Post-secondary education is definitely an investment into ones future, it’s taken as an investment since the most educated have an added advantage when in t comes to securing goods jobs. However, many of the post secondary education don’t have enough means to meet the huge tuition costs in our financial institution. This has lead to thousands of these students applying for students loans; this becomes the good and bad part if viewed from the beneficial and harmful hands respectively.
Credit cards are classified as plastic money by financial institutions and in the wide financial markets. They are convenient to use and to issue however they come along with a number of challenges especially when extended to non income earners who among many include students.
In our country Canada, the higher education has decided to issue post secondary students with credit cards to enable them meet they daily needs to avoid distraction from their studies. Many of them have been wise in managing their credit while the other lot has been reluctant to accept sound ways of managing the credit.
According to Canadian Federation of Students an average Canadian student graduates after four years in university with about $27,000 of debt. This trend is not appealing in a country where job prospects for graduates are so minimal. This shows that after graduation the students will be unable to find decent sources of income to enable them services such credit which will translate to government being unable to finance future post secondary education students for higher education as funds to plough back to the program will be unavailable. This puts the future of this great country in a very awkward situation where most individuals will be unable to access higher education solely due to lack of finances.
Since most students have ended up in a spree spending their credit are so huge and they end up in so huge debt and as it has been defined, debt is a trap which man baits and catches himself. Most students are unable to service such debts, and being unable to find jobs they end up in a desperate situation of an indebted jobless young generation.
Highly indebted young men and women have been unable to lay a good foundation for their household progress as their investment saving are so low and thus their contribution towards the economy regardless of their advanced education becomes less. As argues by Economist Patricia Croft, “if they are saddled with a lot of debt they aren’t going to contribute in a significant way in the structural development of our economy” says economist Patricia Croft, founder of Croft Consulting.
Surprisingly most students borrow so much money to finance the ever increasing tuition hoping that after graduation they will be able to secure well paying jobs that will help them service the loans when the amount becomes due costs. The awkward misfortune is that this turns out into an ugly scene of a surprise where the graduates get low entry level salaries that cannot even sustain their daily needs or more badly they remain jobless even when such amount becomes due.
Current data shows the unemployment rate for youths between ages 15 to 24 stands at 14.3 per cent; this translates to an equivalent potential rate of default which means most of the government fund is being dissipated.
It’s absolute that highly indebted individuals cannot pass for credit if they are rated on their ability to service such loans, and if financial institutions advance loans to such persons they attract so much risk due to probable default, this would definitely cripple our financial market structures.
Credit extended creates a lot of problems to the principal bearers, the students, and this spills over to the family as a whole since some parents find themselves paying such due amount and interest for their children’s where most of them are unable to service whole or part of the due credit.
Most student are deducted such loans from their income this means that their net income is very low, more so the deduction by government inform of income tax as such interest is allowable for taxation, this translates to deficit in the government budget and therefore the government is unable to deliver on its responsibilities efficiently, It may however borrow to finance the deficit which raise the countries debt and this doest auger well for the economic status of any country.
However there a number of alternatives that student can adopt to avoid such huge debts caused by excessive reliance on huge debts.
It would be wise for students to utilize such funds to start small investments that would guarantee them some returns that will in the long run reduce their reliance on credit; this will also ensure their smooth transition from school.
It would be wise for students to understand their standards, their expected economic status in the future before applying for any credit. This will allow them apply for credit that is within their means of repaying and will support their education with utmost comfort.
In summary, financial challenges facing most graduates in Canada care founded on the expensive credit extended to them. Finally individual fiscal discipline is the prime control of avoiding philanthropic spending financed by credit.
References:
Megan, E. S. (2010). Cashless College: Credit card debt among college students and the leadership role of academic institutions. Arizona: University of Phoenix press.
Sheldon, W. (2009). The Canadian student: Financial survival guide. Ontario: Insomniac press.
Sarah, D. (2012). Sink or swim: Get your degree without drowning in debt. Ottawa: Dundurn press.
Jennifer, L.H (2008). The ambiguous effect of undergraduate debt: Extending the human capital model of graduate school enrolment. Ontario: OBPO publishers.
