By Sheryl Smolkin
Before your child heads off to university or college this year, you need to have a frank discussion about how much it will cost and how much you can afford to contribute to his or her tuition and living costs.
If you opened a registered educational savings plan (RESP) when Janice or Jasper was much younger, that nest egg will be a big help. Some young people have also had summer or part-time jobs for many years and have a healthy balance in their savings account.
But with the escalating costs of post-secondary education, chances are that most students will be looking to “the Bank of Mom and Dad” for some assistance, even if that only means living rent free while going to school in their home city.
According to the D+H Student Index survey of 752 Canadian high-school and post-secondary students, when talking to their parents about the cost of school, one in three students say the conversation revealed a gap between the cost of post-secondary education and the financial support their parents could offer. Students only realized the need to line up other sources of financing after having these family conversations.
Fortunately, it’s not taboo for Canadian families to talk about money. Four in five students (80%) say they don’t have any difficulty talking to their parents about money. For the majority of students (55%), the family discussion on how to finance post-secondary education happens in grade 11 or 12.
Reflecting on these conversations, Canadian students say if they could do it again, they would go in with a more realistic idea of the cost of post-secondary education (36%) and have the conversation earlier (26%).
According to Statistics Canada, on average, undergraduate students paid $5,772 in tuition fees in 2013-2014. Over four years, that is more than $20,000 for tuition, before considering other expenses such as books and additional academic fees or any living expenses.
Canadian students usually line up a variety of sources to cover the cost. The top five sources of funding are:
- 43%: Parents are paying
- 43%: Student savings
- 41%: Government federal and/or provincial loans
- 41%: Summer jobs
- 39%: Scholarship money or grants
When parents offered financial support over 1/3 of students said the support was unconditional. However in some cases students were required to get good grades (41%); work in the summer (39%); and/or work part-time during the school year (19%)
Three-quarters of students who took out student loans say they could not afford post-secondary education without one. Nine in ten (89%) say the loans helped them pursue their education and career goals.
A recent CBC article reports that Canadians graduate with an average student debt load of $25,000. But for many others the amount is much higher, particularly if they study for professions like law, medicine or engineering.
High debt loads are not only a financial stress but can delay the time it takes individuals or couples to reach certain milestones, such as having children, getting married or owning property.
Therefore, the sooner parents and children talk about and begin saving for post-secondary education, the better. To the extent possible, students should also be encouraged to select a field of study leading to jobs where there is a healthy demand for new graduates.