For all the things PEI fails to accomplish, the Maritimes’ little brother does do one thing right — student loans. Since October 1, 2012, all student loans in the province have been given with a zero per cent interest rate, as opposed to the system most often adopted which sees interest rates beginning to accumulate soon after a student graduates.
BC — and all of Canada — would greatly benefit from implementing this system as a means to alleviate the ever-increasing amount of student debt.
However, this change to BC student loans requires students to face the reality that the government isn’t going to step in first; the government will not start using taxpayers’ dollars to cover a greater portion of tuition costs. Rather, tuition will continue to outcompete inflation in a horrible race resulting in more students having not enough money and being forced to turn to the dreaded student loan system.
As it stands in BC, this generally much needed financial assistance comes largely free of charge until the day a student trades in the warm bed of academia for a colder-by-comparison shower of reality. At this point, the former undergraduate is left with a veritable ticking time-bomb of financial responsibility. In BC, the average student loan upon graduation is approximately $35,000 — which is well above the national average of $27,000.
It does not have to be this way, nor should it. Unlike the majority of other loans, student loans are taken out with the expectation that the recipient will create a positive externality for our society. Therefore, student loans should not be subject to the same restrictions of a normal loan.
Despite arguments to the contrary about certain degree programs, those taking out student loans are doing so with the intention of joining the skilled workforce. As such, the government should treat these loans as an investment in the future of our economy.
Tuition will continue to outcompete inflation in a horrible race.
Moreover, a person taking out a student loan is in the process of increasing his or her earning potential. Payscale Canada reports the median salary of a person with a Bachelor’s Degree and less than one year of experience in their field at just above $40,000. However, once those with degrees enter the five to nine year mark, their median salary is around 1.5 times higher at approximately $60,000. As a result, the risk that they will default on the loan would be significantly lower if the burden of incurred interest did not exist.
If creditors need assurance about repayment once a student graduates, they can turn to another island’s solution as further evidence against student loan interest. Australia — along with its superior voting system — simply mandates that citizens pay off their government-issued student loan as a percentage of their income once their annual earnings rise above $40,000.
The government should treat these loans as an investment in the of future our economy.
This removes the necessity of interest, and further reduces the risk associated with student financial aid. Australia’s website on education directly states that “the government is not trying to make profits off of your loan as a bank would.” Why would we as BC students not want the same respect and esteem for our educational pursuits?
A low risk, high reward loan from the government to a student should come with a zero per cent interest rate because of the tremendously beneficial nature of the investment. Being that society as a whole generally benefits from an increase in the skilled workforce, and that tuition costs are not likely to lower or stagnate any time soon, it’s only logical that the government ceases to charge interest on student loans.
