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You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.

ROMA: It’s normal for your student years to be a financial grind. You’re spending on tuition and living costs, and it’s tough to make money when you’re studying full-time.

ROB: The high cost of living makes it extra hard for today’s students to graduate without debt, especially if they don’t have help from their families.

ROMA: Welcome to Stress Test, a personal finance podcast for millennials and Gen Z. I’m ROMA: Luciw, a personal finance editor at the Globe and Mail.

ROB: And I’m Rob Carrick, a personal finance columnist at the Globe. The student debt people often compare Canada to the United States. Their students often finish school with debt in the six figures. Our student debt numbers are a fraction of what they are south of the border. And the topic of student debt is not the hot-button issue. It is there.

ROMA: But that doesn’t mean student debt isn’t a growing problem in Canada, one that is set to get worse in the coming years. We’ll dig into why that’s likely to happen. But let’s start by looking at the average student debt load in Canada, that’s sitting at around $27,000 for a bachelor’s degree, and about half of the students graduate with debt. Now, the average time to repay that debt is about ten years. So that takes you into your early thirties. The Canadian government has taken steps over the years to keep tuition under control despite soaring inflation. Ro, have they succeeded?

ROB: Well, tuition has been rising every year, but on an after-inflation basis, it hasn’t been a dramatic rise. I think what’s interesting is the way the government has sort of taken the burden of debt off students. I mean, on April 1st, new regulations came into play where there will no longer be interest charged on future and current student loans. I mean, that’s huge. And I should point out that that’s for federal student loans only. There are still student lines of credit that banks offer, and you have to pay market rates on those. And as we all know, market rates for borrowing have increased quite a lot in the past 12 months. So on the whole, I think the feds have done a reasonably good job. They’ve also increased the grant money available to students by billions of dollars. So people will still need to borrow. But the borrowing environment is a little kinder to students than it used to be.

ROMA: Rob, what is the bad news for students today?

ROB: Rent or rent and the cost of living, specifically food. Now, I know a lot of people will say that’s a problem for everybody in society, but I think it hit students hardest. You know, we’re talking about four-figure rental costs. These are students who may only be able to work for a few months of the year. I think the expensive rent story hits them the hardest of anybody in our population.

ROMA: After the break, we’ll speak with Paul Kershaw, founder of Generation Squeeze and a professor at the University of British Columbia, about how life for students is getting far more expensive. Okay, Paul, welcome back to Stress Test.

PAUL: Thanks so much for having me back.

ROMA: Paul, with the cost of living skyrocketing in Canada. Students are among the hardest hit. You teach at UBC, my alma mater, one of the most beautiful and expensive cities in the world when it comes to housing. What are you hearing from your students?

PAUL: Oh, what I’m hearing is really, worrisome now by comparison with when I was a student a few decades ago. It is so much harder now because you used to think, how am I going to cover my tuition? And now that in Canada is quite a modest concern by comparison with how I am going to cover my rent while I’m going to school largely full time, which precludes my ability to be taking on a lot of employment. And the City of Vancouver or the City of Toronto or Hamilton, or Victoria. Like so many cities in Canada now, it is hard enough to cover your housing costs as a full-time employee, let alone as someone devoting a lot of time to school. And so we now see more and more students needing to at least contemplate that they might have to rely on a food bank while doing graduate work, or they might have to actually, at certain moments, think about having to go to a shelter because of the precarity of their housing. We see the hardship from housing in so many ways manifesting itself in our social lives and in our economy. And I think it is especially frightening right now for what it’s doing for the post-secondary experience.

ROMA: I think there’s this belief, particularly among older generations, that the student years are lean, that everyone’s broke at this stage in life, that I scraped by. And it’s okay for young people today to scrape by. What are today’s students and new grads dealing with specifically that is different that previous generations did not?

