Spring is an inherently optimistic time. As the temperatures rise and the winter blues dissipate for many, the future is celebrated both with weddings and with school graduations. As parents take photographs, young graduates anticipate the opportunities to come their way.
This historic time of buoyant anticipation is, however, witnessing a shift in outlook for many, caused by the daunting debt loads many new graduates are confronting before they even dawn their gowns. Those graduating from post-secondary programs this spring faced the harsh reality that student loan debt in the country has exceeded $15 billion. The Canadian Federation of Students has estimated that the average student debt currently sits at $28,000 and a recent poll has indicated that 21 per cent of students expect to have debts in excess of $40,000 upon graduating. Sadly, these statistics only speak to the student loan debt and do not incorporate the $5 to $8 billion these same students are also carrying on credit cards, lines of credit and other debt instruments.
While we want our bright young minds to enter the next phases of their lives and careers with unabashed optimism, one might understand why the graduation milestone is being met by some with less enthusiasm than days gone past. Building a future, let alone a financially stable one, can be a more challenging task when the road has obstacles from the get-go.
The valedictorian speech gives a concise review of how the graduation milestone has traditionally been viewed. The popular themes of these speeches have historically surrounded following dreams and making a mark in society. Will these goals become harder to achieve with mounting debt burdens that will increasingly place more limitations on our graduates' capacity to seize the day? Will dreams be stymied when finding ways to simply pay the bills places a broad shadow over pursuing ambitions?
To be clear, these thoughts are not intended to be a pessimistic counterweight to the ideals and optimisms that should be experienced at graduation. They are meant as merely an identification of how our current personal debt loads in Canada have far reaching consequences that are as much societal, as they are economic. When our financial leaders speak of Canada's current personal debt, they speak about monetary considerations like tightening mortgage rules and anticipated interest rate increases. Their comments and warnings are well received, as many need to 'hear' the message and deleverage before rates start to rise on all this debt. But we don't hear many comments about current debt loads from our leaders that go beyond the economics of the issue. What about the social changes that may be required to dealt with, or simply result from, all this debt?
The Certified General Accountants Association of Canada released a study in May that indicated one third of Canadians never, or almost never, have any money left over to save after they pay their bills each month. This is the reality many of those new graduates, with an average of $28,000 in debt, will be facing as they (hopefully) enter the work world, want to buy a car or home, or get married. Is there not the potential for some significant alterations to our current social culture that could stem from these household budget restraints?
Our financial leaders, like the Minister of Finance and the (former) Bank of Canada, have done a good job over the last two years at sounding the alarm bells over increasing personal debt loads. Likewise, the financial press have taken up the call and been vigilant in covering the story of our historic debt-to-income ratios and the implications these have on GDP and the national economy.
What we may need next is a more robust discussion surrounding the potential social changes that might result from our current debt levels. Perhaps this will frame the 'bigger picture' for those who have not connected with the issue, as it has been framed to date. Will new grads increasingly vote for educational reforms and post-secondary debt relief over other social programs? Will adult siblings and families living together, as a financial necessity, replace consumption values and alter cultural norms that have evolved in the last few decades? These discussions may move the debt story into a more tangible space for many.
Debt is a curious thing in the financial world, as it speaks equally to value systems, as much as economic cycles and monetary policies. The way in which we address our current debt, individually and communally, will certainly impact our society on more than a purely economic level. Here's hoping our new graduates retain their optimism and continue to seek to change the future for the better. May they seize the day, and their debt, with core values we can all share.