Credit Canada

Buy Now, Pay Later A Curse For Graduates

It's not just student loan debt sinking our graduates as they head out to the work world.

Credit card debt, cell phone debt, and destroyed credit ratings put them behind the 8-ball even before they get started.

"It's no wonder kids these days get into debt trouble," says Talbot Stevens, a London, Ont.-based financial educator and author.

"For every start-saving message from the financial industry, there are 100 messages to buy now, pay later to give young adults the impression they can enjoy their parents' standard of living today, without realizing that their parents took 20 to 30 years to get there."

The bottom line is it's often parents who end up bailing the kids out, after footing higher and higher costs for post-secondary education.

It's estimated a student's cost of living jumped 372.8% in the past three decades, while tuition fees have jumped 678%.

Put another way, a student must work 660 hours at a minimum wage job to pay for tuition and associated costs, compared to 235 hours for the same fees in 1977.

Laurie Campbell, executive director of Credit Canada, says rising student debt is a growing problem, with more graduates forced to seek credit counselling.

"One of the problems is these young people don't understand the terms of the loans," said Campbell. And once they hit the debt wall, "cleaning up the mess is becoming a bigger and bigger job."

Many students complain they can't cope with repayment, like Ivan Basnicki, who graduated from Ottawa's Algonquin College in 1999 with a degree in museum studies and ended up working in part-time temp jobs. He's now driving a tractor-trailer.

INTEREST RELIEF

"I don't want to run away from my debt," said Basnicki, who owes $15,000. "But let me pay what I can afford." He said he applied for interest relief, but his application got lost and he ended up in collections.

Campbell points out bankruptcy isn't an option for these students, after the Bankruptcy Act was amended in 1998 to rule student loan debt cannot be discharged for 10 years.

"If this draconian measure is Ottawa's way to deal with high defaults, then the very least they can do is offer loan education for students," said Campbell.

Talbot wants money management skills taught at the elementary and secondary levels -- so kids don't fall victim to easy credit once they hit university.

Meanwhile, Credit Counselling Canada is planning to lobby Ottawa for better student loan education.

It will also kick off the first-ever Credit Education Week in Canada on Nov. 12, which will include a money management national essay writing contest, open to all Grade 12 students. There will also be seminars at universities.

Details will soon be posted at www.creditcanada.com, where you can order a copy of Money 101, a financial guide for students.

*Reproduced with permission - Sun Media Corp.