PAUL: Well, it is a moment that was going to be lean because of the way in which people are devoting time to study as opposed to work, of course. But just the sheer cost of rent is such a challenge right now. And, the need to often be further afield from where you’re studying to actually find a rent that you might be able to afford. So there’s so much more commuting time in between. And I think one other real new dynamic is, you know, back in the day you might have had one roommate, a couple of roommates, but I hear grad students talking about trying to cram ten people into a place that, you know, that just adds a whole other, you know, community building is part of your strategy just to cope through managing the realities of undergrad or graduate work. And you can see a kind of cynicism start to set in for our students, a real sense of anxiety, because this is supposed to be the moment where you’re devoting to getting that extra learning so that you’re going to then launch and have access to a job that’s going to make it worthwhile having made this sacrifice during the studying years. But it’s hard to have that optimism when you’re going through undergrad or grad school right now because you launch into Toronto where you have a job, maybe pays you 50,000, 60,000 if you’re lucky, as you’re starting out and your rent will consume the vast majority of that. And the prospect of not having roommates is thinking about how you might have a little more financial security. It’s hard to see. Leaving with your degree is the pathway to achieving that security.

ROMA: Students that didn’t have parental help getting through school have always been at a disadvantage to those that did. But it certainly feels like that gap is widening. Is that what you’re seeing now with the students that are coming through your university and, you know, schools across Canada?

PAUL: I think that’s the case. And you might have thought that the parent who was using their RSP on behalf of their children, thinking that they were trying to save enough to cover tuition, that that was going to be a major accomplishment. What a big accomplishment it is for parents to have been planning that way. And this is one of the ways in which sort of the deterioration of the economy for a younger cohort is then sort of smacking their parents who are, you know, like these days or their late forties mid-fifties kind of thing. We’re talking about those starting an undergrad degree and smacking them, saying, Dad, know we’re hurting you because you’re going to be feeling, Oh, I didn’t manage to save enough for my kids. Thinking about their cost of living, going to postdoc, not just their tuition, but the cost of living is just so shot up.

ROMA: It makes me think that it’s also incredibly dependent on where your kid ends up going to school. If you’re, you know, interested in a program where you get into a program that, you know, for example, is at the University of Toronto or in Vancouver, those costs are going to be much higher than if you get into a program somewhere in Quebec or in one of the Prairie Provinces, university or colleges there.

PAUL: And it gives rise to me when thinking like my niece; she’s just about to be heading out next year to start an undergrad career and has been lucky enough. To be accepted into many universities. Their parents are so proud, or their extended family is so proud. And it’s hard to say to her, though, you know, it’s one thing to choose, you know, the best program you think of the best school. But I strongly encourage you to check out what the rents are and choose for that reason, in no small part because that is going to be constraining your entire experience over the year, your post-secondary career.

ROMA: You know, one thing that comes to mind is that if you’re eyeing this massive expense and you’re thinking, okay, you know, I have some money coming that will help me for tuition, but the living costs will be higher, or they’ll be this much. Maybe I need to get a part-time job. Is that what you’re seeing? Are you seeing students who may be taking, you know, gap years to spend a year saving before they go start school?

PAUL: I don’t have good data to comment on the gap year, although somebody probably does. But on the part-time work, let me be clear. As a university professor, I can say with clarity that the proportion of students now needing to work many hours and large part-time work roles to cover their undergrad and their graduate work has increased by comparison with when I was a student. So I started McGill in 1993. I graduated with my Ph.D. from UBC in 2002. So that was my kind of nine, ten years of being in school. And when I was an undergrad, it was kind of normalized. I work in the summer. That is not the experience of undergrads any longer. Undergrads are so often doing part-time work while they are going full-time to school. We often have a culture that kind of mocks a younger demographic, and I’ve seen financial institutions do courses like We’ll have Adulting 101 at this financial institution to help you with your financial planning. But really in some important ways, given how this transition from high school into post-secondary doesn’t really let you ease into that right now. Where you’re going to like going to adults is going to be living in perhaps more on my own, not with my parents for the first time. Well, I’m doing some studying here, but the cost of living is going to be manageable in a range of ways. No. As soon as they’re leaving high school, it’s just such an abrupt hit of, like, wow, talk about adulting right away because the cost of living is ferocious at picking at every part of your pocketbook.

ROMA: And that really would detract in a lot of ways from being able to try other things. When I was in my undergrad, some of my spare time at least went towards writing for the university paper, which is where I sort of, you know, tried it out to see if I liked it. If I had been working a part-time paid job at that time, that wouldn’t have been possible.

