Studying in Canadian colleges can be quite expensive. So getting a student loan is one of the solutions to this problem.
Even statistics for student debt in Canada show that almost half of Canadian college graduates are in some sort of debt, which isn’t all roses.
Student debt has far-reaching repercussions. It can hinder students from working in the careers they want and prevent them from improving their lifestyle for years after college.
But why is student debt a problem? Will future students have the right to the education we currently have? Isn’t there any student debt forgiveness program in the works?
Those are all excellent questions. Let’s find out.
Why is Student Debt a Problem?
Student loans are a huge financial burden for many people in Canada, and it can be difficult to keep up with the repayments. If you’re considering taking out a student loan, you should know the risks involved.
Here are some of the risks associated with student loans in Canada:
- You could end up owing a lot of money.
- You might have to pay high-interest rates.
- You could lose your eligibility for Canada Student Loan Assistance.
- You might have to spend years paying back your loans.
- You could get into financial trouble by relying on credit cards or lines to cover your payments.
- You could end up owing more money than you borrowed.
- You could run into trouble repaying your student loan if you lose your job or get sick.
- Your spouse or partner’s financial situation could affect your ability to pay off your student loan
- You could lose some of your tax credits.
- You could end up paying more in taxes.
Student Loan Statistics in Canada
Now that we know the fundamentals of student loans, let’s look at some depressing college student loan statistics in Canada.
1. Total Student Debt Increased to $22.3 Billion
The total amount of student loans received from the federal government reached around $22.3 billion.
This figure is shocking and alarming but does not include personal and provincial loans, lines of education, and credit. The average student loan debt in Canada is $28,000 for an undergraduate degree and $15,300 for college graduates.
With such a large debt owed, it can take several years before students can pay off their debts.
Borrowers that use the Federal Canada Student Financial Assistance program take nine to fifteen years to pay off their debts.
The more time the cycle of debt continues, the more difficult it becomes for the younger generation to get out of it.
2. 533,000 Post Secondary Students Took a Loan
The Canadian Government has provided loans to more than 533,000 post-secondary students. Moreover, more than 330,000 borrowers received support through the Repayment Assistance Plan.
In total, more than 1.7 million students have taken a student loan.
3. On average, one student debtor owes at least $26,075
On average, a student debtor in Canada owes at least $26,075. With all the student debts combined, it surpassed $20 billion.
According to RemitBee, the average cost for post-secondary education is $6,400 for a year. You can multiply the cost by the length of the program and living expenses, and there is always a chance for the tuition fees to increase.
It is often said that quality education comes at a price. In this context, it is true as students find that the best solution to acquire quality education in Canada is through student loans.
The students take a loan from the Canada Student Loan Program to cover their tuition, textbooks, and other living expenses. Although the loan program is helpful, it does result in students accumulating a large amount of debt.
4. The Average Student Loan Debt is $100,000 for Doctorate Degrees
Becoming a doctor in Canada is a significant commitment in terms of money and energy.
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According to the Association of Faculties of Medicine in Canada (AFMC), the average student loan debt for doctorate degrees is over $100,000. Around 13.6% of students graduate with over $200,000 of student loan debt.
5. 51% of Canadian Students Borrow Money from Their Parents
According to the financial post, 51% of Canadian students need to borrow money from their parents. This is done because they are under debt pressure and cannot meet their post-secondary education expenses.
Also, CIBC research claims that Canadian parents can pay 2/3 of their child’s tuition fees. 21% of parents say they are prepared to pay the whole bill.
The parents in the poll suggest that post-secondary education costs more than $50,000. Many parents use their retirement savings so their children can get out of debt.
6. The interest rate for student loans in Canada is at an all-time high of 5.95%.
Currently, the fixed rate for student loans in Canada is 5.95% (prime + 2%).
Many Canadian students pursue the fixed rate as it is a stable interest rate. When a student negotiates for a fixed rate, they will be charged the same interest rate through the repayment period.
