Professional at a steep price

It takes a lot of creativity to finance second degrees
Pennington (Andrew Tolson)

From the Maclean’s Professional Schools Issue.

Last fall, when Kristen Pennington started at the University of Toronto faculty of law, she was surprised to learn of “an assumption” that students wouldn’t work during the school year. “I’d never been in school and not worked,” the 22-year-old says. “It wasn’t a question.”

During her first year in law school, Pennington held down three part-time jobs: she worked as an after-hours receptionist at the Canadian National Institute for the Blind, as an executive assistant for a lawyer, and as manager of the undergraduate residence at Glendon Campus, part of York University, where she also lived rent-free. “I worked for my room,” she says. “It was a great expense to cross off the list.” The commute from Glendon to U of T’s downtown campus, on public transit, was “45 minutes on a good day.”

Even with this income, Pennington took out loans from the Ontario Student Assistance Program (OSAP) to pay her $26,000 tuition, plus another $500 for books. She secured a $100,000 line of credit without needing her parents to co-sign—even though she had no credit score—and got her first credit card. Because of her financial situation, U of T knocked a few thousand off her tuition for the year. “I have two siblings doing their undergrad,” says Pennington, who comes from Windsor, Ont. “There was quite a lot of strain on my parents, who made it clear upfront they’d help me with a lot of incidentals, but I wouldn’t be getting a lump sum from them.”

A professional degree—like law, medicine, business or engineering—is seen as a ticket to a high-paying job, but it is a costly undertaking. In today’s economy, holding a professional degree is no guarantee, although many students see it as a worthwhile investment. They’re finding creative (and sometimes desperate) ways to fund their education, cobbling together part-time work, paid internships or co-op placements, grants and scholarships, but also taking out bank loans, borrowing money from their parents, putting their rent on credit cards or taking out cash advances.

Tuition is increasingly expensive, keeping pace with the rate of inflation—and in some cases exceeding it. Today, incoming students at the University of Western Ontario’s Richard Ivey School of Business pay $76,700 for the 12-month M.B.A. At U of T’s faculty of law, where earning a degree usually takes three years, first-year tuition for 2012-13 is $27,420. The first year of engineering at Queen’s University costs $10,344, compared with $5,706 for an arts or science degree.

Tuition is just one of many costs. Jun Yeo, who received her M.B.A. from McGill University’s Desautels Faculty of Management in June, says her textbooks cost $150 each (she had to buy about four per term). First-year dentistry students at Dalhousie University pay roughly $17,000 in tuition and another $15,000 as a “technology charge” for dental instruments and tools. In their fourth and final year, medical students apply for residency programs through the Canadian Resident Matching Service (CaRMS); they’ll travel across the country for in-person interviews, which could cost them thousands more in plane and train tickets, phone bills and hotel rooms.

Financial advisers say government student loans, which are interest-free while students are in school full-time, are still the first and best line of defence. Student financial aid comes from federal and provincial governments; loans and grants are available to students who show a need. The cost of the program, as well as cost of living and other considerations, are taken into account.

In 2010-11, 425,000 full-time students received $2.2 billion in Canada Student Loans, according to Human Resources and Skills Development Canada, and more than 320,000 collected $630 million in student grants, which usually don’t have to be repaid. That same school year, $147 million—seven per cent of Canada Student Loans handed out—went to students in law, medicine and dentistry.

Pamela Swinimer, assistant registrar of financial aid at Dalhousie, says Nova Scotia also provides an extra $5,000 loan to students in those professional faculties. But not everybody qualifies for loans or grants—at least, not for the amount they’d hoped for. Students who work part-time can find they qualify for less. In Nova Scotia, Swinimer says students can earn $100 per week during the study period, but if they make more than that, it might affect the amount of their loans.

It’s generally assumed that young adults have access to their parents’ purse strings. In Nova Scotia, students are considered “dependent” during their first four years after high school, so parents’ income affects whether they get a loan and how much it’s worth, says Swinimer. This is also true in other provinces, such as Ontario, and it can create problems for students and parents alike.

