Attention to the student debt crisis in Canada received a headline today in the Vancouver Sun under the title of Growing Number of Students rely on Food Banks.

This is a special category of debt that highlights the financial struggle of those without wealthy parents or shall we say the overwhelming majority of students. It reminds me of the origins of student loan funding in the 1960s.

The student loan program originated in Canada partly because of the wave of social justice that swept through governments and society seeking out fairness and equality for all in the 1960s. It was noticed that only the wealthy were attending the publicly funded universities. The poor and  middle income families could not afford to attend.   

The early pioneers for a more just society, in many respects, embarrassed governments into realizing that publicly funded educational institutions should be affordable and available to basically everyone in society, not just the aristocracy. 

The birth of student loan program became a bit of a compromise between free post-secondary education for all and partially subsidized financial assistance by way of a student loan for the non-wealthy.

The compromise was this: the student loan was affordable, tuition was low and the cost of living was reasonable.

Bursaries and scholarships also played a significant role in the funding paradigm that helped so many attain a post-secondary education.

It wasn’t until the 1970s that the debtor-creditor relationship first began to sour. A few student loan debtors didn’t repay the student loans. This irked an emerging debt collection mentality that held the belief that if you didn’t pay your debts then maximum punishment should be inflicted upon the debtor. No mercy should be granted to the debtor. No review of the extenuating circumstances was necessary. Just punishment. Harsh, severe and unforgiving punishment.

This was a time, the 1970s, when the total consumer debt in Canada excluding mortgages totalled $20 billion. Today it’s over $530 billion.

The debt collection mentality never seemed to mellow with student loan debt while in the wider society, commercial creditors balanced their very miniscule losses to their enormous profits. In fact, the banks and governments in the 1990s preferred to outsource the nastier collection problems to collection agencies.

The Bankruptcy and Insolvency Act was reformed in 1992 to, in part, to remove the punitive element to debt problems and insolvency, streamline the discharge process for both debtors and creditors, and encourage settlements and proposals. By this time, the old school notion that debt and debtors were bad and needed to be punished if they defaulted on their debts had undergone a societal overhaul. We had become a credit society where debt was a normal and a socially accepted part of our lives.

To make a long story short, in 1997-1998 the student loan debtor was isolated from all other debtors in bankruptcy and received punishment more severe than any other debtor in bankruptcy except for those who committed serious offences. Student loan debtors were denied a discharge from a bankruptcy for 10 years.

The early efforts of governments to provide affordable funding for the poor and non-wealthy families for post-secondary education had long since left the building. The student loan debt along with consumer debt had grown to almost $200 billion in the 1990s. The attitudes towards debt and  debtors had indeed changed in bankruptcy, in borrowing and in lending. The amounts lent to students had long abandoned the principle of affordability.

In the Vancouver Sun article, a picture is painted about hundreds of UBC students attending food banks who cannot afford to buy food. A similar phenomena unfolds at Simon Fraser University.

The cost of living, especially high rents and high tuition fees are cited as the primary causes for the financial struggles for non-wealthy students.

This precedes the mountain of debt that awaits many after graduation.

Despite the many differing opinions on student loan debtors, for sure, the pioneers of social justice in the 1960s did not foresee this outcome.

Starving students are a few good reasons to go back to our roots and rethink the costs of post-secondary education.  The mountain of debt that follows is another.

Nothing like waking up on a Friday morning to find out that the Bank of Canada governor says house prices are overvalued by 30 %.  As reported in the Vancouver Sun, Stephen Poloz, the Bank of Canada Governor said, “The vulnerability associated with household indebtedness is edging higher and the overall risk to financial stability in Canada is slightly higher…..house prices overvalued 30%”

Yikes.

Hidden behind the carefully worded text is another warning. As reported, “The bank continues to expect a constructive evolution of imbalances in the household and housing sectors as the economy improves and interest rates begin to normalize.”

I am quite bewildered at why there has been no comments from the media or anywhere else at the impossible task for a debtor (Greece) to successfully negotiate a fair settlement with their creditors (European Union). I mean, the last time the debtor (Greece) had difficulty paying its creditors (the EU), the entire country (Greece) was in turmoil as a direct result of the harsh repayment terms from the previous loan.

This time, the President of Greece was brought before what looked like a gladiator arena lined with angry creditors yelling, belittling, humiliating and demanding what probably will turn out to be a pound of flesh.

This behaviour reminded me of the creditor meetings in a bankruptcy in the past where the debtor and their assets would be carved up into little pieces and punished to the full extent of the bankruptcy law. Sometimes it would be a single mother on social assistance or a student loan debtor being subjected to angry creditors who wanted to inflict pain and suffering onto the debtor. That ultimately, was more important to some creditors, more satisfying, than a realistic repayment plan that would help both the insolvent debtor and the creditors avoid a bankruptcy.

The difference in the comparison between individuals and an insolvent country above is that the insolvent person was shielded by a mediator like a bankruptcy trustee who had the authority to broker a fair and realistic deal to keep both the debtor and creditor out of bankruptcy, or pull the plug and end the negotiations for everyone if no agreement could be reached.

I don’t know why the European Union countries do not understood the rules of bankruptcy and the prudence of having a neutral third party – some agent from a country like the US or Canada skilled in corporate insolvencies – to review the circumstances and make recommendations that would benefit both the debtor and the creditors.

After subjecting Greece to angry and at times insulting reprimand by some creditors, an announcement was made today that harsh new conditions would be imposed on Athens in return for it to be allowed to keep the euro as its currency and avoid total economic collapse.

It looks like the irresponsible debtor has been blamed for all of the economic ills and the creditor has done nothing wrong. It even appears that the creditors are doing a big favour for the debtor by lending a further 86 billion euros in fresh loans on top of the 323 billion euros it has received from two previous bailouts.

