If there is any common source of petulance to be found amongst students today, it is being broke.
Post-secondary tuition has grown 600 per cent faster than inflation in the last 20 years and, combined with decreased funding, the result has deepened our empty pockets. Although it is defensible to hold governments and universities accountable for our personal money problems, it is not justification enough to reject personal financial responsibility.
In my first year of university, I moved into a basement apartment with my partner. I covered half the rent and food on a minimum wage. Working full-time, I had no money left over for tuition, but I didn’t think I had to worry since I had been told repeatedly that government loans are provided to those in need.
As it turns out, however, the allocation of these loans is conditional. Even though I was not receiving financial aid from my family, I was still considered a dependent student. It wasn’t until I paid hundreds of dollars in interest to U of T and took two years off that I began to receive full assistance. By that time, I had spent $9,000 for a year of average marks, three credits, and a lot of anguish.
Stories like mine contribute to a mentality of financial non-responsibility: as students, we’ll be poor no matter what. If we’re deep in debt, it is the fault of cowardly legislators and greedy administrators, and there’s nothing to be done but complain. I lost time and money due to this very attitude. Had I realized that simply waiting until I fit the Ontario Student Assistant Program’s (OSAP)’s criteria would end up costing much less, I wouldn’t be in so much debt now.
For future advice, I spoke to Preet Banerjee about student money management. Banerjee is a UTSC graduate and financial advisor who writes a weekly column for The Globe and Mail. He agrees that it’s tough to be a student, but it’s no excuse to perpetuate hardship through ignorance.
“There’s no one-size-fits-all solution to debt, but there are some universal rules,” Banerjee explains. “If you have lots of debt, you’re going to want to put more emphasis on paying it off at first.”
Then make a future forecast, he continues. If you’re a debt-averse person, you’re going to want to pay it off quickly. If you don’t mind the monthly payments, it may be in your interest to put your income towards appreciable assets, such as further education or real estate. Since OSAP loans have deductible interest — you can receive a tax refund in some cases — carrying loans for the full 15-year maximum is a viable possibility. Debt isn’t necessarily harmful, as long as it’s put towards assets that are likely to grow in value over time.
Banerjee warned against irresponsible purchases. Reasonable indulgence is acceptable, especially once a solid monthly budget is in place, but spending the remainder of a U of T Advanced Planning for Students grant on a Cancun getaway is not easily warranted. Rather, if travel is a necessity, working or studying abroad can fulfill the same need with greater payoff.
Above all, recognizing that saving up for purchases costs less in the long run is what Banerjee calls “the cardinal rule” of personal finance. When you borrow from banks or credit companies, you’re effectively borrowing from your future — you’re taking your expected increase in income and spending it now. But because interest is involved, over a lifetime this practice can end up costing tens of thousands of dollars. Making compromises by setting priorities according to individual budgets is key to getting what we want out of life without digging ourselves any deeper.
While I’m still fuming over OSAP rules that disadvantage low-income students, it’s also my own fault for cultivating a mindset of monetary submission. Researching my options and then spending those two wasted years travelling and gaining experience, rather than working merely to pay off interest payments, would certainly be the way I’d do it over again.
Malone Mullin is a third-year philosophy specialist.