“Dear parents, I am fully aware that money doesn’t grow on trees.
Sincerely, that is why I’m asking you for it.” ~ Anonymous
With regularity our media rings alarm bells about student debt. The lament, often sensationalizing in nature, leaves us with discomfort and guilt over these graduates who apparently struggle hopelessly under the burden. Phrases like “spiraling costs” and “mountainous debts” create visions of a generation of Canadian students in unprecedented financial hardship. Add to this the pictures of protesting Quebec students, and we are surely in a crisis. Or are we?
Recent reporting with a more contrarian view has addressed the issue of misleading media references to student debt. Analysis of government and other studies serves to dispel the myth that most students are in debt, showing that nearly half of graduates had no debt at all. As well, approximately one quarter of those graduating with debt hold most of the debt; on average $27,000. It seems that the perceived crisis may be narrower than often presented and also might be the result of factors other than the alleged unprecedented “spiraling costs”.
It is 1969 and a young man (unnamed to not embarrass the writer) graduates from McMaster University with a $4,500 student loan. Other than free room and board at home in the summers, he has paid for his education with summer and part time work. An average annual starting salary after graduation at the time is $7,000. His debt amounts to 64 percent of gross wage. This ratio taken today assuming a debt of $27,000 and average starting wage of $40,000 is 67 percent and is relatively comparable.
Years later, a postmortem of the circumstances and factors behind this debt revealed no unprecedented “spiraling costs” even though media alarms were common then just like today. There were however a couple of uncomfortable personal truths behind the creation of this debt; namely a failure to budget/ manage money properly plus a sense of entitlement:
- Purchase of an used red MGB sports car $1,400
- Speculative stock buy on advice of a professor (an asbestos mine!) $1,000
- Ski trip to Mt. St. Ann, Quebec $500
- Steady girlfriends and pubs (guys paid in those days) $1,600
Human nature is often not unique and I would venture a bet that dissection of today’s student loans in that “one quarter group” would reveal many cases of self inflicted excessive borrowing related to our two culprits: poor money management and a sense of entitlement.
Good parenting means preparing our kids to stickhandle their own way in life. To ensure university is the right direction, a parent needs to ask some hard questions:
- How badly do you really want a university/college education?
- Are you sure you’re not just in need of leaving home?
- Are you ready to make the sacrifices necessary for this investment in yourself?
- Are you willing to learn money management and to stay within budgets?
- Are you ready to put “some skin in the game” by paying your own tuition?
- If necessary can you accept a lower living standard than at home? (No iPhone 5?)
- Does cheap beer make you throw up?