What hasn’t been mentioned is how realistic the new reforms for debt repayment are and how a nation of individuals and families are being punished for everything that has gone wrong in the past. What hasn’t been mentioned is that both the debtor and creditor benefit from a solution outside of a bankruptcy, not just the debtor.

Essentially, it looks like Greece will be treated like a company in receivership. Assets will be sold for the benefit of creditors to pay down debt - Greece will be required to sell off public companies and property worth 50 billion euros. What could be labeled the creditor appointed receiver, Eurocrats and IMF officials, will be put into a position to ensure compliance with the creditor’s demands.

What troubles me is how creditors’ rights from foreign countries can transcend democratically elected parliaments and how the creditor can seize public property for the repayment of creditors.

As mentioned above, the debtor was all alone in a colosseum full of angry creditors, some wanting to punish the debtor, some wanting an economic death penalty-all creditors acting in the best interest of themselves without any consideration for the debtor, the individuals and families, the historical circumstances that caused the economic crisis or the viability of the demands being made for repayment.

The debtor had no chance. The debtor was outnumbered. As reported in the Vancouver Sun, one Greek businessman lamented, “Basically, we’re being told to sign everything. Whether we agree or not, I only know that I will be paying for this today, tomorrow and for many years. I don’t know whether to laugh or cry.”

It seems to me that the cure may kill the patient. Perhaps more troubling. Nobody sees anything wrong with a creditor doing whatever it has to do to collect its debts. That is a big step back in history. Debtor’s prisons are not far behind.

This certainly qualifies as a Greek tragedy.

Today there is good and bad news.

The good news came from a StatsCan report about all of the household debt in Canada that many  experts have been complaining about – how Canadians have been accused of being bad money managers but guess what? This report confirms that we are not broke and precariously dangling from a cliff of troublesome household debt, but quite the opposite. Canadians have significant assets to back all of the debt – and more. There is a net-worth surplus.

As published recently by the Vancouver Sun, a former chief economic analyst for Stats Can, Philip Cross, revealed that two-thirds of the $1.8 trillion in household debt were mortgages.

Finally someone agrees with what I’ve been saying for many years.

Recently an article in the Vancouver Sun got my blood boiling.

It was a story about a man in St. Catherines Ontario who lost his home, his car and many of his possessions. A fraudster emptied his bank account, mortgaged his home and in total stole $200,00 leaving the senior with $20 to his name. Although they could not provide any details, the police called it the worst case of elder abuse they had ever seen.

It seems that the fraudster was someone the senior knew and trusted – an employee of the credit union where he banked.

Abuse generally and financial abuse in particular against seniors often go undetected or unreported.  A press release posted a few years ago by the BC Association of Community Response Team’s  gave an unforgettable example of financial abuse against seniors:

 “I’m 91. Once I was an educator, and had a decent life. What I am today? An abused senior. Oh, please don’t tell anyone. If my kids find out I’ve been talking, there’ll be hell to pay. I don’t  want them to get into trouble. Everyday it gets worse—last month I had $300,000 in savings. Now there’s only $5000 left. It’s so hard to say NO to them. They yell and use the F word. I don’t know where they learned to talk like that. I’m so ashamed.”

 I thought I might share a few tips about how seniors can protect themselves.

1. If  you feel pressured or uncomfortable - hang up the phone.

2. 4. Never send money or give your credit card, account number or social security number to an unfamiliar party. Wait till you have received written material about any offer or charity.

5. Lock your Mailbox.

6. Have any contracts reviewed by a trusted professional on your side before signing anything.

7. Take your time making any financial decision.

8. When out, leave your purse, wallet, credit cards, and identification home whenever possible. Carry little cash.

9. Don't leave your purse in a shopping cart unattended for even a moment - including while you are loading packages

10. Arrange for government and pension checks to be directly deposited to your bank.

11. Examine your credit card bills and account balances to look for unauthorized charges or withdrawals.

12. Use a shredder to dispose of documents containing private information and pre-approved credit card offers.

13. Be stingy with information if someone calls or sends you an unsolicited e-mail.

14. Avoid strange ATM's.

15. Add password protections to your bank and brokerage accounts.

16. Monitor your credit report.

17. Enroll in an identity theft protection and restoration program

Danger Signals for Financial Abuse

  • Sudden removal of large sums of money from a bank account
  • Inability to pay bills, buy food or personal care items
  • Fear or anxiety when discussing finances
  • Visits by a family member only when check arrives
  • Inaccurate or lack of knowledge of personal finances
  • Unexpected revision of a will, or sudden sale of property

How can I Prevent Becoming a Victim of Financial Abuse?

  • Maintain a network of friends and acquaintances
  • Learn to recognize the signs of abuse
  • Be informed of personal assets, including property, bank accounts and possessions
  • Keep money in a bank, not in your home
  • Have pension checks deposited directly into bank account
  • Have Written repayment agreement before lending

The Better Business Bureau publishes a top ten list of scams to watch out for. Here is their most recent list.

1. Top Auto Scam - Automotive Online Pricing 
2. Top Emotional Scam - Disaster Charity Fraud 
3. Top Identity Theft - Remote Computer Repair 
4. Top Social Media Scam - Fake Facebook Friend Request 
5. Top Romance Scam – Catphishing/Online Dating scam 
6. Top Utilities Scam – Fake Billing 
7. Top Finance Scam - Online Affinity Fraud 
8. Top Sales Scam - Redirected Robocalls 
9. Top Big Data Scam - Big Box Breach 
10. Top Ad Scam - Fake Online Reviews

For further information go to http://www.bbb.org/mbc/bbb-top-10-scams/

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!


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