“A lot of people’s retirement funds got decimated in the financial crisis,” says Andrew Langille, a Toronto employment lawyer who blogs at Youth and Work about youth labour market issues. “Parents still might be earning XYZ, but their ability to save for retirement and provide for their children might be limited. That’s a rather large concern.” Alberta recently changed its rules: there, parental contributions are no longer one of the criteria used to calculate eligibility for government student loans.

University of Toronto’s law faculty gives needs-based bursaries, like what Pennington received—and assume the Bank of Mom and Dad will stay open for life. A certain percentage of what parents make is deemed to be their “contribution,” according to a faculty formula, and is taken into account when assessing students’ finances, even if their family members aren’t helping them out financially at all. If the student is under 30, 100 per cent of the parental contribution is deemed; if the student is 40 or older, that number is still 25 per cent. “We want to reserve the most dollars for students who don’t have that safety net of solid parental income,” says Alexis Archbold, assistant dean of students at the faculty of law.

Kiran Arora is in her second year at U of T law. The mother of two, who lives with her common-law partner, says she wasn’t eligible for a bursary because of her savings, including RRSPs and the equity in her house (mostly the latter). She couldn’t get the standard student line of credit either, because she has a mortgage and her debt load “was already too high.” She’s paying for her degree and other expenses—like additional childcare for her six- and four-year-old—using OSAP and her savings, including RRSPs, and by borrowing some money against the equity in her house. “We’ve been incredibly frugal,” says Arora, who’s in her late 30s. “It’s a huge sacrifice,” although it’s one she’s willing to make for the degree.

Debt can skew a new graduate’s career path. Ontario is in the grips of an articling crisis, with a severe shortage of positions for law graduates. (Articling is a mandatory part of training.) With jobs so scarce, newly trained lawyers find themselves pulled toward big corporate firms, which tend to pay more, so they can start tackling academic debt. This leaves lower-paying areas—like public service, criminal or family law—neglected.

U of T law offers a back-end debt relief program, unique in the country, to help lawyers who choose to practise in less lucrative areas. Graduates can apply for a loan that covers principal and interest repayment obligations on eligible academic debt; at the end of each year, some of that loan is forgiven. (If a student stays in the program for 10 years, the program’s loan is forgiven entirely.) Back-end debt relief helps law graduates choose a career path based on what they want to do, not on a need to pay off debt.

Law students aren’t the only ones feeling debt pressure. Yeo, 27, the McGill M.B.A. graduate, says she’s nervous about paying off her $60,000 in bank loans. “I feel like it’s really tough to get employed,” she says. “My other M.B.A. friends are also looking for jobs.”

Yeo, who is from Singapore and was an international student, found it “virtually impossible” to secure loans in Canada; she ended up paying for her degree with loans from a bank in Singapore. Swinimer says bank loans should be a “backup plan” to offset student loans, but many find themselves reliant on them. Banks see students in professional programs as potential clients likely to go into business for themselves later on. “I was surprised at how quickly I was approved for $100,000,” Pennington says. “They throw quite a lot of money at you.” The Bank of Nova Scotia, for example, offers a Scotia Professional Student Plan aimed at students doing professional degrees in fields like medicine, pharmacy, law or physical therapy. It includes a credit card, a chequing account with no fees and a line of credit with higher limits and “preferred rates.”

But bank loans must eventually be repaid, so Swinimer suggests that students “do a bit of work on Google” and search for scholarships and bursaries offered by local businesses and community groups, some of which “can’t even be given out because there aren’t enough applicants.” Universities often give out merit-based awards, and applying for these is important, too: last year, Ivey gave scholarships to about half of its incoming class of 135. Maria Phillips, director of M.B.A. recruiting and admissions at Ivey, says that while they’re primarily merit-based, some were for financial need.

Last spring, after her first year in law school wrapped up, Pennington moved out of the Glendon residence. She’d saved money on rent all last year and so was able to rent a condo in downtown Toronto, a few minutes’ walk from the U of T campus. “I really, really love it,” she says. She’s looking forward to becoming a lawyer, as evidenced by her hard work to make it there, although she expects to graduate with about $90,000 in debt. Her excitement is tempered with that worry. “It definitely weighs on my mind,” she says.