Recently released fiscal documents show the Canadian government won’t collect $203.5 million in debts from 34,240 students, according to the Canadian Press. It’s the third round of loan write-offs in four years.
Even though this is a recurring problem for the federal government, people are less concerned with student loan debt and more concerned about consumer debt students accumulate during the course of study, said Freida Richer, licenced bankruptcy and proposal trustee with Grant Thornton Limited, in an interview with Global News.
“You don’t need a job to qualify for a credit card,” said Richer. Students can obtain credit cards with low limits to build up a credit history.
“Most students are just paying the minimum payments,” Richer added.
Credit cards are the top driver of consumer debt, said Richer. Typically students carry balances and pay high rates of interest and the burden compounds. Revolving lines of credit are also offered to students. Not being able to find a suitable job paying an ideal wage after graduating makes it difficult to bring down the debt load.
The CSLP provided more than $2.7 billion in loans to approximately 489,000 full-time post-secondary students, representing a 0.5 percent decrease from the number of borrowers in 2013-2014.
The government annually writes off about $19 billion owing in student loans, according to the Canadian Press. This comes as a result of bankruptcies, debt collection passing a six-year legal limit, or the borrower can no longer be found.
Repayment assistance programs can help students pay off their student loans at a more affordable rate by stretching out term of the loan.
Over 256,000 borrowers received support under the government’s Repayment Assistance Plan in 2014–2015, an increase of almost 10 percent from the previous year.
Richer suggests parents use the RESP or another investment vehicle to more effectively save funds for education.