Students anticipate huge debt will disappear fast

40% believe they’ll be on the hook for $25K

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TORONTO – Getting a post-secondary degree can be an expensive endeavour, but a recent survey suggests that most students believe they’ll be on track to pay off their student loans within five years of graduating.

The poll from CIBC (TSX:CM) found that about half, or 51 per cent, of post-secondary students said they would need to borrow money to pay for tuition, living expenses and books.

Although about a quarter expected to owe less than $10,000 by the time they graduate, almost three quarters (73 per cent) expected to owe more than $10,000, including 40 per cent who said they’d likely be on the hook for $25,000 or more of student debt.

The Canadian Federation of Students says students in Ontario and the Maritimes have debt loAds averaging $28,000 at graduation, the highest in the country.

Yet despite the predictions of big debt, most students remain optimistic about their ability to eliminate it.

Sixty-six per cent surveyed believed they’d be able to pay down their debt within five years or less, while 34 per cent expected it would take them more than six years to be debt-free.

“While their intentions are admirable they may not be realistic,” said Christina Kramer, executive vice-president of retail and business banking at CIBC.

“As students graduate and look to start their careers, they will likely be moving out on their own, saving for a car or a down payment on a home, or even starting a family. That’s why it’s important for them to manage the amount of debt they take on, develop a budget that helps them carefully manage their spending while in school and have a plan to pay off debt once they graduate.”

Looking over the short term, another survey — this one by the Bank of Montreal (TSX:BMO) —suggested that those going to college or university were planning on spending an average of $1,121 on school supplies.

It also found some regional differences between where students lived and how much they expected to spend. Those who live in Alberta expected to spend the most on back to school purchases with an average amount of $1,236; followed by Ontario students with $1,204. Those in Saskatchewan and Manitoba expected to spend the least, a combined average of $857.

According to the survey, a third (34 per cent) of the students said they planned on using loans and scholarships to pay for these purchases. Thirty per cent said they were going to rely on financial help from friends and family, while about a quarter (27 per cent) would be using credit.

It found the vast majority of students recently surveyed said most of their costs would be going towards textbooks (88 per cent); new clothes (58 per cent); computers or cell phones (41 per cent); and furniture (20 per cent).

The CIBC poll was conducted online by Leger, which surveyed 500 Canadian university or college students between July 10-17. The BMO survey was conducted by Pollara online between Aug. 1-8, with a sample of 600 Canadian post-secondary students.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

2 comments on “Students anticipate huge debt will disappear fast

  1. I can see the textbooks as a valid expense depending on your program. Some courses require hundreds of dollars in books every term, others virtually nothing. My son is in graphic design and has bought one $40 ebook so far in the first 2 years. No books required for the current term. The $3k+ of software they need was provided at the start of first year and was built into the tuition. He also had to invest in a $3k computer at the start, but other than replacing a power cord there have been no further costs. I have to question the clothing expense mentioned. It seems that boredom rather than actual need governs this area. Most people I know have a clothing budget. They also sit in a cubicle looking at a computer and put virtually no wear and tear on their clothing. Unless the students are attending school in a wildly different climate than where they lived before the school year they there is no need for any clothing purchases. Were all the clothes that were perfectly good before the summer stolen? Where they lost in a fire? Then grow up. You are not 5 and in need of a new outfit for the first day of school. You are now an adult with choices and trade offs to be made. Unless there was some risk of you showing up for class half naked there is no need for new clothing. I’d also venture a guess that the old phone is probably also fine, just not the very latest model. Boo hoo.

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  2. I graduated with 10K of debt paid it off very quickly. The trick was to not buy text books and to take courses with easy profs, also any software should be downloaded for free from pirate bay and it important to learn how to cook affordable nutritious meals (learn to love chicken broccoli and rice). Also upon graduation be prepared to work several terrible jobs in the service sector because we have a false economy still deep in recession. If you are lucky you will get something in your field. Another tip is to apply for interest relief even if you don’t need it. This provided me with 4 years of breathing room where the government will pay the interest on your loans free, best part is there are no checks or balances in place to avoid people from gaming the system like most things in canada eg ei etc.. be smart find loop holes, exploit them and you will do well to be financially stable in this ponzie scheme economic system we live in! yay!

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