As universities and colleges open their doors for another school year, the conversation among students, parents and financial planners is once again turning to the rising cost of a postsecondary education. With tuition on the rise, an economy on shaky ground, and the growth of precarious and part-time work, experts are worried that young people aren't thinking enough about saving money.
"Students and their parents aren't putting enough planning into how they're going to fund their education," said Scott Hannah, CEO of Credit Counselling Society, who every fall speaks to students entering university and college about ways to manage their finances.
For the past decade, tuition has been climbing. According to Statistics Canada, the average undergraduate student paid $5,959 in tuition in the 2014-15 academic year, up 3.3 per cent from the previous school term. Ontario students paid the highest average tuition in Canada at $7,539, followed by Saskatchewan at $6,659. But those costs don't include textbooks, rent, utilities and other living expenses. And with high costs and lack of work experience, many students turn either to their parents or student loans to help finance their education.
While financial aid may be necessary, experts warn that large sums of money, paired with poor personal finance skills, can lead to wasteful spending, further increasing the burden of student debt.
As 20-year-old arts and science student Aleksandra Popovick heads into her third year at Queen's University, she said she's trying to pay more attention to her finances. On top of the cost of tuition, she pays $600 a month for rent and between $50 and $100 for utilities, in addition to groceries and social activities. She estimates she's spending between $900 and $1,500 a month, but she knows her parents are willing and able to pay for her education.
"My entire family values education, so it was a no-brainer," she said. But while having her parents pay for her education is less stressful, Ms. Popovick admits she pays less attention to the costs because of it.
"Sometimes I lose the idea of how much I'm spending," she said, though she's trying to keep track this year through budgeting the money she earned over the summer working at a bank and keeping an eye on her expenses with an Excel spreadsheet.
There's a real difference in the spending habits of students depending on whether they are paying for their own expenses, Mr. Hannah said.
"It doesn't necessarily promote good financial habits if parents are paying," he said. "By making [students] pay for their courses, they are far more cognizant of the value of a dollar."
Student loans are also an issue. A report published in March by the Canadian Federation of Students noted that the average Canadian student now graduates with $28,000 in debt. And that number doesn't factor in the compound interest that begins six months after graduation and varies depending on the length of time it takes to pay back the loan. Mr. Hannah said that can take a decade, delaying other life milestones.
Every year, students tell him they are out of money and late on credit payments, despite taking out loans. Some students, he said, see a loan as free money.
"An 18-year-old who has never had more than $1,000 to their name and suddenly they have maybe $4,500 and have to manage those funds to last through the term," Mr. Hannah said. "Without a game plan, I'm not surprised that they don't have the skill sets or ability to manage properly."
More emphasis needs to be placed on the career prospects of their program, Mr. Hannah said, something 25-year-old Marisa Stefanelli agrees with.
"I had no idea what I wanted to do in high school," said the third-year therapeutic recreation student at Brock University in St. Catharines, Ont. Despite considering herself financially responsible – having held jobs since the age of 14, worked through school and budgeted her money – she switched her career path and school several times, and has $45,000 in total debt, which includes $20,000 in student loans and $25,000 on a line of credit.
"I'm one of four siblings, and having our parents pay for all of us just wasn't an option," Ms. Stefanelli said.
Mr. Hannah said that if financial assistance is required, there are things students can do to lessen the load, such as taking advantage of bursaries and grants, reducing living costs by living at home or with roommates, using public transit instead of a car, buying used textbooks instead of new and setting a discretionary spending budget each week that can't be exceeded.
Most important, if students don't have strong financial skills, they should invest the time to develop them. "We need to think about the long-term implications of spending," he said. "Making decisions when you're 18 or 19 years old will have an impact well into your 30s."