A good gauge of a country’s economy is whether university graduates are repaying their student loans. In Canada, there are disturbing signs that the number of students defaulting on their loans is rising. This week, Human Resources and Skills Development Canada, which administers the Canada Student Loans program, said it was writing off more than 44,000 student loans that were in default, totalling $231 million. That represents loans the government has been trying to collect on for more than six years, after which it is barred from going after student loan debtors under the Canada Student Financial Assistance Act. The default amount has more than doubled since 2010, when the government wrote off $89 million in student debt. In total, $540 million worth of student loans has been written off over the last three years.
Ottawa contends the figures represent a fraction of the $3 billion in loans handed out to 400,000 students each year and that 87 per cent of recipients make their payments. But for the Canadian Federation of Students, a rising default rate is a sign students are having to dig deeper into debt to get an education, even as the economy shuts many grads out of the workforce. The youth unemployment rate is twice that of the rest of the country. And since those who default not only stick taxpayers with their bills, but also destroy their credit scores, it can become a drag on the economy. Says CFS deputy chair Jessica McCormick: “When a graduate can’t buy a house or purchase a car or start a family that makes it very difficult to contribute meaningfully to the economy.”