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Information notice September 2011

Students in the red! The impact of student debt

Student debt is a subject that disturbs people. No one wants to see their children start off with a delay intheir life. In the rest of Canada, they have begun measuring the harmful effects of this debt. In Quebec, this type of debt very widely affects the student population and more specifically affects those who are most at risk of interrupting their studies or simply not going to university: students coming from a low-income background, first-generation students and student parents. Furthermore, Student Financial Assistance (SFA) offers a deficient support that increasingly pushes university students toward private credit.
Debt is without a doubt an important obstacle to all the steps in a study project: it is an impediment to enrolment in students who have a strong aversion to going into debt, a risk factor for school drop outs, a source of stress during studies, an obstacle to the pursuit of graduate studies and a factor that delays the development of life projects following graduation. Despite the fact that everyone agrees that debt has many negative impacts on the pursuit of studies, few indepth studies have been made on the subject, which is a gap that the FEUQ wants to fill. The most alarming finding of the research is undoubtedly the accumulation of the sources of debt by students. While 35% of them do not accumulate any debt, an almost equivalent percentage, namely 36% seek a source of debt. The others, namely 29% of students, accumulate two or three sources of debt either from Student Financial Assistance (SFA), personal loans and family loans. The amounts involved increase in a proportional way among themselves in all the combinations of the accumulation of sources observed, while the percentage of people accumulating various sources virtually does not vary according to the amount accumulated from one or another source.
Graph 1 : Division of full time undergrad students depending on the number of debt sources

has negative impacts on academic performance, is increasingly frequent with students and in many cases constitutes a method to limit debta phenomenon that will only be aggravated by the tuition fee hike.

It is a worrying portrait of student debt in Quebec that is drawn by the FEUQ study. Out of the overall fulltime undergraduate student population, 65% indebt themselves by an average amount of $13,967, and one student in four accumulates more than $20,000 in debts. Furthermore, 35% of students taken on debt from We should also note that work financial institutions for an average in the course of studies, which amount of $8,043. Cost of university studies: toward a spiral of student debt? The research of the FEUQ succeeded in targeting the determinants of student debt. These determinants allow us to draw a precise portrait of students who are most at risk of falling into debt.

Source : FEUQ 2011. Endettement tudiant : tat des lieux, dterminants et impacts. Recherchiste : LouisPhilippe Savoie

A small exception exists with the family loan, where the relation with the other sources of loans is negative, leaving the possibility of its greater use when the student has exhausted his other recourses. This worrying situation leads us to presuppose the existence of a spiral of debt. The nature of our data unfortunately does not allow us to sufficiently push to affirm or flesh out this hypothesis. Students at riskthe most indebted Unsurprisingly, family income is an important factor for being indebted or not, as presented in Chart 2. More than three students out of four from families earning less than $40,000 per year are indebted, for an average amount of $16,620, while students from more well-off backgrounds see their debt load diminish. This finding exists for loans from Student Financial Assistance and for loans obtained from financial institutions, two major components of student debt.

Among students most at risk of interrupting their studies, we find student parents who are heavily affected by debt. They take on debt at a percentage of 87.8% compared to 63.4% if the student does not have dependent children. In the case of private debt, 56.4% of student parents indebt themselves compared to only 36.8% for the rest of the student population. The expected debt of the latter is also much heavier, namely nearly $20,100 compared to $13,445 for students without children. In addition to having to balance studies, family and often work, student parents find themselves in a precarious financial situation. The presence or absence of a parental contribution strongly influences the fact of being indebted. With students receiving such a contribution, we note the presence of a debt in 54% of cases for an average amount of $11,492 while those who do not receive this, 89% are indebted for an average amount of

Graph 2 : Fluctuation of debt rate by source depending on the family income

1--:--;$ +-:--;$ <-:--;$ 0-:--;$ /-:--;$ 3-:--;$ ,-:--;$ *-:--;$ 2-:--;$ 1-:--;$ -:--;$ 789$ 789$ =6>?'%"$ =6>?'%"$ 8'5>@ABC6>"(4#$ 8'5>@ABC6>"(4#$ D.%'@$ D.%'@$

!"##$%&'($)*+$ !"##$%&'($)*+$ +++$ 00:--;$ ,0:<-;$ 2,:<-;$ </:--;$

),-$---$%.$)/+$ ),-$---$%.$)/+$ +++$ 3<:2-;$ ,*:--;$ 2-:--;$ 02:0-;$

)0-$---$%.$ )0-$---$%.$ )12,$+++$ *2:/-;$ */:2-;$ 1+:*-;$ 30:0-;$

)123$---$'(4$ )123$---$'(4$ 5.6"$ 5.6"$ $ 13:+-;$ -;$ 23:<-;$ -;$ 12:0-;$ -;$ *+:*-;$ -;$

