As if the cost of a higher education weren’t crippling enough; university is poised to rival your first mortgage for expense supremacy. If living away from home, the average cost of an undergraduate degree is expected to reach $150, 000 by the year 2031, according to a TD economics report.
And despite the staggering costs to come, nearly one-third of Canadian parents with a child under the age of 18 are not saving for their education.
The reasons are wide ranging. For one, 41 per cent of parents included in the survey say saving for retirement plays a significant role in their ability to save for their children’s education. And 50 per cent of parents cited in the survey say costs associated with recreational activities and the other costs of raising a child -- think daycare and vacations -- impact their ability to save for future education.
“According to data from the Canada Student Loans Program, students in kindergarten today will be paying $13,100 per year in tuition fees by the time they reach university, and $15,100 in tuition fees in their final year,” Jessica McCormick, CFS national chairperson, told Yahoo Canada Finance. Unless federal and provincial governments take immediate action to address high tuition fees and high student debt.”
The increasing cost of education is leaving the Millennial generation in the cold; a generation that according to the Canadian Federation of Students has more than $15 billion in federal student loan debt to pay back.
The average student loan debt in Canada is now a staggering $25,000, according to a BMO survey. And it will take at least 14 years to pay back that debt on average, according to a recent survey from ratesupermarket.ca, a person-finance and consumer website.
Tuition has increased exponentially across Canada since 1975, according to a recent study by the Canadian Centre for Policy Alternatives. In 1975, the average annual undergraduate degree was $551 while the most recent figures places tuition fees at $5,772 in 2013.
"This past year, almost 425,000 students were forced to borrow in order to finance their education," the Canadian Federation of Students website states. "The aggregate of loans disbursed by the Canada Student Loans Program, less the aggregate of loan repayments received is resulting in student debt increasing by $1 million per day."
Provinces stepping in to help
But all hope is not lost for the future taxpayers of Canada; some provincial governments like those of Nova Scotia and Newfoundland, have taken measures to help. The Newfoundland and Labrador government recently replaced provincial student loans with grants, which is a step the Canadian Federation of Students says should provide equal access to all students.
The Nova Scotia government eliminated interest on student loans. Interest on student loans vary across provinces in Canada, and federally the interest is currently positioned at either a floating rate of 2.5 per cent plus prime or a fixed rate of 5 per cent plus prime. Prior to eliminating interest rates, students and graduates had to deal with a 3.5 per cent interest rate in Nova Scotia, according to a government representative. The government will now spend $1.6 million annually to eliminate the interest.
But the debt across Canada remains persistently high and though education is mainly a provincial responsibility, much of the budgetary burden rests in the hands of the federal government, according to the CFS.
“The federal government must take steps to develop a national strategy for post-secondary education that includes dedicated transfer payments to provinces for post-secondary education to ensure institutions are well-funded and not downloading budget shortfalls onto students in the form of tuition fee increases,” McCormick says.
The Nova Scotia’s labour and advanced education department says the motivation for the elimination of interest is to provide relief to young graduates according to Gary Andrea, communications advisor for the department.
“Every dollar counts when these students begin their careers,” Andrea says.