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Here you will learn about the alluring but vicious cycle of the debt trap. You will learn not only what a debt trap is, but you will also learn how to avoid them, what causes them and ultimately, how to escape them.

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Debt trap is the trap of being stuck in a seemingly endless cycle of debt, where it seems that every time you pay off one debt, another one appears. Yet many Canadians do not know they are a part of a debt trap, this website offers insight into what debt traps look like to most Canadians and why they are experiencing it.

One piece of information that I found useful was the statistics that were shown about the sheer amount of Canadians stuck in a debt trap without knowing it and why they are in it. The way that inflation is proportional with debt and the subsequent debt trap.

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-Debt Trap – exaggerates inflation | Locke Consulting Inc.

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The Canadian debt trap is the deepest hole consumers can fall into. Canadians owe more in consumer debt than people from any other country in the world - we can

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Now that you know what a debt trap is, here is how you can avoid it. CTV News (Canadian Television) a reliable Canadian news source outlines things to look out for when taking out loans, and once you have taken them, the steps to take to make sure you pay them off and don't end up in a debt trap.

One piece of information I found useful on this site was the explanation between good and bad debt. It went into detail about the benefits that a credit card can have even though it creates debt, but it also explained how to recognize when something is bad debt and how to avoid it.

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How to avoid falling into a debt trap in Canada

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While loans, financing, and lines of credit can be beneficial tools, debt can be a double-edged sword that can leave you in a financial bind. Personal finance contributor Christopher Liew shares some cautionary tips to help you avoid falling into a debt trap.

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Let's say you somehow did end up in a debt trap, CIBC has laid out some methods on how to escape it. The CIBC (Canadian Imperial Bank of Commerce) is a well-known and trusted Canadian bank which offers debt reduction services and counselling to help you end the cycle of a debt trap. This webpage provides some solutions on how to lower your debt as well as some contact information for counselling.

One piece of information I found useful on this site is the inclusion of others' stories and how they got out of it. Being in debt is not only financially difficult, it can also be mentally stressful and make you feel depressed and alone. But the inclusion of other people's success stories, not only would give you hope but also make you feel less alone and less taboo.

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Start reducing your debt today. Explore our debt relief solutions and connect with our credit counsellors to find the right option for you.

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With all this talk about how common the debt trap is, you are probably wondering why it's so common. In this webpage, the CBC (Canadian Broadcasting Corporation) goes into detail about how many young Canadians are unknowingly walking themselves into a debt trap via student loans.

One piece of information I found useful on this site was the input of students currently enrolled or recently graduated on how the debt is affecting them. Many of them have few goals that don't revolve around just paying off their student loans, they can't buy homes or get cars or support families because they are so bogged down in debt.

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When Samuel Bonne received $15,000 in student grants to fund his studies, he wasn't expecting to have to pay it back. But just two years later - in the middle of the pandemic - those grants were converted to loans.

At the end of his sophomore year at the University of Toronto, the Ontario Student Assistance Program (OSAP) asked Bonne, originally from Mauritius, for his parents' financial documents, but they couldn't provide them.

"My dad works in Kenya and my mom doesn't work," said Bonne. "So I ended up having $15,000 in loans that I did not know about."

Bonne, who became a permanent resident in 2018 on humanitarian grounds, says there was no consideration for the fact that his parents were not Canadian citizens and didn't have the relevant documentation.

What's more, the interest on OSAP loans rose from 4.7 per cent when Bonne entered university in fall 2018 to 7.95 per cent this spring when he graduated with a degree in biological chemistry.

"That's when the interest starts taking over," Bonne said.

Bonne was grateful that he was able to find summer work and receive a research grant, which allowed him to get a head start on his payments.

"I'm just not comfortable with the idea of taking that [debt] for the rest of my life," he said.

But he isn't in the clear yet. Bonne enters medical school at McGill University in Montreal this fall - and, pending other scholarship funding, he's considering taking on a line of credit from a bank, which offers medical students loans of up to $350,000 to finance their medical education.

Bonne isn't sure what area of medicine he wants to pursue yet. But he wants to serve immigrants and other marginalized groups in Quebec, recalling a time after his family first came to Canada in 2009 when his sister got sick and they didn't have a family doctor or a clinic they could go to.

"That's a problem many immigrants face today. I don't even have a family doctor; I'm still on a waitlist," he said, darkly noting that he might be a family physician before he has one himself.

WATCH | Where are all the doctors?

Bonne says he'll take the funding he needs but no more, noting that he also doesn't have family support in Canada to fall back on in a crisis.

"One bedroom, one desk - that's really all I need."

'Gateway debt'

Bonne is far from alone in his struggle with student debt; 1.9 million Canadians owed the federal government a total of $23.5 billion in student loans as of July 2022 - a number that only balloons further when including provincial loans and private debt. More than half of those who pursued professional programs such as medicine took on bank loans or lines of credit, according to a 2020 Statistics Canada report.

Erika Shaker, the director of the national office at the Canadian Centre for Policy Alternatives, says this "gateway debt" perpetuates social inequality and prevents people from achieving financial independence.

"That debt that you graduate with sticks around," she said. "It ends up with you postponing the choices that you can make, whether or not you can buy that house, whether or not you can buy a car, whether or not you can start a family."

It's a reality Ari Black knows well.

"I don't have any financial goals. I can't," said Black, who teaches American Sign Language at Carleton University in Ottawa. "My financial goal is to make sure that I pay all of my bills, I don't default on my student loan - and there's groceries."

WATCH | Petition takes aim at student loan interest:

Black says he's been on interest-only payments since he graduated with a master of education from the University of Ottawa in 2019. As such, the student-turned-activist has made little progress paying off the principal. But he stresses that he had a little choice, especially given the limited income he makes teaching.

