En - Notice - The impact of student debt

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Students in the red!The impact of student debt

Together for education !

September 2011

Student debt is a subject thatdisturbs people. No one wantsto see their children start off with a delay intheir life. In therest of Canada, they havebegun measuring the harmfuleffects of this debt.

In Quebec, this type of debtvery widely affects the studentpopulation and more specifi-cally affects those who are mostat risk of interrupting theirstudies or simply not going touniversity: students coming

from a low-income background, first-generation students and

student parents. Furthermore,Student Financial Assistance(SFA) offers a deficient supportthat increasingly pushes uni-versity students toward privatecredit.

We should also note that workin the course of studies, whichhas negative impacts on acade-

mic performance, is increasingly frequent with students andin many cases constitutes a me-thod to limit debt—a phenome-non that will only beaggravated by the tuition feehike.

Debt is without a doubt an importantobstacle to all the steps in a studyproject: it is an impediment to enrol-ment in students who have a strongaversion to going into debt, a risk fac-tor for school drop outs, a source of stress during studies, an obstacle tothe pursuit of graduate studies and a

factor that delays the development of life projects following graduation.Despite the fact that everyone agreesthat debt has many negative impacts

on the pursuit of studies, few in-depth studies have been made on thesubject, which is a gap that the FEUQwants to fill.

It is a worrying portrait of student

debt in Quebec that is drawn by theFEUQ study. Out of the overall full-time undergraduate student popula-tion, 65% indebt themselves by anaverage amount of $13,967, and onestudent in four accumulates morethan $20,000 in debts. Furthermore,35% of students taken on debt fromfinancial institutions for an averageamount of $8,043.

Cost of university studies: toward a spi-ral of student debt?

The research of the FEUQ succeededin targeting the determinants of stu-dent debt. These determinants allowus to draw a precise portrait of stu-dents who are most at risk of fallinginto debt.

The most alarming finding of the re-search is undoubtedly the accumula-tion of the sources of debt bystudents. While 35% of them do notaccumulate any debt, an almost equi-valent percentage, namely 36% seek a source of debt. The others, namely29% of students, accumulate two or

three sources of debt either from Stu-dent Financial Assistance (SFA), per-sonal loans and family loans. Theamounts involved increase in a pro-portional way among themselves inall the combinations of the accumu-

lation of sources observed, while thepercentage of people accumulatingvarious sources virtually does notvary according to the amount accu-

mulated from one or another source.

Graph 1 : Division of full time under-

grad students depending on the number

of debt sources

Source : FEUQ 2011. Endettement étudiant : État deslieux, déterminants et impacts. Recherchiste : Louis-Philippe Savoie



Together for education ! 2

A small exception exists with the family loan, wherethe relation with the other sources of loans is nega-tive, leaving the possibility of its greater use whenthe student has exhausted his other recourses. This

worrying situation leads us to presuppose the exis-tence of a spiral of debt. The nature of our data un-fortunately does not allow us to sufficiently push toaffirm or flesh out this hypothesis.

Students at risk—the most indebted

Unsurprisingly, family income is an important factorfor being indebted or not, as presented in Chart 2.More than three students out of four from familiesearning less than $40,000 per year are indebted, for

an average amount of $16,620, while students frommore well-off backgrounds see their debt load dimi-nish. This finding exists for loans from Student Fi-nancial Assistance and for loans obtained fromfinancial institutions, two major components of stu-dent debt.

Among students most at risk of interrupting theirstudies, we find student parents who are heavily af-fected by debt. They take on debt at a percentage of

87.8% compared to 63.4% if the student does nothave dependent children. In the case of private debt,56.4% of student parents indebt themselves compa-red to only 36.8% for the rest of the student popula-tion. The expected debt of the latter is also muchheavier, namely nearly $20,100 compared to $13,445for students without children. In addition to havingto balance studies, family and often work, studentparents find themselves in a precarious financial si-tuation.

The presence or absence of a parental contributionstrongly influences the fact of being indebted. Withstudents receiving such a contribution, we note thepresence of a debt in 54% of cases for an averageamount of $11,492 while those who do not receivethis, 89% are indebted for an average amount of

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

Source : FEUQ 2011. Endettement étudiant : État des lieux, déterminants et impacts. Recherchiste : Louis-Philippe Savoie



$16,727, namely 1.5 times the debt of students recei-ving parental aid. Even if the student financial assis-tance program considers them, their families shouldcontribute, 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 thestudent. We should point out that the FEUQ recentlyshowed that the main determinant of parental finan-cial support for studies is the level of parental in-come.