PAUL: That’s true. And it also really impacts how I run our Master of the public health program at UBC, and it impacts how we must view the seeds of students applying to us because we often in the past would have said, I’m going to judge the CV in terms of like the relevance of the work experience and like folks. Screw asking for relevant work experience any longer. You got it. We just must understand people are having to put in hours wherever they can to make enough money to cover their food and their living costs. And so we can’t expect that kind of volunteerism as much on the CV by comparison with just having the opportunity to get by financially. The current approach is just fundamentally eroding the ability of students to excel. You can’t be your best learner. You can’t be your best knowledge producer if you are so frightened by where you’re going to find shelter or where you will be able to provide food.

ROMA: What would you say to a young Canadian who’s considering applying to a university or college in the next few years? Or for parents that have, you know, kids that they expect one day will go to college or university?

PAUL: Yes, I still say do it. I still say do it because the data are clear that those with more education will be able to outcompete those with less education in the labor market. Does it get you as much as what education got us some decades ago? The answer is no. But it still does better position you in this complicated labor market. So do that. But I do find myself wanting to encourage people to think about their educational decisions in part in terms of where it could take you to find a cost of living that was not as oppressive as you’ll find in the GTA or Metro Vancouver. And in the past, you know, you could have said, Oh, you don’t have to go that far afield, you know, go to Hamilton, go to London, go to Victoria. But those things are increasingly challenging, too. So the advice I gave my niece, who I love and adore, is. Think about where you might like to end up that would be affordable and then what would be a pathway to get there. And there can be so many rich lives to live as we are managing to balance our pocketbook pressures with a range of other aspirations we have in life. And may we then also be mindful as we’re trying to crack this broken system for ourselves individually. How do we use our education to then inform our voices as citizens to call for better public policy, to transition our goals for our economy, and to promote thriving, not just a rising GDP? Right now, rising real estate contribute to rising GDP, and that is not giving rise to thriving for many younger people, even if it’s making somebody like me wealthier.

ROB: Our next guest works in marketing at an arts organization. She graduated with $40,000 in student debt about ten years ago. She’s still paying it off.

LANA: So my name is Lana. I am in Toronto, and I am 33 years old.

ROB: Mine is from St Catherine’s, a city near Niagara Falls, Ontario. She moved to Toronto to study art history at the University of Toronto in 2008.

LANA: So I was looking at local places. I was looking at Brock, which is St Catherine’s University, McMaster and Hamilton, and UofT in Toronto. And I mean, the draw for U of T was partly like living in the city, but I found that that had the best program for what I wanted to do.

ROB: The cost wasn’t a big factor in her decision, even though she wasn’t getting help from her parents.

LANA: I come from a family, and I think I’m quite unique in the people that I met at U of T. A lot of my friends are people that had support from their families. So I did not. I intentionally took a year off between high school and university to save up as much as I could, and I paid for my entire first year that way. To be honest with you, money was not factoring into my choice. I wanted the best education that I could get in the best place that I could get it. And I felt like that was the place to do it.

ROB: Tuition was expensive, but Lana didn’t question the price tag at the time.

LANA: I think when I started, it was about five grand a year. That’s not chump change. That’s a lot of money. But rent was my biggest concern in Toronto. So I did residence for one year, and I’m very grateful that I did. It was wildly expensive, but I made friends that are now like siblings. And then, after that, I paid about 800 a month for half of a two-bedroom apartment. From 2009 to 2014, which now, you know, you can’t, you can’t get anywhere like that. But tuition costs. Yeah, I guess I just saw it as a thing that I had to do. And this is something that I’m thinking about a lot when I talk to younger people now. And when I look at my peers who work in the same field as me, is it necessary? I was raised to think that you had to get a university degree. It’s something that you must do if you want a good income. I didn’t see it as something that was negotiable. That makes sense. I paid what I paid, and I didn’t really consider the cost at the time. Now, looking back, you know, all of my peers in marketing, but no one I know in my field of marketing degree. So yeah, I have wondered after the fact, you know, was that so necessary?

ROB: When she graduated, she owed about $29,000 through Ontario’s student assistance program called, OSAP, and about $12,000 on her student line of credit. More than half of the debt was to cover living expenses, even though she worked throughout her undergrad degree.

