Reduce Student Debt to Reduce Household Debt
At this year’s Annual Conference of the Canadian Economics Association, Armine Yalnizyan gave a presentation entitled “Surviving the Recovery:Â The Distribution of CanadianÂ Household Debt.” The panel was co-sponsored by the Canadian Association for Business Economics and the Progressive Economics Forum.
As Armine made clear in her presentation, household debt in Canada has steadily risenÂ over the past two decades.Â In 1990, the average Canadian household had debtÂ representing just under 90% of its personal disposable income.Â Today, that figure stands atÂ roughly 150%.
But some groupsÂ are affectedÂ more than others.Â The chart below (used in Armine’sÂ presentation)Â gives a breakdown of which age groups in Canada are most likely to hold household debt.Â Clearly, thoseÂ Canadians most likely to be in debtÂ are over the age of 25 and under the age of 45.
I can’t help but make two observations here.Â First,Â this is precisely the age group most likely to be struggling with student debt.Â Second, student debt in Canada has risen quite dramatically in recent years.Â According to the Canadian Federation of Students, average student debt for a four-year degree in Ontario has increased by 175%â€”from roughly $8,000 to roughly $22,000â€”in the past 15 years.
It thereforeÂ seems to meÂ that one very direct way for senior levels of government to tackle rising levels of household debt in Canada is to reduce student debtâ€”by reducing tuition fees, improving student financial aid programs or both.
Nick Falvo is a Calgary-based research consultant. He has a PhD in public policy.