Student
      Loans:
      A
      costly
      experience
     
    
   
   
    
     
      By
      Dorothy
      Wright
     
    
   
   
    
     
       
     
    
   
   
    
     
      EDUCATION
      TODAY
      IS
      FAST
      BECOMING
      A
     
    
   
   
    
     
      luxury
      that
      very
      few
      can
      afford.
      Even
      after
      you
      get
     
     
      your
      degree,
      the
      chances
      of
      getting
      a
      job
      in
      your
      field
     
     
      and
      making
      enough
      money
      to
      pay
      back
      your
      student
     
     
      loans
      quickly
      may
      be
      a
      lot
      to
      hope
      for.
      Yet
      the
     
     
      government,
      both
      federal
      and
      provincial,
      are
      still
     
     
      handing
      out
      thousands
      of
      student
      loans.
      Now
      the
     
     
      banks
      are
      getting
      into
      the
      act
      by
      targeting
      those
     
     
      students
      who
      don’t
      qualify
      for
      Canada
      Student
     
     
      Loans.
      The
      decision
      to
      take
      out
      a
      student
      loan
     
     
      should
      not
      be
      made
      lightly
      because
      the
      conse-
     
     
      quences,
      with
      respect
      to
      your
      budget
      and
      credit,
     
     
      could
      outweigh
      the
      benefits
      of
      your
      education.
     
    

    
     
      Whether
      you
      end
      up
      with
      a
      Canada
      Student
     
     
      Loan
      or
      a
      bank
      student
      loan,
      the
      total
      amount
      the
     
     
      bank
      will
      allow
      you
      to
      borrow
      is
      $5,200
      a
      year.
      For
     
     
      example,
      you
      could
      have
      a
      Canada
      Student
      Loan
      for
     
     
      $2,
      000
      and
      a
      bank
      student
      loan
      for
      up
      to
      $3,200.
     
    

    
     
      The
      main
      difference
      in
      the
      loans
      is
      that
      the
     
     
      Canada
      Student
      Loan
      is
      interest-free
      until
      you
     
     
      finish
      school,
      while
      the
      bank
      student
      loan
      requires
     
     
      you
      to
      pay
      interest
      while
      you
      are
      still
      in
      school.
     
     
      Paying
      interest
      while
      you
      are
      in
      school
      on
      the
      bank
     
     
      student
      loan
      could
      cost
      you
      an
      extra
      $12,
      000
      to
     
     
      $13,000
      more
      than
      the
      Canada
      Student
      Loan
      for
      the
     
     
      same
      amount
      of
      money.
     
    

    
     
      The
      bank
      will
      grant
      a
      student
      a
      loan
      of
      up
      to
     
     
      atotal
      of
      $31,200
      for
      a4
      year
      undergraduate
      degree
     
     
      and
      a
      2
      year
      graduate
      degree
      for
      a
      total
      of
      6
      years
      of
     
     
      school.
      Interest
      payments
      must
      be
      made
      monthly.
     
     
      Over
      the
      6
      year
      period,
      the
      interest
      would
      amount
      to
     
     
      approximately
      $12,831
      provided
      the
      interest
      rate
     
     
      doesn’t
      rise
      above
      the
      current
      rate
      11.75%.
      Out
      of
     
     
      their
      $5,200
      annual
      loan,
      the
      student
      would
      have
      to
     
     
      pay
      $3,666
      in
      interest
      alone
      that
      sixth
      year.
      If
      the
     
     
      loan
      is
      re-paid
      as
      agreed
      and
      the
      interest
      rate
      is
     
     
      constant,
      the
      total
      amount
      repaid
      over
      16
      years,
      (6
     
     
      years
      of
      school,
      6
      months
      of
      no
      principal
      payments,
     
     
      and
      9
      1/2
      years
      of
      principal
      and
      interest
      payments)
     
     
      would
      be
      approximately
      $66,589--
      of
      that,
      $35,389
     
     
      is
      interest.
     
    

    
     
      The
      student
      has
      now
      graduated
      and
      even
     
    
   
   
    
     
      has
      ajob.
      For
      the
      next
      9
      1/2
      years,
      there
      is
      $455
      to
     
     
      pay
      each
      month
      on
      the
      $31,200
      student
      loan.
      That
     
     
      $455
      amonth
      payment
      will
      take
      a
      big
      bite
      out
      of
      any
     
     
      budget,
      no
      matter
      how
      much
      the
      graduate
      makes.
     