With the increasing interest rates, Black says his monthly payments will soon increase by $500 to $600.

"We already have people choosing rent or food," said Black. "I'm not in that situation, but I'm close to it."

Black says he calls the National Student Loans Service Centre every six months to request to continue with interest-only payments. But while he was grateful to hear that federal loan interest was eliminated in April, he was also informed that provincial interest would continue - and that there was a 12-month cap on how long he could make interest-only payments.

So after a final period of reduced payments, he says he'll likely have to apply for a repayment assistance plan.

All this led to Black starting an online petition to eliminate student loan interest at all levels of government. It has roughly 74 signatures.

Shaker says eliminating interest is "the least that can be done."

"If we're really looking at systemically addressing the issue, the answer is not more loans, not raising the loan ceiling," she said. "It's actually acknowledging that investing in post-secondary education is not just a commitment to the students who want to pursue it, but it's a commitment to future innovation, future equity."

High costs of higher education

Shaker says pressure to make loan payments can also trap many former students in a cycle of precarity as they take on "whatever job[s] they can" to make ends meet. Beyond that, she stresses that the increasing costs of higher education excludes those whose families can't or don't support them - and those who have children or other dependants of their own.

Average undergraduate tuition fees for full-time domestic students have risen from $534 in 1972-73 to $6,834 in 2022-23. These figures are almost double what they would be if tuition rates grew proportionally with inflation.

"We need a much more honest understanding of who is going to post secondary," said Shaker. "Otherwise we're leaving out swaths of students who don't fit this template and we're reproducing the inequalities that already exist."

Rania Phillips, a recent graduate of the Rotman School of Management at the University of Toronto, feels that the student financial aid system places too much emphasis on income over wealth.

"Things like expenses are very much affected by wealth," she said. "Families who make less money but don't necessarily have to pay a mortgage have a very different financial situation than families who do have a mortgage, especially in the current housing market."

Phillips worked three jobs in her final year of undergraduate studies and took a year off to work before pursuing a masters degree this fall. She says the pressure to make ends meet led her to only consider academic programs that would allow her to immediately start repaying her student loans.

"There's certainly ... a different way you carry yourself when you don't have the constant stress of how you're going to make the very basics of your education," she said.

Despite his difficulties, Black says he's appreciative of how the student loan system allowed him to pursue an education, and he intends to pay back "every cent."

"I don't want to give anyone the impression that I think that I'm somehow a blameless victim in this scenario - I'm not," said Black. "I'm an active participant in my situation."

But unlike a lease on a car or a mortgage on a house, he says, he can't return the education he received - nor would he want to.

"I was gambling that I would succeed," he said. "So far, it's helping me, but it's not helping me enough to keep up with what they are asking for. And I can't give it to them to make up for it.

"There's nothing for me to pay them back with - so I'm trapped in the system."

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How student loans keep some people trapped in debt | CBC News

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Some 1.9 million Canadians owed the federal government a total of $23.5 billion in student loans as of July 2022 - a number that only balloons further when including provincial loans and private debt. Meanwhile, tuition fees are now 13 times more than they were 50 years ago.

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This video is about two people, Jennifer and Somxay who are both in college and just finished college and are both in a debt trap. The filmmaker tells us that the banks weren't making money off people who were paying their payments on time so they started targeting college students like, Jennifer and Somxay because they knew they could make a profit off students who weren't educated on how loans work and end up getting in a trap The reason why I chose this video is because it's about students like us and I felt like I could relate to it. One thing I found useful is that the banks are almost always try to trap us because that's how they make their money.

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To summarize this video, banks are always trying to lure you by offering benefits for signing up for a credit card. Banks will see that you're paying your credit card on time and will increase the limit on your card to entice you to spend more of your limit This video is a great video for anyone who isn't educated on what loans are and what credit cards are and it serves as warning about debt trap. One piece of information that I found useful was banks will raise your limit on your credit until it reaches up to 10000$. I liked how this video went into more depths

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Credit Card Debt Trap Explained| How Do Banks Put You Under Debt| Be Aware Its A Lifetime trap

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This video goes on about how getting a mortgage for your house could end up being a debt trap. In the first 10 years of you owning a house mortgage, you pay most of your interest on your house and less on the principal, and on average you are bound to move every 6-7 years due to plenty of reasons like a new job, downgrading or upgrading, and what ends up happening is you get a mortgage and you have to pay most of that interest again. The reason why I chose this video is because it shows a different example of what a debt trap can be. One piece oof information that i found useful is it might be better to not move and just keep your house because it can end up saving you money.

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How Mortgages Keep you Trapped in Debt for Decades

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One thing we've learnt is that banks can't always be trusted and you must always read the fine print to prevent yourself from trapping yourself in debt.

A real-life example is that we've realized that many people in our lives are in fact in a version of a debt trap, which is very relevant to us. One thing we would pass on to friends and family is the identify the signs of bad debt and how to avoid it.

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This video goes into detail about the history of credit cards and how there used to be a limit on how much interest these credit card companies can charge. Some of these credit card companies would hire lawyers to write their fine print and find loopholes to make you pay more like making your payment due on a holiday so you'll hopefully forget to make your payment The reason I chose this video is because it's important to know the history of the companies you borrow money from. One piece of information that I found useful is the average American household is in 8000 dollars worth of debt

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Credit Cards: The Business of Enslaving Poor People

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This image shows how debt can quickly rise up and overwhelm you, forcing you to take more loans and push you deeper into a debt trap which can be extremely difficult to escape.

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From what I've been researching, this image perfectly demonstrates what a dept trap is and the cycle you go through when you are in a debt trap