Study: The financial impact of student loans

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As tuition fees have risen, more students have relied on student loans to help finance their postsecondary education and debt loads have gone up. This situation in turn has had an impact on individual students' financial positions after graduation.

This study, based on data from three different surveys, found that well over one-half (57%) of the graduating class of 2005 had student loans, up from 49% 10 years earlier. Average student debt on graduation rose from $15,200 to $18,800 during the same decade. Also, the proportion of borrowers who graduated with debt loads of at least $25,000 increased to 27% in 2005 from 17% in 1995.

Among postsecondary graduates, borrowers did not differ significantly from non-borrowers in terms of employment rates, total personal income and the likelihood of having a registered pension plan.

However, borrowers had a significantly lower probability of having savings and investments than non-borrowers. Analysis showed that among postsecondary graduates aged 20 to 45 in 2007, 42% of those who had borrowed money to finance their schooling had savings and investments, compared with 52% of other postsecondary graduates, all other factors being equal.

Borrowers with postsecondary education were less likely to own their homes, and when they did, they were slightly more likely to have a mortgage than non-borrowers with postsecondary education.

According to data on a group of postsecondary graduates aged 20 to 29 from the 2005 Survey of Financial Security, those with and those without student loans had similar average total personal debts. But postsecondary graduates with student loans had, on average, lower assets and correspondingly lower net worth than those who did not have student loans.

The results suggest that, while student debt continues to affect individuals' finances after graduation, borrowers who complete their postsecondary education received labour market returns to their education similar to those of non-borrowers.

Moreover, both groups of graduates have fared much better in the labour market than those with less education, including those with partial postsecondary studies.

Note: This study, published in the January 2010 edition of Perspectives on Labour and Income, examines the financial situation of postsecondary graduates who borrowed money to finance their education compared with their counterparts who did not do so. It also examines other characteristics such as personal income, savings and investments, the presence of a retirement pension plan, home ownership, assets, debts and net worth for student loan borrowers. It is based on the latest data from the National Graduates Survey (class of 2005), the Survey of Labour and Income Dynamics (2002 to 2007) and the Survey of Financial Security (2005).

Definitions, data sources and methods: survey numbers, including related surveys, 2620, 3889 and 5012.

The article "The financial impact of student loans" is now available in the January 2010 online edition of Perspectives on Labour and Income, Vol. 11, no. 1 (75-001-X, free), from the Key resource module of our website under Publications.

For more information, or to enquire about the concepts, methods or data quality of this article, contact May Luong (613-951-6014; may.luong@statcan.gc.ca), Labour and Household Surveys Analysis Division.

Study: The financial impact of student loans

As tuition fees have risen, more students have relied on student loans to help finance their postsecondary education and debt loads have gone up. This situation in turn has had an impact on individual students' financial positions after graduation.

This study, based on data from three different surveys, found that well over one-half (57%) of the graduating class of 2005 had student loans, up from 49% 10 years earlier. Average student debt on graduation rose from $15,200 to $18,800 during the same decade. Also, the proportion of borrowers who graduated with debt loads of at least $25,000 increased to 27% in 2005 from 17% in 1995.

Among postsecondary graduates, borrowers did not differ significantly from non-borrowers in terms of employment rates, total personal income and the likelihood of having a registered pension plan.

However, borrowers had a significantly lower probability of having savings and investments than non-borrowers. Analysis showed that among postsecondary graduates aged 20 to 45 in 2007, 42% of those who had borrowed money to finance their schooling had savings and investments, compared with 52% of other postsecondary graduates, all other factors being equal.

Borrowers with postsecondary education were less likely to own their homes, and when they did, they were slightly more likely to have a mortgage than non-borrowers with postsecondary education.

According to data on a group of postsecondary graduates aged 20 to 29 from the 2005 Survey of Financial Security, those with and those without student loans had similar average total personal debts. But postsecondary graduates with student loans had, on average, lower assets and correspondingly lower net worth than those who did not have student loans.

The results suggest that, while student debt continues to affect individuals' finances after graduation, borrowers who complete their postsecondary education received labour market returns to their education similar to those of non-borrowers.

Moreover, both groups of graduates have fared much better in the labour market than those with less education, including those with partial postsecondary studies.

Note: This study, published in the January 2010 edition of Perspectives on Labour and Income, examines the financial situation of postsecondary graduates who borrowed money to finance their education compared with their counterparts who did not do so. It also examines other characteristics such as personal income, savings and investments, the presence of a retirement pension plan, home ownership, assets, debts and net worth for student loan borrowers. It is based on the latest data from the National Graduates Survey (class of 2005), the Survey of Labour and Income Dynamics (2002 to 2007) and the Survey of Financial Security (2005).

Definitions, data sources and methods: survey numbers, including related surveys, 2620, 3889 and 5012.

The article "The financial impact of student loans" is now available in the January 2010 online edition of Perspectives on Labour and Income, Vol. 11, no. 1 (75-001-X, free), from the Key resource module of our website under Publications.

For more information, or to enquire about the concepts, methods or data quality of this article, contact May Luong (613-951-6014; may.luong@statcan.gc.ca), Labour and Household Surveys Analysis Division.