How student loans keep some people trapped in debt

When Samuel Bonne received $15,000 in student grants to fund his studies, he wasn't expecting to have to pay it back. But just two years later in the middle of the pandemic those grants were converted to loans.

At the end of his sophomore year at the University of Toronto, the Ontario Student Assistance Program (OSAP) asked Bonne, originally from Mauritius, for his parents' financial documents, but they couldn't provide them.

"My dad works in Kenya and my mom doesn't work," said Bonne. "So I ended up having $15,000 in loans that I did not know about."

Bonne, who became a permanent resident in 2018 on humanitarian grounds, says there was no consideration for the fact that his parents were not Canadian citizens and didn't have the relevant documentation.

What's more, the interest on OSAP loans rose from 4.7 per cent when Bonne entered university in fall 2018 to 7.95 per cent this spring when he graduated with a degree in biological chemistry.

"That's when the interest starts taking over," Bonne said.

Bonne was grateful that he was able to find summer work and receive a research grant, which allowed him to get a head start on his payments.

"I'm just not comfortable with the idea of taking that [debt] for the rest of my life," he said.

But he isn't in the clear yet. Bonne enters medical school at McGill University in Montreal this fall and, pending other scholarship funding, he's considering taking on a line of credit from a bank, which offers medical students loans of up to $350,000 to finance their medical education.

Bonne isn't sure what area of medicine he wants to pursue yet. But he wants to serve immigrants and other marginalized groups in Quebec, recalling a time after his family first came to Canada in 2009 when his sister got sick and they didn't have a family doctor or a clinic they could go to.

"That's a problem many immigrants face today. I don't even have a family doctor; I'm still on a waitlist," he said, darkly noting that he might be a family physician before he has one himself.

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Bonne says he'll take the funding he needs but no more, noting that he also doesn't have family support in Canada to fall back on in a crisis.

"One bedroom, one desk that's really all I need."

'Gateway debt'

Bonne is far from alone in his struggle with student debt; 1.9 million Canadians owed the federal government a total of $23.5 billion in student loans as of July 2022 a number that only balloons further when including provincial loans and private debt. More than half of those who pursued professional programs such as medicine took on bank loans or lines of credit, according to a 2020 Statistics Canada report.

Erika Shaker, the director of the national office at the Canadian Centre for Policy Alternatives, says this "gateway debt" perpetuates social inequality and prevents people from achieving financial independence.

"That debt that you graduate with sticks around," she said. "It ends up with you postponing the choices that you can make, whether or not you can buy that house, whether or not you can buy a car, whether or not you can start a family."

It's a reality Ari Black knows well.

"I don't have any financial goals. I can't," said Black, who teaches American Sign Language at Carleton University in Ottawa. "My financial goal is to make sure that I pay all of my bills, I don't default on my student loan and there's groceries."

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Black says he's been on interest-only payments since he graduated with a master of education from the University of Ottawa in 2019. As such, the student-turned-activist has made little progress paying off the principal. But he stresses that he had a little choice, especially given the limited income he makes teaching.

With the increasing interest rates, Black says his monthly payments will soon increase by $500 to $600.

"We already have people choosing rent or food," said Black. "I'm not in that situation, but I'm close to it."

Black says he calls the National Student Loans Service Centre every six months to request to continue with interest-only payments. But while he was grateful to hear that federal loan interest was eliminated in April, he was also informed that provincial interest would continue and that there was a 12-month cap on how long he could make interest-only payments.

So after a final period of reduced payments, he says he'll likely have to apply for a repayment assistance plan.

All this led to Black starting an online petition to eliminate student loan interest at all levels of government. It has roughly 74 signatures.

Shaker says eliminating interest is "the least that can be done."

"If we're really looking at systemically addressing the issue, the answer is not more loans, not raising the loan ceiling," she said. "It's actually acknowledging that investing in post-secondary education is not just a commitment to the students who want to pursue it, but it's a commitment to future innovation, future equity."

High costs of higher education

Shaker says pressure to make loan payments can also trap many former students in a cycle of precarity as they take on "whatever job[s] they can" to make ends meet. Beyond that, she stresses that the increasing costs of higher education excludes those whose families can't or don't support them and those who have children or other dependants of their own.

Average undergraduate tuition fees for full-time domestic students have risen from $534 in 1972-73 to $6,834 in 2022-23. These figures are almost double what they would be if tuition rates grew proportionally with inflation.

"We need a much more honest understanding of who is going to post secondary," said Shaker. "Otherwise we're leaving out swaths of students who don't fit this template and we're reproducing the inequalities that already exist."

Rania Phillips, a recent graduate of the Rotman School of Management at the University of Toronto, feels that the student financial aid system places too much emphasis on income over wealth.

"Things like expenses are very much affected by wealth," she said. "Families who make less money but don't necessarily have to pay a mortgage have a very different financial situation than families who do have a mortgage, especially in the current housing market."

Phillips worked three jobs in her final year of undergraduate studies and took a year off to work before pursuing a masters degree this fall. She says the pressure to make ends meet led her to only consider academic programs that would allow her to immediately start repaying her student loans.

"There's certainly a different way you carry yourself when you don't have the constant stress of how you're going to make the very basics of your education," she said.

Despite his difficulties, Black says he's appreciative of how the student loan system allowed him to pursue an education, and he intends to pay back "every cent."

"I don't want to give anyone the impression that I think that I'm somehow a blameless victim in this scenario I'm not," said Black. "I'm an active participant in my situation."

But unlike a lease on a car or a mortgage on a house, he says, he can't return the education he received nor would he want to.

"I was gambling that I would succeed," he said. "So far, it's helping me, but it's not helping me enough to keep up with what they are asking for. And I can't give it to them to make up for it.

"There's nothing for me to pay them back with so I'm trapped in the system."