Manageable Student Debt Threshold Research: Final Report

Summary

A recent SRDC study, contracted by Alberta Enterprise and Advanced Education, addressed the conceptual and empirical aspects of student debt manageability. The Manageable Student Debt Threshold Research project used a number of methods to understand how debt manageability is conceptualized, measured, and incorporated into lending practices in Canada and other jurisdictions. The study also used Statistics Canada data to estimate the proportions of student borrowers that correspond to the varying definitions of manageability identified.

The study found that a range of concepts are used to gauge the manageability of student debt, from an “8 per cent of income” rule of thumb to more broadly-defined debt servicing ratios to measures based on the postsecondary education earnings premium. These concepts have been built into a variety of payment programs, such as the Canada Student Loans Repayment Assistance Plan, that use income tests to adjust the affordability of loan repayments.

The empirical analysis found that sizable minorities of student borrowers had repayments above most manageability thresholds. This finding was reinforced by the opinions of key informants, many of whom noted a connection between the manageability of student debt and the financial capabilities of borrowers.

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