Falling grades and mounting bills

Rummaging through shelves of canned goods at a local food bank, University of Waterloo dropout Rick Kim finds himself in a place he never imagined.

“I’ve always been a pretty bright student,” he says.

In fact, he was top of his high school graduating class and received a scholarship to study nanotechnology engineering at the University of Waterloo.

Four years later, after failing and re-taking some classes, Kim could no longer afford his tuition and had to quit school. Now he serves beer at a Waterloo sports bar, making just enough to sublet a room in an apartment he shares with four friends.

In his mid-twenties and $32,000 in debt, Kim’s situation is not unique. One American study by the Bill and Melinda Gates Foundation found that more than one third of college dropouts listed an inability to afford tuition and fees as their major reason for leaving school.

Norah Foster, a credit counselor in Ottawa, believes the situation is similar in Canada. She says many students show up in her office near the end of term when money is tight and next term’s tuition is coming due. Like Rick Kim, they’re looking for a way to avoid dropping out, a situation Foster describes as one of the worst a young person can be in: burdened with student debt, but without a degree to get a well-paying job to pay it off.

Easy money

Kim arrived in Waterloo from Vancouver at the start of his first year of university with loans from the federal and British Colombia governments.

“It should have all gone to tuition but there were times I did spend the money on living expenses,” Kim says.

He readily admits he spent a lot of money going out to binge drink, as well on drugs at one point.

Student loans that land in a lump sum in a student’s bank account can easily be misspent, Foster says. “It just seems like easy money.”

After failing his first class, things got hard for Kim. He had been counting on a well-paying job through the university’s co-op program, but lost his co-op eligibility when he failed classes. Without any income, his debts from tuition and other costs piled up fast.

“After first and second year I started to realize I was walking on a tight rope,” Kim says.

One day, the tuition payment deadline passed and Kim was not able to pay. His student loans would not cover the total amount and his parents weren’t willing to help. Friends pitched in to make up the difference, but there was still an outstanding balance.

“Eventually, with all the loans I had to repay, and the outstanding balance that kept growing year after year … I was forced to end my education,” Kim says.

Norah Foster is sympathetic.

“You get a young person, they make a wrong turn or something, and all their hopes and dreams are taken away from them,” Foster says. “That’s not right.”

The financial illiteracy of the educated

Many Canadian young people head off to university without much of a clue as how to manage their money. As many as three-quarters of undergraduate students surveyed by the Canadian Alliance of Student Associations in 2010 didn’t know that interest on their student loans would begin to accrue immediately after graduation.

The federally appointed Task Force on Financial Literacy presented several ideas to address this problem when it reported to Parliament in February 2011. Seven of the 30 recommendations related specifically to young people, including one that called for mandatory money management counseling for any person seeking a government student loan.

This kind of compulsory financial education might have helped someone like Rick Kim, but to date, none of the task force’s recommendations have been implemented.

“It was hard for me to adapt [to university life] and it took me a while to find balance,” Kim says.

Maureen Jones, director of student awards and financial aid at the University of Waterloo, says many students are overwhelmed at university like Kim.

“Where I see some students run in to difficulty is not speaking to someone at financial aid early enough,” Jones says.

Given enough time, a financial aid officer can counsel students on their personal finances before tuition and other expenses, such as books and co-op fees, are due. Jones says there are also bursaries available to students like Kim whose finances are squeezed despite government student loans.

“We try to make every effort,” Jones says, students need to take the first step by planning ahead.

Kim did receive some bursaries, but ultimately, he still came up short and the debt continues to dog him. Kim’s outstanding university tuition  — about $5,200 — was recently sent to a collection agency and he has to regularly re-apply for interest-free status on his $32,000 worth of government student loans.

The whole experience has left Kim disheartened. For now, he’s just making enough to scrape by, let alone plan for the future.  Once a straight-A student, Kim’s now so discouraged he’s not sure he’ll ever want to pick up where he left off in his degree.

He’s proof that the resources available still leave room for smart young people to fall through the cracks.