There are two main types of debt among the student population:
- Student debts arising from loans taken out under the student financial assistance program.
- Debts associated with the use of consumer credit (credit cards and lines of credit, personal loans, etc.).
Why is the distinction between debt to government (student loans) and debt to private organizations (credit cards and lines of credit) important in the analysis of student debt (Fiset & Pugliese, 2021)?
“Student Loans”
The debt situation — arising from what are commonly referred to as “student loans” — has remained relatively stable since 2000. Indeed, the proportion of graduates with student debt at the end of their program remains more or less the same, i.e., between 40% and 50%, depending on the level of graduation (Galarneau & Gibson, 2020). One exception to this rule concerns students in certain programs — law, medicine, business administration, etc. — who saw their debt levels increase between 2000 and 2015 (Fiset & Pugliese, 2021).
Mass Credit
The second type of debt — arising from the use of consumer credit — is increasingly important among the student population (Guay-Boutet, 2018).
Debt from private non-governmental sources has grown markedly since 2000 (Fiset & Pugliese, 2021). The average amount of this type of debt is rising, as is the proportion of students who have recourse to it (ibid.).
In March 2023, credit rating company Equifax estimated an 8.4% increase in non-mortgage debt levels for the millennial generation (currently aged 25 to 39). This rise would be attributable to increased use of consumer credit. The credit card delinquency rate (i.e., non-payment on the due date) for the 18-to-25 age group climbed by nearly 31% over the previous year, compared to 17% for the population as a whole (The Canadian Press, 2023).
In the province of Québec, around 90% of undergraduate and graduate students have one or two credit cards (Cloutier & Roy, 2020).
Access to credit was facilitated by the targeted marketing of financial products aimed at each segment of the population, including the student population (Guay-Boutet, 2018). In 2017, the average amount of this type of debt for Generation Z (born after 1994, i.e. under 29 at the time of writing) was $6,871, an increase of almost 23% (Transunion, 2019, in Cloutier & Maltais-Proulx, 2022).
Thus, while little recent research in the province of Québec has focused on the influence of credit companies and financial institutions on the student population, their role in student debt seems substantial (ibid.):
The majority of students are inexperienced, and their level of knowledge inadequately prepares them for the numerous solicitations they receive from companies offering credit products. This phenomenon, combined with the trust students have in these companies, leads them to have spending aspirations higher than their current means, paving the way to problem debt (ibid.).
Is Higher Education an Investment?
The distinction between debt to private organizations (credit cards and lines of credit) and debt to government (student loans) is important in the analysis of student debt (Fiset & Pugliese, 2021). Firstly, borrowing and repayment conditions are not the same (ibid.). In the case of debts contracted under the government’s Student Financial Assistance (SFA) program, the government pays the interest while students are in school — which is not the case with credit cards. Furthermore, under the SFA program, students in a precarious financial situation benefit from repayment assistance measures (debt forgiveness, deferred repayment) to help them postpone repayment at an opportune time.
There are differences between, on the one hand, debt as “investment
leverage” and compensatory debt such as consumer credit on the other (Pugliese & Boivin, 2023).
Taking out “student loans” to pursue higher education can be seen as an investment. Indeed, a higher education degree confers numerous advantages on the labour market, whether in terms of remuneration, working conditions or social benefits (Galarneau & Gibson, 2020). Obtaining a post-secondary degree would thus ensure a good return on every dollar invested in education (ibid.).
If pursuing college and university studies implies future gains, it necessarily implies more immediate costs (Eccles & Wigfield, 2020):
- The cost of the effort, i.e., the effort perceived as necessary and whether it is worthwhile;
- The opportunity cost, what you have to give up to pursue your studies (e.g., earn money quickly);
- The psychological cost of experiencing negative emotions while studying (ibid.).
In this complex relationship between costs and investment, the costs would be justified by the investment in “human capital,” i.e., the aggregate of knowledge and skills acquired by a person throughout their lifetime (Johnson & al., 2016). In short, the investment in education would, in the long term, be “worth” the immediate costs associated with pursuing higher education.
Pursuing a college or university education produces not only individual, but also collective benefits (Fack & Huillery, 2021). Such “positive externalities” take many forms: innovation in society, growth in wages, hence tax revenues for the state and so on (Hendren & Sprung-Keyser, 2020). Education policies are among those that offer the greatest long-term gains for society (ibid.). Consequently, public investment in higher education — as is the case with the individual investment required — generates long-term benefits that justify the immediate costs to the individual and to society.