7. Canadian students face a high prime rate of 3.95%.
Students face one of the highest prime rates for student loans at 3.95%. The prime rate is the foundation for calculating the interest applied to the Canada Student Loan.
This rate is used by the major banks of Canada and other financial institutions to set interest rates for student loans.
As the Bank of Canada struggles to curb inflation rates, it is expected that the Prime Rate will continue to rise.
8. The variable rate for student loans is 3.95%
The variable rate concerns the interest rates that vary over time and is often connected with the prime rate.
If a student negotiates a variable rate, the charged interest during repayment will decrease or increase along with the prime rate.
9. Tuition fees in Canada increased to $7,437 for Graduate Students
The increasing tuition fees are one of the primary reasons for increasing debts in Canada.
Undergraduate students pay $6,834 on average, 2.6% more than their previous year. The fees are even higher for graduate students, who pay $7,437, which is 1.7% higher than the last year.
10. Female Students Take More Loans Than Male Students
Recent statistics show that there is an evident gap between male and female students in Canada. According to the data, this happens because women earn less than men and make $4.13 less per hour.
Since women make less money, they have lower savings to contribute to their education. This forces them to take more student loans than men.
This gap between the genders is not only present in Canada, but it is evident in the U.S as well.
According to the research from AAUW, women graduate with more than $2700 in student debt than men.
The Bottom Line
As the statistics show, Canadian students are experiencing an increasing trend of student loans from both private and government institutions.
This crisis is reflected in more undergraduates and post-graduates struggling to repay their debts. Moreover, the default rate is rising as well.
The average college debt in Canada is around $30,000. This is a considerably large amount, and it could take several years for students to repay this.
Therefore, it is important that you stay on top of your student loan debt and develop a robust plan for repayment.
Is student debt a problem in Canada?
Student loans are a problem as it has almost doubled over the last two decades in Canada. Many Canadian borrowers now collectively owe more than $20 billion in U.S dollar loans. Student debt has great repercussions as it could take years to repay their loans. It normally takes nine to fifteen years to pay off their debts.
Does Canada have a student debt crisis like the U.S?
The simple answer is yes. Although Canada has cheaper tuition than the U.S, students still face a lot of debt problems similar to the U.S. Just to give an idea, the average student debt in Canada is around $26,000, while in the U.S, it is about $31,000. The loans are almost similar and can be counted towards the debt crisis. It takes multiple years before students in any of these countries can repay their loans.
How many Canadians currently have student loans?
Currently, there are 1.7 million Canadian students with student loans. The total value of student loans in Canada is now over $22 billion. Among these loans, 75% are government-backed, while 36% are bank loans. Moreover, the average student debtor owes around $26,075.
What is the average student loan debt?
The total student loan is $22.3 billion, while the average loan is 28,000$ for an undergraduate degree and $15,300 for college graduates. Although this statistic is shocking, it does not even include personal and provincial loans. This figure does not include lines of credit and education.
Do student loans go away after 7 years in Canada?
The rule is simple in Canada. You are responsible for monthly payments of student loans even after you declare bankruptcy. If you file bankruptcy for at least 7 years from graduation, your student loan debt will be eligible for discharge. Therefore, you have the option to wait seven years to declare your student loan bankruptcy.
What happens if you can not pay your student loans in Canada?
There are some repercussions if you can not pay your student loans in Canada. When you miss nine months of payment, the federal part of your loans is given to the Canada Revenue Agency (CRA) for collection purposes. If you ever want to be eligible for student loans again, you must bring your loan up to date.
Is there student loan forgiveness in Canada?
In Canada, federal student loans are discharged when you pass away and have outstanding debt. In this case, student debt is forgiven. The case is a little different for private student loans. Private student loans get transferred to the estate and not your family.
How long does it take to pay off student loans in Canada?
According to the Canadian Student Loan Program, it takes almost ten years before students can fully repay their student loans. It takes a lot of time since many students cannot find jobs, and even those who do, it takes them considerable time before they have savings to repay the debt.
Related: Social Assistance Payment Dates in Canada.