Alberta post-secondary students warned as available student-loan dollars surge
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Provincial officials have freed up tens of million more in loans for Alberta students, but some are warning that taking on such debt comes with major risks post-graduation.
In all, the Alberta government has added $150 million to its student loans fund since original projections that $275 million would be available for the near-complete 2012-13 school year — a 55 per cent increase.
The province claims the dramatic jump comes as a result of changes to student aid provisions that make post-secondary more accessible by putting less emphasis on parent contributions and part-time earnings when considering which students qualify.
But Ron Graham, president of his own Edmonton financial-planning firm, worries the now-$425 million available for loans will be enticing to some young Albertans who haven't fully thought through their career plans.
"If you find that what you want to do is not an area that has growing profession (or) occupation, you may want to sit back and think should I go into debt to get this degree that may not help me get a job . . . judging from kids, I don't think that happens very much," he said.
When combined with federal student loans, the average Alberta student took out $10,933 in 2011-12, according to data provided by the University of Calgary Students' Union.
Provincial student loans can take a floating interest rate or a fixed one at prime plus two per cent. Federal loans come in at an even great cost of prime plus 2.5 per cent or a fixed five per cent rate. The Canadian Federation of Students says a majority of students takes a near-decade to pay back their loans, meaning thousands in interest would be tacked on.
And that outstanding charge is a major concern for Raphael Jacob, chair of the Council of Alberta University Students and incoming president of the University of Calgary Students' Union. He said while he appreciates any move to make education more accessible, he would far prefer to see the loans turned into other forms or student aid like bursaries, grants and scholarships.
"The back-end cost — that crushing debt load — that's the downside," he said.
Alberta non-loan student aid will rise five per cent to $211 million for the 2013-14 school year. As well, the government announced last week it's freezing tuition for the 2013-14; however, some schools are still adding new or increased student services fees.
The Alberta government estimates it receives full repayment of loans from 90 per cent of students taking them.
Students do not accrue interest on their loans during their time at a post-secondary institution as well as during a six-month grace period after graduation.