Changes in Ontario Student Aid Will Lower Student Debt

Improvements to Ontario’s student aid system were unveiled in the Ontario budget this week. Lauded by all levels of Ontario’s education system and by student advocacy groups, these changes aim to make college and university more affordable for students from lower-income homes.

Under the new legislation, which will begin phase-in in 2017, students from families with household incomes less than $50,000 per year will receive grants that cover slightly more than their tuition costs (total student expenses include tuition, educational materials and housing). Middle-income families will also receive more help with tuition costs than they did previously.

Under the current system, students must apply to diverse granting bodies and to OSAP to access maximum funding via grants and loans. The government promises that the new system will be much easier to navigate, with a “one-stop shopping” concept. Students from lower-income families may still require loans to cover the entirety of their education expenses, especially if they choose university over college – but the new system increases the grant portion and decreases the loan portion of their overall funding.

The government’s stated intention is to make post-secondary education more accessible to students from lower-income families – a move that is indeed progressive. “We want to have more students who would not otherwise look to post-secondary,” said Ontario Liberal Finance Minister Charles Sousa.

The effect of the new legislation on the after-studies student debt load

The main idea is that a better-educated workforce will be good for Ontario’s economy in the long term, both by deceasing reliance on government social assistance programs, and by attracting business to Ontario.

However, there is another benefit that’s not talked about as much.

Currently, many Ontario students finish post-secondary studies carrying a massive student debt.

Debts totalling over $40,000 are common, especially if a graduate degree is sought.

Thus, before the student even becomes a member of the workforce, he or she has become accustomed to carrying a five-figure debt.

How does this affect the individual’s mindset as he or she becomes a worker and a consumer? If you ask a new graduate at this juncture, they will likely speak with optimism about their plan to cut corners and pay the loans off as soon as possible. But reality has a way of intervening. What if it takes time to find a good job? What if the nation’s economy takes a downturn? What if the graduate starts a family?

Many former students thus do not fulfill their plans to pay off their student debt quickly. In some cases, the money that is owed, via the “miracle” of compound interest, simply grows and becomes the basis for a stubborn debt load that lasts for decades or even a lifetime. For some, insolvency is down the road, as eventually it becomes impossible to keep up with the bills.

Average amount of debt at time of graduation by type of debt and level of study*

According to Statistics Canada’s survey* of the 2009/2010 graduating class, 43% of college graduates, 50% of bachelor graduates, 44% of master’s and 41% of doctorate graduates relied on government or non-government student loans, which include private, family and bank loans, to help finance their education.

Things are looking up, however, with this new legislation. Under the proposed changes, less Ontario students will emerge from college or university with five-figure debts, already trained to rely on credit. Instead, they will enter the workforce with every hope of being able to make financial progress, and even to save money against future expenses. It’s an old concept, but one that may once again be within our Ontario young people’s reach.