’t default on my student loan — and there are groceries.”
Ari Black, a professor at Carleton University who teaches American Sign Language, explains why he has started a petition to abolish student loan interest in all jurisdictions.
Black says he’s only been paying interest since he graduated in 2019 with a master’s degree in education from the University of Ottawa. As such, the student-turned-activist has made little progress in paying off principal. But he emphasizes that he had little choice, especially given the limited income he earns from teaching.
Of the rising interestBlack says his monthly payments will soon increase by $500 to $600.
“We already have people choosing to rent or eat,” Black said. “I’m not in that situation, but I’m close.”
Black says he calls the National Student Loans Service Center every six months to ask to continue with interest-only payments. But while he was grateful to hear that the federal loan rate was abolished in April, he was also told that the provincial rate would remain — and that there would be a 12-month limit on how long he could only make interest-only payments.
So after a final period of reduced payments, he says he’ll probably have to file a payment management plan.
All this led to black starting an online petition to abolish student loan interest at all levels of government. It has about 74 signatures.
Shaker says eliminating interest is “the least that can be done.”
“If we really want to tackle the problem systematically, the answer is not more loans, not raising the loan ceiling,” she said. “It’s actually recognizing that investing in post-secondary education isn’t just a commitment to the students who want to pursue it, but it’s a commitment to future innovation, future equity.”
High cost of higher education
Shaker says pressure to pay loans can also trap many former students in a cycle of uncertainty as they take “any job.”[s] they can “make ends meet.” In addition, she stresses that the rising cost of higher education excludes those whose families cannot or cannot support them — and those who have children or other dependents of their own.
Average undergraduate tuition for full-time domestic students increased from $534 in 1972-73 to $6,834 in 2022-23. These numbers are nearly double what they would be if tuition grew in line with inflation.
“We need a much fairer understanding of who’s going to post secondary,” Shaker said. “Otherwise, we’re omitting groups of students who don’t fit this template and reproducing the inequalities that already exist.”
Rania Phillips, a recent graduate of the Rotman School of Management at the University of Toronto, thinks the student financial aid system puts too much emphasis on income over wealth.
“Things like spending are heavily influenced by wealth,” she said. “Families that earn less but do not necessarily have to pay a mortgage have a very different financial situation than families that do have a mortgage, especially in the current housing market.”
Phillips worked three jobs in her senior year of undergraduate studies and took a year off to work before pursuing a master’s degree this fall. She says the pressure to make ends meet led her to consider only academic programs that would allow her to immediately repay her student loans.
“There’s definitely … another way you carry yourself when you don’t have the constant stress about how you’re going to make the foundation of your education,” she said.
Despite his difficulties, Black says he appreciates the loan system has allowed him to get an education, and plans to pay back “every penny”.
“I don’t want to give anyone the impression that I think I’m somehow an innocent victim in this scenario — I’m not,” Black said. “I am an active participant in my situation.”
But unlike a lease on a car or a mortgage on a house, he says, he can’t — and wouldn’t want to — return the education he received.
“I bet that I would succeed,” he said. “It’s helping me so far, but it’s not helping me enough to keep up with what they’re asking for. And I can’t give it to them to make up for it.
“There’s nothing for me to pay them back with – so I’m stuck in the system.”
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