Collection of Student Debt
On the other hand, some students may harbor misperceptions about the value of higher education and student debt (Noël & al., 2017). This is particularly true of students who are the first generation in their family to attend a college or university (first-generation students – FGS), who may tend to overestimate the immediate costs and underestimate the future gains associated with a post-secondary degree. FGS are believed to be more concerned about their debt and less certain about the added value of university studies (Université du Québec, 2013). The parents’ level of education thus appears to be associated with the belief that studying is — or is not — worthwhile (Heckman & al., 2023).
Yet it has been documented that employment rates rise with educational attainment (Frenette, 2019). In other words, pursuing post-secondary education increases the likelihood of obtaining a quality job and better conditions on the labour market, including higher wages (Reid & al., 2020).
As a result, developing student financial literacy focusing on consumer credit and the government’s SFA program is crucial to reversing misperceptions about debt.
Cloutier, J. & Maltais-Proulx, J. (2022). Aux études, endettés, mais cellulaires à l’année : les étudiants universitaires sont-ils vraiment les seuls responsables de leurs dettes ? Dans C. Ouellet, B. Korai, L. Godin et A.-M. Gosselin (dir.), Revisiter le consumérisme au Québec. État des lieux, défis et perspectives (p. 181‑206). Presses de l’Université Laval. https://www.pulaval.com/libreacces/9782763754901.pdf
Cloutier, J. & Roy, A. (2020). Consumer Credit Use of Undergraduate, Graduate and Postgraduate Students: An Application of the Theory of Planned Behaviour. Journal of Consumer Policy, 43(3), 565‑592. https://doi.org/10.1007/s10603-019-09447-8
Eccles, J. S. & Wigfield, A. (2020). From expectancy-value theory to situated expectancy-value theory: A developmental, social cognitive, and sociocultural perspective on motivation. Contemporary Educational Psychology, 61. https://doi.org/10.1016/j.cedpsych.2020.101859
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Fiset, E. & Pugliese, M. (2021). L’endettement étudiant au Québec. Des réflexions à l’égard de la littérature existante. Chaire-réseau de recherche sur la jeunesse du Québec. https://chairejeunesse.ca/wp-content/uploads/2022/11/CRJ_ENDETTEMENT_VFF.pdf
Frenette, M. (2019). Les perspectives de carrière des diplômés de l’enseignement postsecondaire s’améliorent-elles? (no 11F0019M 415). Statistique Canada. https://www150.statcan.gc.ca/n1/pub/11f0019m/11f0019m2019003-fra.htm
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Guay-Boutet, C. (2018). Économie politique de l’endettement étudiant bancaire au Québec [mémoire de maîtrise, Université du Québec à Montréal]. Archipel. https://archipel.uqam.ca/11558/1/M15518.pdf
Heckman, S. J., Letkiewicz, J. C. & Kim, K. T. (2023). A Fracturing Social Contract? How Perceptions of the Value of Higher Education are Changing. Journal of Family and Economic Issues, 44(1), 156‑174. https://doi.org/10.1007/s10834-021-09811-2
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Noël, M.-F., Bourdon, S. & Brault-Labbé, A. (2017). Particularités de l’influence des parents sur la perception de la valeur des études chez des jeunes de niveau postsecondaire : une analyse qualitative longitudinale. Enfances, Familles, Générations, (26). https://doi.org/10.7202/1041068ar
Pugliese, M. & Boivin, L. C. (2023, 26 avril). Les difficultés liées aux dettes chez les jeunes du Québec [série conférences-midi « l’emploi des jeunes : état et enjeux actuels »]. https://chairejeunesse.ca/activites/conferences-midi-lemploi-des-jeunes-etat-et-enjeux-actuels/
Reid, A., Chen, H. A. & Guertin, R. (2020). Résultats sur le marché du travail des diplômés du niveau postsecondaire, promotion de 2015. Statistique Canada. https://www150.statcan.gc.ca/n1/pub/81-595-m/81-595-m2020002-fra.htm
Université du Québec. (2013). Parce que le Québec a besoin de tous ses talents. Proposition en vue d’une stratégie nationale de participation aux études universitaires. Université du Québec. https://www.uquebec.ca/communications/documents/UQC-Quebec_ses_talents-complet.pdf
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