Canadian parents are struggling to save for their children’s education
Canadian parents are struggling to save for their children’s education, a new survey shows.
As high school graduates pack up and head to university or college this fall, the reality is that many of them will have to find alternative ways to fund their education.
A survey conducted by TD Canada Trust shows that almost one-in-two parents (45 per cent) who have children eligible to attend post-secondary education this September have not started saving for their kids’ education costs.
“Next to saving for retirement, one of the biggest financial challenges the majority of Canadians will face is saving for their children’s education,” says Shahz Beig, Associate Vice President, Personal Lending, TD Canada Trust.
“For university and college students living away from home, the cost of pursuing an undergraduate degree is approximately $80,000, so it’s no surprise parents are struggling to make ends meet.”
The survey found that only 12 per cent of parents with children under the age of 18 plan to pay for 100 per cent of their kids’ university or college education.
Almost half (49 per cent) of parents surveyed say they plan to pay for most of their children’s education, but expect their kids to contribute using earnings from jobs. Thirty-two per cent say they will pay for essentials such as books and tuition, but expect their children to pay for all other expenses.
What to do if you haven’t saved
Students who have not saved enough money to cover the costs of post-secondary have a daunting task ahead of them.
Tuition fees have more than doubled in the past 20 years. In the 2010/2011 school year, the average undergraduate student in Canada paid $5,138 in tuition fees.
Expenses on top of tuition include books, rent, food, and transportation costs.
Fortunately, there are some funding options available.
Financial assistance can come from government loans, scholarships, bursaries and grants. Some students may also qualify for a student line of credit from their bank, which is often a smarter decision than raking up expenses on credit card or bank loans with high interest rates.
“Buyer beware” however, as student lines of credits and loans can leave university and college students with a significant debt load following graduation.
A StatsCan study of students in 2005 (the most recent year on record for relevant data) showed that 57 per cent of graduating students had loans to pay off. The average student debt at graduation had risen from $15,200 to $18,800 since 1995. The number of graduates with debt loads of $25,000 or more also increased, sitting at 27 per cent, compared to 17 per cent in 1995.
Today the average debt load ranges from $30,000 to $60,000 at graduation, with grads some specialized programs such as medicine or law carrying a debt load upwards of $100,000.
According to the Canadian Federation of Students (CFS), Canadians carry over $13.8-billion in student debt. The number of people defaulting on their loans is also on the rise.
“People are finding it more difficult to make payments, budgets are becoming more strained and we are seeing more reliance on food banks and the use of emergency bursaries offered by student unions,” says David Molenhuis, from the CFS.
The more debt a graduate carries, the less likely they to start saving and building their net worth.
A 2010 StatsCan study shows that, among post-secondary graduates aged 20 to 45, people who borrowed money in school were less likely to have investments or savings after graduation than non-borrowers.
Also, the likelihood of graduates owning a home after graduation was lower for borrowers (53 per cent) compared to non-borrowers (60 per cent).
RESOURCES FOR STUDENTS
Canadian Federation of Students: http://www.cfs-fcee.ca/html/english/home/index.php
Alberta Learning Information Service: http://alis.alberta.ca/hs/fo/studentsfinance/students-finance.html
Saskatchewan Student Financial Assistance: http://www.aeei.gov.sk.ca/student-loans/
Manitoba Student Aid: http://www.gov.mb.ca/educate/sfa/pages/sfaFrontDoor_en.html
Ontario Student Assistance Program (OSAP): https://osap.gov.on.ca/OSAPPortal
Financial aid for Quebec students: http://www.afe.gouv.qc.ca/fr/planSite/index.asp
New Brunswick Post-Secondary Education: http://www2.gnb.ca/content/gnb/en/departments/post-secondary_education_training_and_labour/post-secondary_education/content/funding_and_financialinformation/student_financialservices.html
Newfoundland and Labrador Student Aid: http://www.ed.gov.nl.ca/studentaid/
Northwest Territories Student Financial Assistance: http://www.nwtsfa.gov.nt.ca/
Nova Scotia Student Assistance: http://studentloans.ednet.ns.ca/
PEI Student Financial Services: http://www.gov.pe.ca/ial/index.php3?number=1000707&lang=E