Last week, U.S. President Joe Biden announced his administration would be forgiving up to US$20,000 in student loans for low- and middle-income borrowers, reducing the debt load for more than 40 million Americans.
Some student groups, as well as the federal NDP, have called on the federal government to do the same here in Canada, but experts are divided over whether cancelling student debt is the best way to help young Canadians.
Numbers from 2019 showed that nearly two million Canadian students owed the federal government a total of $20.5 billion, with the average loan balance exceeding $13,000 at the time of leaving school -- although these numbers don't include debt to other sources, such as private student loans.
Erika Shaker of the Canadian Centre for Policy Alternatives says loan forgiveness would be "absolutely life changing for students who qualify."
"I think we have to remember there's a cost to graduating a generation into debt. The costs are just sort of downloaded on the students and their families, many of whom are far less in a position to actually bear that cost than the federal government," she told CTV's Your Morning on Friday.
Shaker pointed to the findings from a 2018 study in Ontario, which found that one of six bankruptcies in the province involved student loans.
"So, if you extrapolate that across the rest of the country, we're talking about 22,000 former students declaring bankruptcy in 2018 alone, at least in part because of student debt," Shaker said.
A 2019 report from the Parliamentary Budget Officer found that in order to eliminate tuition and forgive debt for graduates earning less than $70,000, it would cost $16 billion in the first year, $13 billion in the second year and $10 billion annually after that.
But the Macdonald-Laurier Institute's Aaron Wudrick says he's not convinced that sweeping student loan forgiveness is the best use of resources, noting that university graduates, especially those who go into professional fields like law or medicine, typically go on to have higher incomes than those who don't go to university.
"I think it's fair to say you have limited resources, you want to target the money at the neediest group. I think there's a strong argument that (university graduates are) not the neediest," he told CTVNews.ca over the phone.
"The people who don't go to university and go into trades or start a business -- the question that those people I think fairly ask is... 'Why am I obligated to pay for the decision of other people to go to university?'" Wudrick added.
Instead of loan forgiveness Wudrick suggests other measures, such as reducing or forgiving the interest costs, as well as making loan repayments contingent on income.
Currently, graduates can apply to delay their government student loan payments if their income falls below $25,000, although the Liberals campaigned last year on increasing the threshold to $50,000. The Liberal government has also waived student loan interest charges until March 2023.
"I think there are other mechanisms you can do to lower the burden and make it more manageable for people without just … wiping it out," Wudrick said.
