Excerpt:
A Nova Scotia court has ruled that a former university student does not have to pay back tens of thousands of dollars he borrowed from a bank.
Alfredo Abdo won his case in bankruptcy court this week, with the court concluding that the Royal Bank of Canada was at least partly responsible for what happened.“I question whether advancing all that money at one time was prudent banking on the part of RBC,” registrar Richard Cregan said in a written decision.
Abdo was a promising engineering student at Dalhousie University in September 2004. He had good grades, a scholarship and lived at home with this family.
In his second year, at the age of 19, he borrowed $20,000 from RBC though a student line of credit. He made bad investments online, according to court documents, and he accepted an offer from the bank for another loan of $30,000 to solve his problem.
Abdo started having dizzy spells. Finding his engineering program very stressful, he switched to commerce. But he dropped out of university in his third year.
The dizziness and social anxiety never went away, Abdo said, and therefore he couldn’t work or pay back the bank loans. He filed for bankruptcy last November.
The Canadian court probably thinks that they are compassionate, good people sticking it to the corporations. But actually what they’ve done is caused the banks to think a second time about making loans to borderline cases, so that the poorest students will now be refused student loans. If the courts refuse to enforce contracts signed by both parties, then the banks just won’t enter in to those contracts.
Down in New Zealand, they have the same problem.
Excerpt:
Thousands of people with student loans are defaulting on payments, leaving the Government to chase hundreds of millions of dollars.
More than one in five borrowers – or 114,000 people – have overdue payments and thousands of students are leaving tertiary education with no qualification and big bills.
The Education Ministry’s student loan scheme annual report shows that $306 million in payments is overdue, a $100m increase from a year ago.
The substantial growth includes a big rise in the level of payments owed by people now living overseas, more than doubling to $114m.
New Zealand University Students Association co-president Sophia Blair said it was not surprising that students with loans were heading overseas and letting the bills mount. “You can earn higher wages [overseas].”
[…]Total student loan debt had reached $10.2 billion and is predicted to grow by an average of $875m a year to more than $20b by 2022.
The report also showed about 39 per cent of students who left tertiary education with a loan did so without achieving a qualification.
About 8000 students with loans who left study in 2005 had nothing to show for it by 2007.
New Zealand, if I understand correctly is a fairly left-wing country, which probably subsidizes tuition and taxes income. So, students would be incentivized to game the system by taking out loans backed by the government, and then leaving to work abroad in more capitalist economies. Socialism encourages people to game the system and avoid taking responsibility for their own decisions.
UPDATE: New Zealand blogger Madeleine Flanagan wrote to me in an e-mail:
It’s old news, it has been the same way for years and years and that story comes out every year but as always it is interesting.
Your assessment is pretty spot on. In New Zealand student loans are pretty much available to anyone who applies for one. Acceptance at University or an alternative tertiary institution is not difficult, especially once you are over 20 as the institutions want your money – they get more funding the more students they have. Student loans are interest free and you do not have to begin repayments until you finish study. The state funds something like 75% of the tuition fees directly anyway so the loan is only for 25% of the actual cost. There are benefits available for living costs and if you don’t qualify for them you can borrow living costs and have them added to your student loan. So it is set up to make it easy to get into debt.
Being a fairly left-wing country there is a lot of regulation in the market place so of course you can pretty much always earn more overseas and once overseas the state cannot garnish your wages to get your student loan repayment.
The system has some fairly bad holes in it. For example, people who are being funded for Uni by they employer, like I was pre-accident, to study can take the cash for tuition fees from their employer, invest it and then take out an interest free student loan to pay their tuition fees. At the completion of study they then pay off the loan with the invested funds and pocket the interest – compliments of the taxpayer. Only students with cash coming from somewhere can do that as your student loan gets paid straight to the education provider apparently a lot of students with wealthy parents do this too.
As if this situation were not bad enough, organizations like New Zealand University Students Association (NZUSA), quoted below whinging about the level of pay rates in New Zealand , typically also whinge that education is not “free” anymore like it used to be when the politicians went to Uni! They argue that being educated to tertiary level benefits society so therefore society should pay for all of it (and have much higher wages).
New Zealand is crazy.
WINTERY KNIGHT 