VANCOUVER -- "Leave me alone, already. I'm doing the best I can." This is probably a typical Canadian reaction as yet another media person, banker or financial adviser tells us once again we have too much debt and this debt is going to ruin our country as a whole and our personal futures in particular.
Nowhere are the horrors of debt more vilified than when the debt is held by newly graduated and frequently unemployed students. Young people should not have to begin their adult lives with tens of thousands of dollars of debt looming over their heads, even more so when their work options do not contain the secure, well-paying jobs they had hoped to get after graduation.
How are they going to buy a house, start a family and do the things that keep the country going?
Student debt is a problem in the U.S. as well as Canada. U.S. President Barack Obama thought he had a solution. Universities and colleges should dramatically reduce the tuition fees they charge. Then students would not need to borrow so much to get their education. He forgot, however, it costs the educational institutions money to provide education.
If students pay less, someone else has to make up the difference and it won't be governments on both sides of the Canada/U.S. border trying to balance budgets and reduce their own debt.
A better solution would be to give incoming students the tools they need to avoid getting into the high debt/low income trap in the first place.
First, we have to make a distinction between consumption and investment. If you are going to school to expand your mind, to be fascinated by learning new and exciting things or to enjoy time with friends while postponing getting a job for a few years, then that is consumption.
If you are going to school to get the skills required to meet your future needs, such as food, shelter, raising a family, and maybe even the occasional vacation, then that is investment.
Student debt can be justified -- in fact, even encouraged -- if it is for investment purposes because it can then be expected to generate the income needed to repay the debt and more. It is debt for consumption purposes that gets us into trouble.
Unfortunately, many students and parents are not clear about the purpose behind getting an education. At one time, getting a degree meant -- besides four years of having fun and maybe even learning something -- landing a good job upon graduation, but that is no longer true.
In fact, it has not been true for at least two generations.
A degree today has to be understood to be an investment. Students need to do their homework and ask some searching questions well before they register. In what fields am I likely to find work? Who will hire me? Where are my prospective employers located and how much do they pay?
Maybe students should even go and talk to some potential employers and see what they look for before enrolling.
Better to find out now rather than after graduating deep in debt.
Too many students still treat education as a consumer good, picking courses they like or because they are not offered too early in the morning. It is usually only in the final semesters students start looking for a return on their "investment" but by then it is often too late.
According to a study by the Bank of Montreal, however, there is some light at the end of the tunnel.
The study reports while less than a third (29 per cent) of post-secondary students expect to get a job in their field on graduation, almost half (46 per cent) now have a backup plan. If no one will give them a job, they will create their own by starting a business.
This is good news. Canada will benefit from emergence of young, educated entrepreneurs. Let us hope they have learned the difference between investment and consumption and are aware of the pitfalls of debt as they get their businesses going.
Roslyn Kunin is a consulting economist and speaker and can be reached at www.rkunin.com.