Buried By Student Loans? Why Canada May Be Your Savior
Student loans and college debt are serious problems for millions of Americans. With growing tuition costs piling mountains of debt on students, entire generations have found themselves in serious trouble. It’s been a primary factor in some large-scale economic trends the millennials, for example, are marrying later, delaying having children, and are reluctant to buy houses or cars.
You can dig into the reasons why tuition has gone up so much, but at the end of the day, we’re still faced with the same problem. People are struggling to deal with their student loans. And many feel that the price they paid for a degree wasn’t worth the investment.
The problem is twofold, though. It’s not just that an entire generation is struggling to keep up, it’s that we don’t have a plan to deal with it. At least not any plan that won’t come at an astronomical cost.
But north of the border? They may have something cooking in the form of a new plan to deal with college debt and student loans. Essentially, the plan is to make it so that borrowers don’t have to make any payments until they are on a sound financial footing. According to the Canadian government, that translates to having a job that pays at least $25,000 per year.
The plan went into effect on November 1, and according to Canadian officials, is supposed to allow college graduates some leeway to find work before their grace period runs out. “Borrowers who are having difficulty making their monthly Canada Student Loan payments can apply for help through the Repayment Assistance Plan,” a government release reads. “Depending on their financial situation — such as their income and family size — borrowers can get approved for a reduced monthly payment on their Canada Student Loan, or for no monthly payment at all.”
“The future prosperity of our country depends on young Canadians getting the education and training needed to succeed in the job market. As a result of this new measure, students will be better positioned to transition into the workforce after graduation,” said MaryAnn Mihychuk, Minister of Employment for Workforce Development and Labour.
This is the second bone the government has thrown Canadian borrowers in the past year. In August, the government also announced increased support through its student grant program. More money became available to students from low- and middle-income families for college as a result.
What you need to know, though, is that Canada is taking a step toward trying to remedy a problem we’re still struggling with here in the States. Whether it’s a success or failure will be borne out with time.
Help for American students?
What does this mean for American students? Not much, in the immediate term. But it’s good to see a major world government and a neighboring one at that take a stab at solving a problem. Given the government gridlock in the United States over the past several years, it’s rather refreshing.
The real question is whether the U.S. might consider taking on a similar policy in the future. Student loan debt is a real problem that is somehow still flying under the radar. We still lack a long-term plan for handling it, and that will probably hurt us down the line.
But what we need to consider is just how different Canada is from the U.S. They are very similar in a number of ways, and share a language (for the most part), culture, and a continent. Canada, however, has roughly 10% of the population of the United States. There’s a difference in scale.
The average Canadian borrower is dealing with loan debt of around $25,000. The average American graduating in 2016, on the other hand, has $37,172.
You also have to consider whether a job earning $25,000 in the U.S. is enough to be considered “secure.” In many cities, you’ll end up paying that amount in rent for an apartment over the course of a year. The plan, as-is, simply might not work in America.
But the concept is there and may prove fruitful for the Canadian economy in coming years. U.S. lawmakers should keep an eye on it to see how things play out. Someone will eventually have to propose some sort of legislation to help drowning borrowers. If the Canadian plan is successful, it may be a useful blueprint.