The student loan juggernaut

>> How Canada treats its university graduates as thieves

by JACQUIE CHARLTON

The government's current views on student bankruptcy began, as government views often do these days, with a report from a right-wing think tank.

In this case it was an analysis of Canada's student debt crisis from the C.D. Howe Institute sometime last year, says Concordia Student Union president David Smaller. The average 1998 Canadian graduate, it said, will owe $25,000 in student loans, nearly five times higher than in 1982, and higher even than the average student debt in the U.S.

What was the reaction in government circles? Pure panic, according to Smaller, but not on behalf of the students. "They said, 'Students are going to default on their loans! We'd better save the banks!'"

And save them they did. The last federal budget, touted as the budget for youth with its Millennium Scholarship Fund, also includes the Liberal government's intention to forbid students from declaring bankruptcy until 10 years after graduation. At the moment they're prohibited for two years. Liberal Finance Minister Paul Martin did not mention the proposal in his budget speech.

The whole idea seems like another of those currently fashionable economic policies that take into account the needs of some vast, faceless system over those of ordinary people. Clearly, graduates beginning their working lives $25,000 in debt--when so many of the jobs they get are part-time, temporary or ill-paid--may have serious problems paying back their loans. They face economic realities that seem to be grasped poorly or not at all by policy makers, the kind of people who think that a little advice on budgeting is all graduates need to be diligent payers of student loans.

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I declared bankruptcy because of student loans. I fully intended to pay them all back, but after graduation I was supporting myself and a child on about $800 a month and had to ask for a payback deferral. The deferral period ran out after 18 months and my bank began, without warning, to take $170 from my account each month. My rent cheques bounced. My world started to fall apart. It may have been the NSF cheque charges, or the sheer amount of money they took, or perhaps still the eerie facelessness of the money-snatching itself that panicked me, but panicked I was.

A trustee I visited spoke seductively of bankruptcy. He made it seem like the solution to all my problems. I succumbed and signed the forms.

I won't go into the bad side of bankruptcy here: how expensive it was, or the nasty letters I got from the trustee, or the insulting treatment I had to endure from my bank, or how demeaning and exploitive a racket it appears to me now. But I will describe the bizarre financial counselling session I was summoned to with my trustee shortly after declaring bankruptcy. I was asked to mark down how much I made each month and what my expenditures were. I provided my rent and utility figures and so on. I began to lose faith in the whole process when the trustee was, for some reason, unwilling to accept my "$0" response for the amount I spent on clothing every month. He advised me to write down $150, which is about the equivalent of what I and my three closest friends combined spend on clothing in a year.

If that wasn't enough, I was then told I was supposed to be putting money aside for insurance and RRSPs, as well as 15 per cent of each paycheque into a savings account for emergencies. I stared at him blankly. I may have snorted quietly.

I dutifully completed the form, however, and the trustee and I shook hands at the end of the counselling session. I felt, and I was sure my trustee did too, that it had been an embarrassing waste of time.

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There are exceptions to the rule, but most people genuinely want to pay off his or her debts. Ask anyone what they'll do with extra cash they're due to receive, and nine times out of 10 they'll say, "Pay off my debts." But there is something different about paying off a student loan for 25 years--double what you got after all the interest has been counted--when you make very little money. Student bankruptcy is not a problem of scammers or careless budgeting: it is a problem compounded by high tuition fees, low incomes, and interest charges that, over the years, go through the roof.