     
      Buying
      a
      house
      could
      be
      out
      of
      reach
      while
     
     
      a
      student
      loan
      is
      still
      under
      repayment
      because
      of
     
     
      how
      it
      affects
      net
      worth
      (the
      difference
      between
     
     
      what
      is
      owned
      and
      what
      is
      owed).
      One
      of
      the
     
    
   
   
    
     
      requirements
      for
      a
      mortgage
      loan
      is
      a
      positive
      net
     
     
      worth.
      While
      having
      an
      education
      is
      definitely
      an
     
     
      asset,
      it
      doesn’t
      have
      a
      dollar
      value
      to
      offset
      the
     
     
      student
      loan
      liability.
      Thus
      a
      graduate
      has
      a
      nega-
     
     
      tive
      net
      worth.
      Mortgage
      loans
      may
      be
      made
      in
     
     
      these
      cases,
      but
      on
      an
      exceptional
      basis
      only.
     
     
      What
      happens
      to
      these
      student
      loans
      and
      the
     
     
      student
      if
      they
      don’t
      find
      a
      job?
      Ifthe
      student
      still
     
     
      can’t
      find
      work
      after
      the
      6
      month
      ‘‘payment
      free’’
     
     
      period,
      he
      or
      she
      can
      apply
      for
      interest
      relief
      for
      3
     
     
      months
      at
      a
      time,
      for
      a
      total
      of
      18
      months.
      The
     
    
   
   
    
     
      CUP
      Graphic/
      Hans
      Beckers/
      The
      Uniter
     
    
   
   
    
     
      government
      pays
      the
      interest
      on
      the
      Canada
      Student
     
     
      Loan
      while
      the
      student
      is
      on
      interest
      relief.
     
    

    
     
      At
      the
      end
      of
      that
      period
      if
      the
      student
      still
     
     
      isn't
      working,
      they
      are
      nonetheless
      expected
      to
     
     
      make
      payments
      on
      their
      loan.
      After
      3
      payments
     
     
      have
      lapsed,
      the
      bank
      charges
      the
      student
      loan
      back
     
     
      to
      the
      government
      and
      then
      the
      loan
      is
      sent
      to
      a
     
     
      collection
      agency.
      Because
      these
      collection
      agen-
     
    
   
   
    
     
      foes
     
    
   
   
    
     
         
     
    
   
   
    
     
      cies
      are
      paid
      on
      a
      commission
      basis,
      they
      harass
      the
     
     
      student
      for
      payments.
      With
      the
      past
      due
      interest
     
     
      added
      on,
      a
      $17,000
      student
      loan
      is
      now
      $19,500.
     
    

    
     
      With
      payments
      of
      $200
      a
      month,
      $170
      goes
     
     
      to
      current
      interest
      and
      the
      balance
      is
      applied
      against
     
     
      the
      past
      due
      interest.
      For
      about
      8
      years,
      nothing
      gets
     
     
      put
      on
      the
      principal.
      The
      student
      ends
      up
      paying
      on
     
     
      the
      loan
      for
      the
      next
      22
      years.
      After
      22
      years,
      if
      the
     
     
      payments
      were
      paid
      on
      time
      at
      $200
      a
      month,
     
     
      $39,925
      will
      have
      been
      paid
      in
      interest
      alone.
     
    

    
     
      If
      the
      student
      has
      managed
      to
      acquire
      prop-
     
    
   
   
    
     
       
     
    
   
   
    
     
       
     
    
   
   
    
     
      erty,
      the
      government
      can
      demand
      payment
      in
      ful
     
     
      the
      defaulted
      loan
      and
      take
      a
      judgement
      againg
     
     
      property.
      The
      judgement
      could
      force
      sale
      of
     
     
      asset
      to
      pay
      the
      debt,
      with
      all
      legal
      cost
      incu
     
     
      added
      to
      the
      debt.
     
    

    
     
      Now
      suppose
      the
      student
      with
      the
      defay
     
     
      student
      loan
      has
      a
      job
      and
      is
      expecting
      a
      heal
     
     
      income
      tax
      refund.
      He
      or
      she
      will
      be
      disappoin
     
     
      because
      that
      income
      tax
      refund
      will
      be
      applie
     
     
      the
      defaulted
      loan.
     