Source : FEUQ 2011. Endettement tudiant : tat des lieux, dterminants et impacts. Recherchiste : Louis-Philippe Savoie

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$16,727, namely 1.5 times the debt of students receiving parental aid. Even if the student financial assistance program considers them, their families should contribute, and unfortunately, many families are not able to support their children due to low income, thus at the same time reducing the aid granted to the student. We should point out that the FEUQ recently showed that the main determinant of parental financial support for studies is the level of parental income. This risk factor is also present in the case where students must leave their region or do not live with their parents. Students not pursuing their university studies in their region of origin get into debt 74% of the time while in the contrary case this percentage falls to 61%. The residence status has an even more marked impact: only 43% of students living with their parents have recourse to debt for an average amount of $8,781 while this percentage is 74% for those who have left the family home, with their loans attaining an average of $15,278, namely almost the double. The reason is evident: leaving the region of origin as well as the family home involves various important expenses (moving and various utilities) and living expenses that are often higher (rent, food, etc.). Studying in a remote region also has an influence on debt: 76.7% of students in the regions indebt themselves for an average amount of $15,101 while in Montreal 62% of students must take on debt for an average amount of $13,789. Students attending a regional university are in 70% of cases first generation studentsa characteristic that also has an impact. They indebt themselves in a proportion of 71.4% and an average amount of $14,713 compared to the debt rate of 57.6% and an average amount of $12,829 in students whose parents attended university. Deficient financial assistance! The FEUQ research also casts light on numerous deRemunerated work is the main source of funding for students, namely 55% of all income. In autumn 2009, ficiencies in the SFA program. It is clear that the program does not succeed in meeting the needs of students: more than 52% of students receiving SFA loans also have private debts. This finding is also valid to a lesser degree in regard to loans from the family or friends: 23.4% of students on SFA have reGraph 3 : Percentage of students receving SFA and having another source of debt

Source : FEUQ 2011. Endettement tudiant : tat des lieux, dterminants et impacts. Recherchiste : Louis-Philippe Savoie

course to this type of loan. Students on SFA, whose parents are often in a difficult position to offer them significant financial support, must turn to other sources to cover their expenses, namely, in this case, financial institutions, which goes against the very mission of the program. This insufficient support is even more flagrant in the case of student parents. The latter leave their studies with an average debt of $20,100, namely $7,500 more than students who do not have dependent children. Once again, the considerable expenses these parents have to assume are not sufficiently covered by SFA. Here again, the shortfall seems to be largely covered by private debt. Working during studies: a strategy to prevent debt?

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more than 63% of students held at least one remunerated job. It emerged in the study that it is also used by students to prevent excessive debt. In fact, the presence of a job during studies is correlated with lower debt. However, this debt indeed exists and is in no way negligible: 64.5% of students holding a job in autumn 2009 also accumulated debts and 32.6% had recourse to a private debt. Significant amounts were accumulated by these students, namely $15,403 and $9,563 on average. It seems there is a trend to accumulated and anticipated debt throughout studies, which would encourage a significant number of students to work. Now, the literature shows that these jobs have a negative impact on academic performance and the duration of studies.

Conclusion Students can barely pay all the fees inherent to their education without indebting themselves, and this is even before the tuition fee hike of $1,625 announced by the Charest government. They live through great financial stress and are particularly vulnerable to financial institutions that offer too little information on the management of credit and its obligations. Given this situation, it is future generations that will either not go to university due to the prospect of too great a debt load or indebt themselves heavily and push back their projects to start a family, buy a house, start up a business or undertake graduate studies. Once again, the choices of the Charest government in regard to education will suffocate the middle class and the disadvantaged, to the detriment of the prosperity and quality of life of Quebecers.

Source : FEUQ 2011. Endettement tudiant : tat des lieux, dterminants et impacts. Recherchiste : Louis-Philippe Savoie

Whats the FEUQ ?

The Fdration tudiante universitaire du Qubec (FEUQ) is an organization that brings together 15 student associations with 125,000 students from all levels of study and every region of Quebec. Established since 1989, its main mandate has been to defend the rights and interests of students with governments and education stakeholders. Throughout its twenty years of existence, it has endeavored to defend a humanistic education as a societal choice. It focuses particularly on defending its members before, during and after their passage in university by demanding, above all, an accessible and quality education.

Contact us Fdration tudiante universitaire du Qubec 15, rue Marie-Anne Ouest 2e tage Montral (Qubec) H2W 1B6 Telephone : (514) 396-3380 Fax : (514) 396-7140 E-mail: feuq@feuq.qc.ca www.feuq.qc.ca All rights reserved FEUQ 2011
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