Skip to main content

The risk of student loan defaults and delays has been on the rise, and the “system is broken,” officials warned the federal government in a presentation earlier this year.

Federal student debt alone is approximately $17-billion and the Liberal government has to regularly write off millions of dollars in loans it will never collect, say the documents, obtained by The Canadian Press under the Access to Information Act.

The presentation, dated five days before the Liberals tabled their 2019 budget, said the costs for postsecondary education have increased at rates “above wage growth and inflation” over the last decade, while the cost of living has also jumped, creating an affordability crunch for new and graduating students.

Nonetheless, postsecondary education remains a must for many entering the job market, the documents acknowledge.

As a result, there are “rising perceptions of student loans as ’anchors’ on the economic mobility, risk tolerance and aversion, and quality of life for the first decade of students after graduation.”

The presentation makes recommendations for how to address the problem, but they were blacked out in the documents. Student groups say they have ideas of their own, including more non-repayable grants and waiving interest payments on student loans.

The Canadian Federation of Students and the Canadian Alliance of Student Associations are each readying to launch get-out-the-vote campaigns on campuses to get students to cast ballots in the Oct. 21 federal election.

They hope to replicate the high turnout of voters aged 18 to 25 during the 2015 election, forcing federal parties to think about student debt as one of several issues to address in their platforms if they hope to woo young voters.

About half of graduating students leave school with some degree of debt, with the average sum being about $26,000, the groups say.

Borrowers typically take between nine and 15 years to fully pay off their federal loans. The documents noted that debt payments can eat up as much as 13 per cent of a recent graduate’s income.

The documents echo the affordability message federal party leaders have started to lay out as a fixture of the fall campaign.

The presentation said a “boomerang generation of millennials” has felt the financial pain from loans they took out to go back to school when the recession hit a decade ago, limiting “their ability to afford housing and other essentials in a highly precarious youth job market.”

Since coming to office, the Liberals have expanded the amount of non-repayable grants to low-income students, and student groups hope to see more of the same after this fall’s vote to ease the strain on upfront costs.

“The amount of non-repayable aid that the Canada Student Loan program is offering – it has ballooned ... and that wouldn’t have been a thing over a decade ago,” said John Rix, executive director of the Canadian Alliance of Student Associations.

“We’re trending in the right direction, and we’re hoping that after the election, there could potentially be further movement towards more grants.”

An expansion of grants would also help with costs postgraduation, students say. So, too, would waiving interest payments on federal loans, said Sofia Descalzi, chairperson of the Canadian Federation of Students.

The Liberals’ pre-election budget this March announced a six-month, postgraduation grace period where interest charges would be waived. Eliminating interest entirely on loans wouldn’t be too much of a leap for the next federal government, Ms. Descalzi said, pointing to provinces such as Prince Edward Island, Manitoba and British Columbia that have already made the decision.

“We’re talking about the government profiting off of students’ backs to access an education they need to enter the job market. That is ridiculous in our view,” she said.

The CFS plans to launch its get-out-the-vote campaign on Aug. 21 – one month out from election day – and Ms. Descalzi said the group plans to make sure students think about their debts and the parties with policy to fix the issue when they go to the ballot box.

Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.