The British Columbia provincial government has decided to intervene with unpaid student debt by allowing ICBC to withhold driver’s licences from students who fail to make their loan payments.
The proposed legislation will act as a last resort for students with unpaid debt. In 2013, accumulated federal student debt in Canada reached more than $15 billion. The average debt for students in B.C. is $35 000 for a four-year degree, $8 000 dollars above the national average, according to the Canadian Federation of Students in 2014.
In 1996, while working at the University of Western Ontario, Murray Baker published The Debt-Free Graduate, a “survival guide” for students looking to minimize their debt during and after their degree. The book has sold over 185 000 copies.
“There are a lot of books out there for baby boomers on how to manage money for retirement.Here’s a demographic of students who are taking on these huge steps, and there’s really no information for them on how to manage money,” he said.
Baker links the high cost of living in B.C. to students’ higher debt levels post-graduation, and considers today’s levels of unemployment as a “double whammy” for students tackling debt.
Although he is not a “big proponent” of the proposed ICBC legislation, he admits those affected will be a limited group. “The proportion of students that would say they are just trying to avoid student loans is really quite a small number. It won’t affect the majority of people; it’ll just affect that small group that are maybe trying to avoid paying loans,” he said.
“By and large, most students are very conscientious about paying their student loans. There are a number of programs that are there to assist students if they get into trouble,” he said. Baker cites government interest relief and loan forgiveness programs as some of the resources available to those who are unable to pay for their loans due to under-employment and unemployment.
His book also suggests minimizing debt as much as possible during a degree rather than after. Students graduating with a few thousand dollars worth of debt rather than $20 000 will make a “huge difference,” he said.
Seeking out scholarship requirements early on and creating savings plans are also helpful, he said.
Director of External Affairs Greg Atkinson believes the proposed legislation is flawed. “Instead of punishing people for this situation, I think the government needs to be providing more support. We are the only province that doesn’t have needs-based non-repayable grants—a proven method of reducing student debt levels,” he said via email.
Graduating students in B.C. are met with the highest interest rate in the country: prime plus 2.5 per cent or more. The six-month grace period accumulates interest, adding an average of $716 to the principal balance, he said.
Atkinson encourages students to contact their local MLAs, the Minister of Advanced Education, and the Minister of Finance to encourage them to oppose the legislation. The UVSS has been in discussion with ministers on issues surrounding student debt, interest rates, and grants.
“Instead of punishing these people, the government should be finding creative ways to assist people in paying off this debt, not removing their ability to pay it off by revoking their ability to drive,” he said.