LANA: I had a position with the university as a work-study, and I worked in other places in my field. So at a minimum, two jobs at most, three throughout my undergrad. OSAP plus work could not support me in Toronto, so I took out a line of credit. I don’t think I took out the line of credit until my second or third year of university. I did take that year off to save up a lot of money and pay for as much as I could for my first and second years of university. But then, for the remaining years, I felt like I needed a cushion.

ROB: She’s aggressively paying down her line of credit. The federal government’s move to make student loans interest-free has also helped, but the debt impacted her life as a young adult.

LANA: I think the biggest thing that I’ve noticed is that a lot of people in my life have had their schooling paid for. And I notice this a difference with my, you know, my partner, my friends, people that have had things paid for that are now like if they have extra money after rent and costs and cell phone bills and all of that; they can put that towards savings, they can put that towards things like an RRSP or a TFSA. I’m talking about travel. I’m talking about the things that people want to be doing. At my age, I don’t have that luxury. I’m just paying down this debt.

ROB: And the debt isn’t going away anytime soon.

LANA: Oh God, I hope that I can make some career jumps and that I’ll be able to pay it off by 40. And that’s very ambitious. I would say right now, it’s less of a burden emotionally and financially because emotionally, I’ve decided that that is okay. I have a lot of complicated feelings about it, but it’s okay. And logistically and financially, with this interest freeze that the government has done, I feel a lot better about holding this particular debt.

ROB: Lana is happy about the decision she made. But she says there’s no way she could do it now with the higher cost of living.

LANA: Yeah, I have no idea how someone in their mid-twenties or early twenties, or late teens would try to establish themselves. To have a roommate at 1500 dollars is crackers. And, you know, even if you have a part-time job or you graduate, you have an entry-level job, people are paying 40K if you’re really lucky; that’s nuts.

ROB: After the break, we’ll hear from Globe and Mail personal finance reporter Erica Alini on how rent is driving up the cost of living for students.

ROMA: Erica Alini is a personal finance reporter at the Globe and Mail. Here’s our conversation. Erika, you’re currently researching the average cost of renting a bedroom in a shared house or apartment in Canada for another story. The reality is that this is how a lot of students live. That’s how I lived when I was attending university. How much can a student expect to pay if they’re living in a big city? Let’s start off with Toronto or Vancouver.

ERICA: So in Vancouver, the data varies a little bit depending on the platform, but you’re looking at anywhere between 1100 a month and 1400 a month on average. And Toronto, we’re looking at just under 1000 to 1300 a month on average. So that’s quite shocking, I find.

ROMA: It’s a lot of money for a student. How much is that risen on a year-over-year basis?

ERICA: So I only have sort of year-over-year data for one of the platforms, and that was Kijiji. And so Toronto, we’re looking at a 12% increase since last year, and Vancouver, it’s over 30%.

ROMA: What are some of the other cities or locations where you’ve seen the biggest change in terms of rent costs?

ERICA: So that’s what was interesting. It’s one of those things like I’ve used this phrase so many times talking about the housing market. It was shocking but not surprising, or like I expected, that it would still be very expensive in a lot of other places beyond Vancouver and Toronto. But it was still shocking to see the numbers. And so basically, the gist of what the data shows was that the Atlantic provinces are getting quite expensive like you’re looking at 800, 900 a month for a room in Halifax. Saint John is becoming quite expensive in southern Ontario. In a lot of the cities where you would have large student populations, like I’m thinking Hamilton Waterloo in Kitchener, London, you’re looking at 800 to over 900 a month for a room in a shared home. And really, a lot of Ontario, a lot of southern Ontario, was above 800 a month.

ROMA: Okay. I want to get back to housing in a sec. But what are the other major financial pain points for students these days?

ERICA: Well, certainly groceries, just the cost of food. Right. That’s the one bit of, you know, inflation kind of has stubbornly kept going up and up. But the other thing is just the cost of debt. And so, in undergrad, you may be able to get by with grants and loans, but if you go to graduate school, particularly if you’re pursuing a professional degree, if you want to be a doctor, a lawyer, a veterinarian, then the amount of debt that you incur like we’re seeing now six figures, debt. Student loans are not going to cover all of it. A lot of it is going to be that, generally, what poor people do is they take out a student line of credit which has variable interest rates. And so now that we’ve seen this incredible spike in interest rates over the past year, since March of last year, then those costs are also piling up. Great. Just the cost of borrowing on the student line of credit.

