Ray of light

R. tipped me off to a sea change in Canadian student loan policy today, which finally allows for the possibility of income-contingent debt repayment.  The new regulations will limit a borrower’s payments to no more than 20% of their gross household income and cap their total repayment period at 15 years, after which time any remaining debt will be forgiven.  Apparently, a similar policy was adopted in the United States last fall, although the payments of American borrowers will be capped at an even more generous 15% of discretionary income and additional amounts will be forgiven for those involved in public service.

Although this is extraordinarily good news for low- and middle-income students, I can’t help but wonder why it took a full-blown economic crisis for our governments to reform the student loan system.  That’s a largely rhetorical question, of course; as I’ve argued elsewhere, education was subject to the same neo-liberal ideology that has brought the global financial system to the brink of collapse, and student loans were managed in much the same way as sub-prime mortgages, which we now know were the catalyst for it.

The problem was and remains the gap between the average earner’s income and the cost of post-secondary education, which, like housing, is prohibitively high.  While government has made the management of student loan debt somewhat less arduous, it has done nothing to resolve this core issue.  Already, some American colleges are rejecting qualified low-income applicants in favour of less qualified students who do not require financial aid, and with both public and private funds evaporating, the situation can only get worse.

Still, I am relieved to know that I will no longer be expected to make $600+ monthly payments to my lending institution irrespective of my future employment status or income level.  This means that I can afford to live on a modest salary after I graduate, and the future, while still uncertain, is just a shade brighter because of it.  Phew!