A few months ago, we reported that increases in student debt in the 2000s did not keep up with tuition, owing largely to increases in student grant and bursary programs.

Yet the raw amount of student debt at graduation tells only part of the story. Thinking about debt in terms of balance owing can obscure more than it reveals; it’s also worth looking at debt from the lens of monthly student loan payments.

Given student loans’ fixed repayment period, monthly loan payments are based on just two things: the principal (the amount of debt at graduation) and the interest rate. Figure 1 provides the debt at graduation over time. Debt rose rapidly in the 1990s when loans were rising quickly and grant programs were being dismantled, but since then has stayed fairly steady. The most recent publicly-available data dates from 2009; to generate a figure for 2011, we have assumed a decrease in nominal debt of 4% based on observed changes in government aggregate lending over that time.

Figure 1: Average Debt Among Borrowers at Graduation in Canada for Bachelor’s Degree Graduates, 1982-2009 (in 2009 dollars)

Source: Statistics Canada’s National Graduate Surveys, Canadian University Survey Consortium Graduating Student Surveys

Interest rates on Canadian student loan programs are set by tacking a premium onto the prime rate. Between 1982 and 1990, CSLP charged interest of prime plus 1%; from 1995 onwards, it charged prime plus 2.5% (this is for a variable repayment rate; CSLP also offers a fixed rate of prime plus 5% that is much higher and, therefore, less frequently selected by students). A number of provincial programs offer lower interest rates; Ontario, for instance, charges just prime plus 1%. To keep things simple, we’ll use the higher CSL rate – just keep in mind that the figures we report below are, as a result, slight overestimates.

Now, while debt has been rising over the past few decades, interest rates have been falling. In the eighties, prime was consistently over 10%, while in the nineties it was mostly in the 7-10% range. Since 2000, as often as not it’s been below 5% and currently it’s bumping along around 3%. The resulting effect on student loan payments can be seen in Figure 2. 

Figure 2: Monthly Student Loan Payments in Canada, 1982 to 2011 (in 2009 dollars)

Source: Statistics Canada’s National Graduate Surveys, Canadian University Survey Consortium Graduating Student Surveys, CanLearn.ca repayment calculator, Bank of Canada

In other words, student loan burdens have been stable for over a decade and are even down slightly over the past five years thanks to the Bank of Canada’s recession-fighting policies. In fact, the average monthly payment is down 15% since 2006.

It’s easy to think of student debt as a single figure – the amount owing at graduation. And with inflation, that figure is always going to be rising. But a more nuanced approach tells a different – and less sensationalist – story.

Of course, an even more nuanced approach would also take into consideration graduates’ ability to pay. More on that next time.