ROMA: How are all these factors changing the student experience in Canada? You know, if I was a student looking at this and I didn’t have significant parental help, what kinds of things are students considering now to try to keep costs under control?

ERICA: So I think it really limits your choices, like assuming that you are planning ahead. Right. Because sometimes students don’t have the awareness to do that. Right. Like they will rack up a lot of debt. And then the reckoning moment comes when they graduate, which I frankly like. It’s understandable. They’re very young, right? If they have no guidance, it’s hard to fault them for not knowing at the get-go. I’m 18. You know what to do. But if they have the foresight, then this really cuts down or can cut down on the choices that they have in terms of where to go to school. And so maybe it’s I’m going to need to go to whatever postgraduate institution is close enough that I can commute from wherever, you know, I live. If with my my parents or if I want to move out because we must remember, staying at home is an option for everybody, especially in low-income families. There’s an expectation that you’re going to move out, or there’s just like the setup is; it would be impossible for you to pursue an undergraduate degree while staying at home. Right. So you have to move out, and then you really have to look at where’s the place where I can, you know, when housing is cheapest. And so these developments in rent, you know, rent increases, they could shift to where students go for school. So. In Atlantic Canada. Atlantic Canada has traditionally had an edge. From that point of view, because living costs were lower than in other parts of the country, that was one of the attractions of going to school, you know, perhaps in Nova Scotia. And now, if you’re thinking about Halifax, not so much, right? So maybe you have to rethink and, you know, maybe you’re going to end up somewhere in, you know, maybe an end up in Edmonton or you’re going to end up in Saskatchewan or Quebec. If you know, language permitting.

ROMA: How much of a game changer is having parental help with these costs going to be in the years ahead?

ERICA: I think it’s going to be huge. I think this is a trend that I see when it comes to young people everywhere. Your parents being able to help is going to make a tremendous difference. And, you know, when people think about parental help like we have this idea of the bank of mum and dad cutting this gigantic check, right? To pay for all your tuition or a big down payment on a house. And that certainly is part of it. But parental help can also be like the ability to stay at home, like to live at home throughout your undergrad and beyond, and to stay at home and save up in the, you know, first several years of your career.

ROMA: What are the repercussions if you’re starting off life with higher levels of student debt?

ERICA: So that’s a thing. So I often hear, right, that student debt in Canada is not that high. And so sometimes I take issue with that because, you know, if you look at the average amongst students who have debt, we’re looking at, you know, 28,000. And so to begin with, you know, that’s not anything. Right. Especially when you’re starting salary might be 50,000. Right. But right now, when you have that, when you have, you know, you’re facing monthly rent of, you know, around $1,000 for a room in a shared apartment. When you’re facing housing costs, like when you’re facing having to save so much for a down payment on a house. If you ever want to be a homeowner, at some point, it just becomes like a huge financial crash that comes from many sides.

ROB: Looking back, student debt levels in Canada have actually been a bit of a good news story. We haven’t seen much of an increase at all in average debt levels over the years. The future looks challenging, though High rents and expensive living costs will put more of a financial burden on students than in the past. ROB:ert, What should students take away from today’s conversations?

ROMA: One. Be strategic in what you study. Make sure there’s a job market for grads with the degree you’re getting, and don’t exclude the trades. Canadians need them too. Two. Going away to school is part of the student experience, but is it worth tens of thousands of dollars in debt? If you have the option of living at home while you study, consider it. You’ll save so much money. Three. Post-secondary degrees give you an edge. So leaving school with debt is still a good investment.

ROB: Thank you for listening to Stress Test. This show is produced by Kyle Fulton and Emily Jackson. Our executive producer is Kiran Rana. Thanks to Erica, Lana, and Paul for joining us.

ROMA: You can find stress tests wherever you listen to podcasts. If you like this episode, please give us a five-star rating on Apple Podcasts and share it with your friends, especially those gearing up to go away to school.

ROB: Next step on Stress Test. We talk to people who have completely given up on home ownership. Some millennials and Gen Zs believe buying a home will never happen for them, and they’re okay with it. We discuss alternative financial goals, but homeownership is off the table.

ROMA: Until then, find us at the Globe and Mail dot com. And thanks for listening.

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