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Editorial::

Misconception: the luxuries of student debt
By STAFF
The Beacon
Imagine checking your bank account to find an increase of $5,000. The money is not because it is pay day, or someone just decided they should put it in your account and you can do with it as you please.

It would be like winning the lottery � a large sum of money that was not produced by long hours of labour, nor purchasing a bingo ticket. A lot of cash just happened to wind up in your name and your control.

This is how the average student feels when they check their bank account and suddenly go from a poor student who eats Kraft dinner as a delicacy, to a rich kid buying everyone's shots at the bar.

No work, all play. It's like free money.

This is the production of the generation that believes debt is OK. Debt is good. It has no limit, it will never demand payback and it will not stop students from trying to purchase a home, be captured by high interest rates or attest to them saving up money for their children's college education.

Wrong.

Students who qualify for government student loans are not entitled to pay back any of that loan or interest while they are students. They have no payment plan. Making one unconsciously believe the money is not a loan, forgetting that some day, preferably six months after graduation, the student is responsible for paying back the exact amount borrowed, plus interest.

Students become used to loans. They see them as annual incomes that keep filling their bank account with money whenever the school term starts.

They believe the school work they perform and the classes they attend are the labour they have given in order to receive payment for rent, food, books and tuition.

Rather than figuring out an exact budget, students are applying for the maximum amount of student loans because they can.

Students are not pinching pennies; they are paying their bills and then having a good time.

According to Statistics Canada, student debt rose every year since 1990. Although, the tuition has risen as well. Therefore, loans have increased in accordance with the tuition fees. In Newfoundland, tuition has either dropped or remained stable. In Quebec there is also a tuition freeze. So, why are students increasing the amount they borrow, after they have paid their tuition?

In one anecdotal case, a student used a loan to purchase a $1,000 puppy and help pay for a car.

Another student used a loan to make a trip to a Third World country and help those less fortunate.

Although the money was used for a greater good, why was the student even granted the money in the first place?

Both students managed to pay for their high cost tuition, rent, bills and all other necessities to live and survive. But they had money left over to play and do as they pleased.

Rather than using the leftover money, and returning it to what they owe and putting in on the principal, they figured the money was already theirs and had to be spent.

Students are not prepared for the debits appearing in their bank account after they graduate. Just like the free money that appeared out of nowhere, the government takes their payment directly from your account, whether the money is there or not. They have the ability to overdraw anyone's account, if the person signed an agreement to pay the loan back after graduation.

The Web site www.canadastudentdebt.com helps students prepare for debt and budgeting. According to this site, more and more students are not aware of the consequences of debt because they do not have to face reality while they are attending school.

The Web site also states many people have paid thousands of dollars in interest but nothing on the principal and the loan system is a tax on the working poor.

Most students who graduate from an undergraduate institution are not educated for a specific trade and cannot use their education to receive a high paying job. Under graduate schools are usually a stepping stone towards further education that prepares students for specific jobs.

Therefore, after graduation from undergraduate institutes, some students do not want to continue going to school or gaining a trade. Rather, students are continuing to work their old summer jobs but turning them into lifetime employment that extends past August and into the year. These jobs usually pay low incomes and the student is forced to only make the minimum required payment on their student loan.

Students then produce a habit of minimum payments on their debt.

Most students are prepared to be in debt for at least 10 years, because they plan to always pay the minimum monthly payment, no matter what their income.

Debt is debt. Our generation of graduating students need to start making budgets and borrow according to what they need, not what they want. They are supposed to live a low-income lifestyle, walk to class, buy no-name products and save leftovers until they become questionably eatable. Students are meant to cut coupons, not backpack around Europe.

All students are known as poor students. So, start acting like it and be aware that money borrowed, is money spent.