Tackling student debt

ERIC SMITH | As levels of student debt at graduation continue to rise across the country, both the provincial and federal governments are looking for strategies to address the problem.

In the recent throne speech to Parliament, the federal government promised to set up a billion-dollar scholarship fund for the year 2000. In Quebec, a report submitted to Education Minister Pauline Marois suggests ways the loans and bursaries system can be modified to decrease student debt loads.

Judy Stymest, director of student aid at McGill, says the federal initiative is "the best news because it's lots of money targeted at low- and moderate-income students."

But with implementation more than two years away, details of how the fund will work are sketchy. "I'm happy they've announced it in advance so they have time to plan it properly," Stymest says.

Although the provincial report does not recommend increased government investment in Quebec's loans and bursaries system, its recommendations, if implemented, will have a more immediate effect on current students.

Université de Montréal economist Claude Montmarquette, who chaired the committee responsible for the report, says that a significant contributing factor to debt difficulties is poor financial management by students.

The blame lies not so much with students themselves as it does with a system that disburses lump sums at the beginning of a semester and fails to keep students up to date on the size of their accumulated debt. Montmarquette recommends that loans be paid in monthly instalments and that the cheques come with a statement of a student's current debt load.

Student loans, Montmarquette says, "need to be considered as loans." Many students, he argues, incur other debts with higher interest and less flexible repayment options, and these take priority over their student loan debt when they graduate. Lending institutions must take levels of student loan debt into account when evaluating someone's creditworthiness.

He recommends that instead of granting an automatic six-month grace period to all graduating students, this option should be available only to students who fail to find work.

And Montmarquette would like to see greater rewards for students who do well academically. He proposes that scholarships for up to $5,000 annually not be counted in when assessing eligibility for loans and bursaries. The amount exempted currently is $500.

He also suggests there should be a ceiling on debt loads for students who need to start borrowing when they enter CEGEP. "By the time they reach the master's level, if they are completing their studies on time, we want to be able to say 'no more loans, from now on only bursaries.' Resources must be directed to those with the greatest difficulty who are successful."

Students' Society Vice-President (External) Lisa Phipps says the Montmarquette report's recommendations make sense. The monthly instalment proposal is "a good initiative as a means of attacking student debt," she says. "Students who get a huge lump sum of money are not budgeting accordingly and instalments will help them allocate their money more wisely."

"I applaud the recommendation for more information to remind students of what their debt load is," say Stymest. "We've started debt and budget counseling to help students budget wisely. Students are more debt-conscious than they were five years ago, but we still have a long way to go."

Both Stymest and Phipps are pleased with the report's endorsement of McGill's and Concordia's work study programs and its proposal that they be a model for other Quebec universities. Montmarquette says the programs, which subsidize the hiring of students for jobs on campus, "are an excellent idea." But he adds that in many French-language institutions, "it will be difficult to implement this with the unions."

Other aspects of the report are getting less favourable reviews at McGill. A proposal to scrap, or at the very least restrict, the loan program for the purchase of computers met with resistance from both Phipps and Stymest.

"For many students," Phipps argues, "a laptop computer is a fundamental tool." Stymest agrees, "Most students need a computer and I would not like to see the loans abolished."

Montmarquette counters that the computer loan program contributes significantly to student debt by encouraging the purchase of machines that far exceed students' needs.

"The default rates on these loans are enormous," he says. Students, he adds, tend to borrow the maximum allowed amount of $3,000 to buy top-of-the-line computers when they only need a $500 word processor. And he asks why computers are favoured over other expensive educational tools "like musical instruments or surgical instruments."

Montmarquette says the minister's initial reaction to the report has been positive and his committee has asked for a mandate to consider other possible changes to the loans and bursaries program.