Friday, March 28, 2014

Interest-free Student Loans

I've resurrected my blog! 

I got fired up about a segment I heard on our local CBC drive home program, Shift.  They were talking about how Nova Scotia has eliminated interest on provincial student loans.  Then, they played clips of what students in New Brunswick thought of the new program and whether these students thought NB should adopt a similar policy.  Well, here are my thoughts on the matter.

I think we've obviously done a great disservice to our young adults by not teaching them basic financial principles - we've created an entitled generation.  One girl interviewed on the program said that the government shouldn't charge more money when students are just asking to 'borrow' money from the government for their education.  Charging interest is the basis of our whole economy.  The government has to charge interest to make the loaning sustainable. If there was no interest, our savings accounts would never grow above inflation (if that) - which we would hate.  

I think we often forget too that student loans aren't the only option to be able to afford University - the government has great incentives for contributing to RESP's, students can work during the summer and throughout the school year to finance their education, and of course there are a plethora of grants or scholarships.  I'm not saying it is easy to finance post-secondary education without debt (or even possible for everyone) - but we tend to teach that it is impossible for anyone to get a post-secondary education without debt - which just isn't the case.  

We forget too that University isn't the only post-grade school option.  A University education doesn't guarantee you a job.  Nor does it, for the most part, train you to do a job.  Mostly, University teaches critical thinking - which can be important for jobs, and can be requirements for jobs, but a University education alone (without a plethora of other skills & experience) won't get you any job. 

And let's be honest, in my University days, I saw many people use their student loans to fund many things other than education - alcohol, gaming systems, and flat screen tv's to name a few.  We kid ourselves if we think that all this money that is loaned in student loans is going solely to educational expenses.

We need to stop feeling entitled to a University education.  We need to stop teaching this generation that starting life with debt is 'the smart move'.  And honestly, I wish we would stop using our tax payer dollars to make debt as accessible as possible - because with, or without interest, a huge debt load is an awful way to start your life.

**Edit: I want to note that I am only averse to student loans because I think they become a real burden on the person who has borrowed the money.  I don't think stopping student loans is the answer, because I believe education is important.  I do think, though, that we need to start teaching people at a younger age how challenging it is to live with debt, how to save money for education (or other goals), and we need to brainstorm ways to provide multiple alternatives to getting into debt.  So that instead of debt being a first resort, it becomes a last resort.

*Note: the opinions above are all my own.  I definitely don't know everything, I'm only 25.  I'm not mad at anyone who has student loans - and I don't think the people who have student loans are to blame.  I think we've done (as a society) a really crappy job of teaching other options.  And I think in the future, that needs to change.  So people don't start life as slaves to their debt.