This risk factor is also present in the case where stu-dents must leave their region or do not live withtheir parents. Students not pursuing their universitystudies in their region of origin get into debt 74% of

the time while in the contrary case this percentagefalls to 61%. The residence status has an even moremarked impact: only 43% of students living withtheir parents have recourse to debt for an averageamount of $8,781 while this percentage is 74% forthose who have left the family home, with theirloans attaining an average of $15,278, namely almostthe double. The reason is evident: leaving the regionof origin as well as the family home involves variousimportant expenses (moving and various utilities)

and living expenses that are often higher (rent, food,etc.).

Studying in a remote region also has an influence ondebt: 76.7% of students in the regions indebt them-selves for an average amount of $15,101 while inMontreal 62% of students must take on debt for anaverage amount of $13,789. Students attending a re-gional university are in 70% of cases first generationstudents—a 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 debtrate of 57.6% and an average amount of $12,829 instudents whose parents attended university.

Deficient financial assistance!

The FEUQ research also casts light on numerous de-

ficiencies in the SFA program. It is clear that the pro-gram does not succeed in meeting the needs of stu-dents: more than 52% of students receiving SFAloans also have private debts. This finding is also

valid to a lesser degree in regard to loans from thefamily or friends: 23.4% of students on SFA have re-

course to this type of loan. Students on SFA, whoseparents are often in a difficult position to offer them

significant financial support, must turn to othersources to cover their expenses, namely, in this casefinancial institutions, which goes against the verymission of the program.

This insufficient support is even more flagrant in thecase of student parents. The latter leave their studieswith an average debt of $20,100, namely $7,500 morethan students who do not have dependent childrenOnce again, the considerable expenses these parentshave 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?

Remunerated work is the main source of funding forstudents, namely 55% of all income. In autumn 2009,

Fédération étudiante universitaire du Québec

3 Together for education !

Graph 3 : Percentage of students receving SFA and ha-

ving another source of debt

Source : FEUQ 2011. Endettement étudiant : État des lieux, déterminants etimpacts. Recherchiste : Louis-Philippe Savoie



4

more than 63% of students held at least one remunera-ted job. It emerged in the study that it is also used bystudents to prevent excessive debt. In fact, the presenceof a job during studies is correlated with lower debt.

However, this debt indeed exists and is in no way ne-gligible: 64.5% of students holding a job in autumn 2009also accumulated debts and 32.6% had recourse to aprivate debt. Significant amounts were accumulated bythese students, namely $15,403 and $9,563 on average.It seems there is a trend to accumulated and anticipateddebt throughout studies, which would encourage a si-gnificant number of students to work. Now, the litera-ture shows that these jobs have a negative impact onacademic performance and the duration of studies.

Conclusion

Students can barely pay all the fees inherent to theireducation without indebting themselves, and this is

even before the tuition fee hike of $1,625 announced bythe Charest government. They live through great finan-cial stress and are particularly vulnerable to financialinstitutions that offer too little information on the ma-nagement of credit and its obligations. Given this situa-tion, it is future generations that will either not go touniversity due to the prospect of too great a debt loador indebt themselves heavily and push back their projects to start a family, buy a house, start up a businessor undertake graduate studies. Once again, the choicesof the Charest government in regard to education wil

suffocate the middle class and the disadvantaged, tothe detriment of the prosperity and quality of life ofQuebecers.

Together for education !

What’s the FEUQ ?

The Fédération étudiante universitaire du Québec (FEUQ)

is an organization that brings together 15 student associa-

tions 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 stu-

dents with governments and education stakeholders.

Throughout its twenty years of existence, it has endeavored

to defend a humanistic education as a societal choice. It fo-

cuses particularly on defending its members before, during

and after their passage in university by demanding, above

all, an accessible and quality education.

Contact us

Fédération étudiante universitaire du Québec

15, rue Marie-Anne Ouest

2e étage

Montréal (Québec)

H2W 1B6Telephone : (514) 396-3380

Fax : (514) 396-7140

E-mail: [email protected]

www.feuq.qc.ca

©All rights reserved – FEUQ 2011

Source : FEUQ 2011. Endettement étudiant : État des lieux, déterminants et impacts. Recherchiste : Louis-Philippe Savoie

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En - Notice - The impact of student debt