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Staggering debt: Lessons for young and old

Ryerson University sophomore Rodney Diverlus

Rodney Diverlus has already maxed out three credit cards paying for rent and food. He carries an $18,000 debt load and is pretty sure that figure will double in two years.

And, to top it all off, the Ryerson University sophomore has no idea how he will pay back all that money.

"You can pay for the big things with government loans – like tuition, rent and books," Mr. Diverlus said. "But it's the little things that add up, like groceries, transit and laundry, and I'm scrambling to find ways to make ends meet."

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Such is the plight of many a graduating postsecondary student. As the cost of education rises, more and more students are relying on loans. This puts a strain on future finances, when they buy their first home, choose to start a family or proceed to higher education. In some cases, it even has an impact on their parents, who delay their retirement and take on additional debt to help their children.

Between 1995 and 2005, the proportion of graduating students in debt increased from 49 per cent to 57 per cent, a 2010 Statistics Canada report said. Undergraduate tuition fees rose by an average of almost 10 per cent a year between 1990 and 1999. The rate of increase has since slowed to 5.3 per cent.

Jessica McCormick, a recent graduate from Memorial University, said her family took out $100,000 in debt to help finance her and her sister's postsecondary education.

"My parents had to put off their retirement, and they also had to take out a second mortgage on their home," she said. "They have made considerable sacrifices to put my sister and me through university … and, obviously, I feel terrible about that."

The 23-year-old tries to pay off roughly $200 a month with earnings from her full-time job with the Canadian Federation of Students in Newfoundland and Labrador and says it's a "real burden living paycheque to paycheque."

According to Statistics Canada, the average debt for student loans increased from $15,200 to $18,800. But after adjusting for inflation, debt has not increased at all, said Craig Alexander, chief economist at TD Canada.

"I found that really surprising, given how tuition costs have increased over the years," Mr. Alexander said.

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"I think the only way to reconcile that is either students are contributing more to paying for their financial education, or their parents are, and I suspect it's more likely the latter … Canadians are starting to save for retirement later in life, and partly, I think this is because more and more parents are helping out students with paying the tuition fees."

The Statistics Canada report also noted that in 2005, "Canada not only had more individuals graduating with student loans, but also an increasing proportion graduating with larger debt loads than in the past." The proportion of student loan borrowers that owed $25,000 or more at graduation increased from 17 per cent in 1995 to 27 per cent in 2005. The proportion owing $50,000 or more tripled from 2 per cent to 6 per cent in the same decade.

Kimalee Phillips, another student, said she wants to pursue a degree in law, but all she can think of is the $50,000 bank loan she had to take out to pay for her undergraduate degree at Carleton University.

"It's so depressing," she said. "The last thing I can do is take on an additional $80,000 [in debt]to go to law school."

Collectively, students in Canada owe the federal government more than $15-billion, said Roxanne Dubois, chairperson of the Canadian Federation of Students.

"Taking on debt can have a huge impact on a student's life, especially after they graduate with mortgage-sized debts," Ms. Dubois said.

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She said student debt has the greatest impact on students from low-income families.

"If your parents can help you with your finances, then you can graduate, get a job and starting contributing to the economy right away," she said. "But someone from a low-income family needs to spend more time paying back that debt and it will have an impact on the next several years of their life."

On average, it takes students 7.4 years to pay back their loans, Statistics Canada said.

Ms. Dubois added that female students might be at a disadvantage when they take on debt, since women have lower average annual earnings than men.

"So if you are a woman and statistically proven to earn a lesser wage at graduation, then you'll take on even more time to pay back your loans, which means you will pay more for your postsecondary education degree [over time]than men would do," she said.

This is the first of a two-part series on student debt. We'll also be running a video series later this week, which you'll be able to watch at

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