CIBC Centre examines growing concern over student loans

A growing concern for graduating students around the world is how they will repay student loans, which have accumulated over the course of their studies.

According to new research from Western’s CIBC Centre for Human Capital and Productivity, a student borrower in Canada, on average, faces more than $10,000 in Canada Student Loans Program (CSLP) debt upon graduation. More shockingly, nearly 15 per cent will find themselves in default at some point within the first three years after leaving university.

In a policy brief, Student Loan Payment Problems, Lance Lochner, CIBC Centre director, Todd Stinebrickner, CIBC Faculty Fellow, and Utku Suleymanoglu, Western graduate student, examine two recent CSLP surveys to determine which factors contribute to student loan delinquency and default. Lochner says post-education earnings and family support are centrally important to avoiding debt defaults.

“Roughly half of all students defaulting on their CSLP loans earned less than $10,000 per year at the time they entered default,” said Lochner, a professor in Western’s Department of Economics. “Students with low incomes are significantly more likely to experience repayment problems if they cannot draw on financial support from their families.”

Other important factors include student debt levels, educational attainment and institutional choices, and beliefs about the importance of repaying student loans.

The policy brief is based on CIBC Centre Working Paper 2013-3, also by Lochner, Stinebrickner and Utku Suleymanoglu.