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Scholarships good, credit cards bad

by Archives March 2, 2005

HAMILTON (CUP) — With many students incurring record debts, universities and colleges across the country are taking a firm stance against mobile phone and credit card companies that target students on campus.

Some post-secondary institutions — like Fanshawe College in London, Ont. — have taken the dramatic step of banning credit card companies from advertising on their campuses altogether. Fanshawe’s financial aid office recognized a trend of students reporting significant credit card debt on their bursary applications.

“While (credit card) companies often claim that there are low limits — like $500 — on their student cards, these limits can be increased without warning,” said Tracie Long, manager of McMaster University’s financial aid office. “We’ve had numerous cases of students with very large expenses on their credit cards. Even information on the huge interest costs isn’t often supplied to the students up front.”

A 2001 study commissioned by the federal government’s Millennium Scholarship Foundation found that four out of 10 students have accumulated debt on their credit cards, with 24 per cent of those carrying credit card debts up to $500, and 19 per cent carrying credit card debts over $2,500.

John McGowan, business manager of the McMaster student union, agreed that credit card debt is a growing concern for many students.

“In my ideal scenario, students should be educated about the debt, instead of sold the debt,” he said.

Along with the burden of credit card debt, mobile phones also mean heavy bills for debt-saddled students. “Cell phones are a much larger problem than students realize,” said Long. “They rope you into three-year contracts, and while $20 a month doesn’t sound bad, often the actual bills are significantly larger.”

According to the National Graduates Survey on Student Debt released by Statistics Canada, students graduating in 2000 had an average government student debt of $19,500 for a bachelor’s degree.

“Forty-five percent of students graduating with bachelor’s degrees had government student loans,” said Long.

“Moreover, in 2003-2004, McMaster received more than 7,400 OSAP applications,” Long continued. “Approximately 74 per cent of students who applied for OSAP were eligible for funding.”

“Post-secondary education can be a large expense, which is why we encourage students to prepare well in advance with their parents for the anticipated cost,” said Roberta Hague, vice-president of retail loans at Scotiabank.

“As a starting point, look for free money in the form of scholarships. Then students might use income from part-time or seasonal employment, and turn to their parents for assistance. If these resources don’t cover expenses fully, then consider government student loans,” said Hague. “When these options have become exhausted, talk to a banker about the best options they may have available for you to meet your needs.”

Although many students resist the idea of having to be saddled with so much student debt after they complete university, Long noted, “while the standard repayment schedule for loans is 10 years, 22 per cent of the bachelor’s degree graduates had their debt paid off within two years of graduation.”

No matter how long it takes to repay, Long recommended Ontario students apply to the Ontario Student Assistance Program every year.

“It opens up additional opportunities in terms of bursary and work program assistance. It may also provide an additional source of funding to help meet some unexpected education costs. It will definitely help in terms of establishing realistic budgets for the school year,” said Long.

Financial aid officers and bank officials all stress the importance of shrewd budgeting and planning to avoid excessive debt, and to maintain a good credit rating. Long also noted learning to keep accurate financial records now will help students manage their loans when they graduate.

“Protect your credit rating,” said Long. “Never allow loans to go into default; investigate repayment options and interest relief with lenders to keep loans in good standing.”

Even though learning to balance a budget and taking on a loan can be difficult, tuition fees and monthly rents are not the only worries that students face in their fight against debt. However, most students have no regrets.

“It’s definitely worth every penny,” said Michelle Bloomer, an English major. “I always thought that the whole idea of going to university is to try something new and meet new people.”

Jen Hanson, a student at Brock University, emphasized the importance of saving money, especially if a student wants to maintain a social life while away at school.

“When I go out, it’s usually planned well in advance and I’m able to save. I also have a separate account for the money I’m saving up for big things,” said Hanson.

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With files from Mark Quaglia and Mark Kennedy

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