    

    
     
      Suppose
      this
      same
      now-working
      stud
     
     
      would
      like
      to
      buy
      a
      car
      or
      a
      house.
      Because:
     
     
      credit
      investigation
      done
      by
      the
      financial
      institu
     
     
      shows
      a
      defaulted
      student
      loan,
      they
      are
      unab;
     
     
      lend
      this
      person
      any
      money.
      Bankruptcy
      is
     
     
      option,
      but
      it
      would
      result
      in
      loss
      of
      any
      assets
     
     
      well
      as
      loss
      of
      liability
      for
      debts.
      A
      year
      or
      so
      a
     
     
      being
      discharged
      from
      bankruptcy,
      the
      student
      co
     
     
      start
      to
      rebuild
      his
      or
      her
      credit.
      The
      debt,
      howe
     
     
      has
      not
      disappeared.
      It
      increases
      the
      national
      (
     
     
      and
      is
      passed
      back
      to
      the
      taxpayers
      in
      increa
     
     
      taxes.
      There
      is
      no
      escaping
      the
      consequences
     
    

    
     
      Co-op
      education,
      fee-payer
      programs,
      |
     
     
      employment
      education
      programs,
      continuing
      ¢
     
     
      cation
      programs
      through
      employers,
      or
      on-the:
     
     
      training
      could
      be
      some
      alternatives
      to
      school
     
     
      without
      debt.
      If
      you
      decide
      that
      you
      are
      going
      to!
     
     
      a
      student
      loan
      to
      further
      your
      education,
      consid
     
     
      carefully.
      Weigh
      the
      costs
      and
      consequences
      agai
     
     
      the
      benefits
      and
      your
      ability
      and
      commitmen
     
     
      repay
      the
      loan
      in
      the
      future.
      Both
      the
      governm
     
     
      and
      the
      banks
      have
      faith
      that
      you
      will
      be
      abl
     
     
      successfully
      complete
      your
      studies
      and
      repay
     
     
      loan.
      Certainly,
      schooling
      by
      student
      loan
      \
     
     
      either
      be
      the
      most
      practical
      and
      rewarding
      lesso
     
     
      economics
      the
      student
      will
      ever
      have,
      or
      a
      negal
     
     
      learning
      experience
      that
      haunts
      a
      student
      for
     
     
      rest
      of
      his
      or
      her
      life.
      In
      any
      case,
      the
      student
      sho
     
     
      certainly
      be
      aware
      of
      how
      costly
      student
      loans:
     
     
      be.
     
    
   
   
    
     
       
     
    
   
   
    
     
       
     
     
        
     
    
   
   
    
     
       
     
    
   
   
    
     
      Your
      student
      representatives
      on
      the
      Presidential
      search
      committee,
     
     
      Paula
      MacFadyen
      and
      Patricia
      Embleton
     
    
   
   
    
     
      Please
      respond
      in
      writing
      to
      the
      co-chairs
     
     
      Philip
      Smith
      and/or
      Margaret
      Munro
     
    
   
   
    
     
         
     
    
   
   
    
     
      Since
      September
      27th
      candidates
      to
      be
      the
      next
      president
      of
      UPEI
      have
      each
      been
      spending
      four
      days
      on
      campus.
      The
      four
     
     
      candidates
      for
      president
      are
      Dr.
      Elizabeth
      Epperly,
      Associate
      Professor
      of
      English
      at
      UPEI;
      Dr.
      Tim
      Easley,
      Principal
      of
      Frost
     
     
      Campus,
      Sir
      Sanford
      Fleming
      College;
      Dr.
      Roger
      Barnsley,
      Vice-Presdent
      Academic
      at
      St.
      Thomas
      University;
      and
      Dr.
      Colin
     
     
      Dodds,
      Vice-President
      Academic
      and
      Research
      at
      St.
      Mary's
      University.
      Dr.
      Colin
      Dodds
      is
      the
      final
      candidate
      to
      come
      on
     
     
      campus
      and
      students
      will,
      again
      have
      the
      opportunity
      to
      meet
      with
      the
      candidate
      at
      a
      Student
      Forum
      at
      the
      Barn
      on
      Thurs.,
     
     
      Oct.
      27
      at
      11:00am.
      All
      students
      are
      encouraged
      to
      attend.
      We
      welcome
      and
      thank
      you
      in
      advance
      for
      any
      comments
      that
      you
     
     
      might
      have
      on
      the
      presidential
      candidates.
      Responses
      must
      be
      received
      no
      later
      than
      Tuesday,
      November
      Ist.
     
    
   
   
    
     
      smithp@upei.ca|
      munroe@upei.ca
     
    
   
   
    
     
      Box
      25,
      University
      of
      Prince
      Edward
      Island,
      550
      University
      ave.,
      Ch'town,
      PEI,
      C1A
      4P3
     
    
   
   
    
     
       
     
     
        
        
     
     
       
       
     
     
       
       
     
     
         
     
     
       
       
     
     
         
     
     
       
       
     
     
       
       
     
     
       
     
     
       
       
     
    
   
   
    
     
       
     
    
   
   
    
     
       
     
    
   
   
    
     
       
     
    
   
   
    
     
       
     
    
   
   
    
     
       
     
    
   
   
    
     
      ctober
      25,
      1994