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Rbc Sues Md Student Who Dropped Out Due To Mental Illness, Thoughts?


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About banks rising interest rates... What a naivete. Not because of this or that student default! Bad loans are a monetized risk in everyday banking business. And  loan interest rates depend on several market factors, student debt not being one of them.

 

Banks could absolutely raise interest rates because of events like this. A one-off event isn't going to change things, but this is not the only case of a medical student having to default on their loans. Medical student LOCs are at prime in Canada because banks have judged medical student debt to be more-or-less a sure thing to be paid off. The less of a sure thing it becomes - due to more people defaulting - the more of a risk providing that debt is, and the higher the interest rate goes. The prime rate depends on several market factors, but what a bank charges on a loan relative to prime depends on the nature of that loan and the person being loaned to. Bad loans are a monetized risk in the banking world, but the way they offset any increased risk is with increased interest rates. RBC stands to lose a lot of money on this deal, effectively wiping out the gains they'll make from many other students' LOC interest payments. It's not out of the realm of possibility that they start to consider medical student debt a more risky proposition than they do now - and raise their rates accordingly.

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Banks would have to suffer a lot of bad students loans to feel financial impact. What you call "lots of money" is a drop in the bucket for the bank. These defaults are still rare occurrences.

Besides, if the default DOES happen, what is it to gain there, other than further destroying the guy. It does not help the bank financially, and it blemishes its reputation.  Suck it up RBC, you were complicit in the default by advancing too much money at once.

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Banks would have to suffer a lot of bad students loans to feel financial impact. What you call "lots of money" is a drop in the bucket for the bank. These defaults are still rare occurrences.

Besides, if the default DOES happen, what is it to gain there, other than further destroying the guy. It does not help the bank financially, and it blemishes its reputation.  Suck it up RBC, you were complicit in the default by advancing too much money at once.

 

well the bank yes. The division of the bank and also the respective manager ha - that is the yearly return of what 50 average sized student loans? 

 

Still until we know for sure the student doesn't have assets the bank will take steps. 

 

Dawns on me there is the chance the student could change their mind again and go back to finish the med degree (I mean that could happen). If they just waved this away then that would not be good. 

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80k is an understatement. 

 

I don't think 90K after two year and possible undergraduate debt is out of the realm of normal.  Tuition&fees is 17K/year (Sask figures) gives at least 34K (plus went back to school after year off which probably added to debt).  Cost of living is likely at least 15-20k/year (that's about the 1 person low income line) gives 30 to 40K.  That gives somewhere between 65 and 75K (for a normal med student without prior debt) excluding interest payments.  The bank probably extended credit in the return to school year and the year off.  I doubt there's any assets to be recovered - I'm sure there were spending sprees - just that the chances of finding even a 20K car are probably minimal.   

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I don't think 90K after two year and possible undergraduate debt is out of the realm of normal.  Tuition&fees is 17K/year (Sask figures) gives at least 34K (plus went back to school after year off which probably added to debt).  Cost of living is likely at least 15-20k/year (that's about the 1 person low income line) gives 30 to 40K.  That gives somewhere between 65 and 75K (for a normal med student without prior debt) excluding interest payments.  The bank probably extended credit in the return to school year and the year off.  I doubt there's any assets to be recovered - I'm sure there were spending sprees - just that the chances of finding even a 20K car are probably minimal.   

170K on just the line of credit. It is very likely(aka, it wouldn't make sense not to) have student loans for medical school too - thats another 30,000$ right there at least for 2 years(varies by province).

 

LOC only came into the picture in medical school, sure could be possible that he had an outstanding balance from a personal line of credit and moved it over to the medical school LOC.

 

So even with the 65-75k(and that is likely being generous, cause its saskatchewan and rent is far cheaper than other locales), that is 130,000$ on top of that unaccounted for, perhaps with a bit of that towards prior debt. 

 

So yes, it is VERY out of the norm.  Lets not underplay that, is my point. 

 

I hope he gets a resolution that allows him to move on with life in the most pragmatic matter. 

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170K on just the line of credit. It is very likely(aka, it wouldn't make sense not to) have student loans for medical school too - thats another 30,000$ right there at least for 2 years(varies by province).

 

LOC only came into the picture in medical school, sure could be possible that he had an outstanding balance from a personal line of credit and moved it over to the medical school LOC.

 

So even with the 65-75k(and that is likely being generous, cause its saskatchewan and rent is far cheaper than other locales), that is 130,000$ on top of that unaccounted for, perhaps with a bit of that towards prior debt. 

 

So yes, it is VERY out of the norm.  Lets not underplay that, is my point. 

 

I hope he gets a resolution that allows him to move on with life in the most pragmatic matter. 

 

I agree that the sum total is way out of norm for two years.  But, don't think that it's just two years of debt and I don't think that 90K debt after two years is drastically out of the norm (excluding provincial loans - if provincial loans paid tuition then yes - that's very high).

 

 Provincial student loans do vary by province: some don't offer any to med students.  Also the individual probably paid another 18K in fees or so on the return to school year, and probably had living costs paid for by the bank for those next two years too (adding another 30-40K).  That adds another 50K to 60K to the elevated 90K.  The interest alone is probably running at around 4K/year at that level.  

 

Edit:  I think the bank might have tried to work with the individual, so the whole thing is unfortunate.  Rent is cheaper, but utilities are probably pretty high, given the winter. 

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Many people seem to be focused on how much debt he racked up in 2 years. Turns out he was actually in medical school longer than that, struggling to pass each year and was held back a few times. Perhaps explains why he accumulated more debt than would be expected for someone to successfully go through 2 years of medicine.

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^ Good point. Not sure how a medical school would go about suggesting that to someone though, especially with mental illness involved. They probably don't want the bad press that RBC is currently getting haha.

 

All in all, sad story. Hopefully they figure something out. 

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Oh interesting! To play Devil's advocate, though, at one point should a school suggest to a person that they should entertain an alternative career? 

 

yeah that is always a hard thing for a school to determine - and they are very exposed if they enforce it. Messy

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Many people seem to be focused on how much debt he racked up in 2 years. Turns out he was actually in medical school longer than that, struggling to pass each year and was held back a few times. Perhaps explains why he accumulated more debt than would be expected for someone to successfully go through 2 years of medicine.

Source for information other than what was presented?

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I agree he was in school from more than two years.  I'm not sure he was involuntarily held back multiple times though:

 

2012-3 (1st year)

2013-4 (2nd year- serious episode year)

2014-5 (year off)

2015- now (leaves program & debt continues to accumulate, after unable to return in 2015)

 

If anything, looks like the program tried to convince him to stay (link) - quote " While the College of Medicine did what they could to convince him to stay in the program, he eventually realized he had to discontinue his studies."

 

Lots of consequences to leaving, so didn't want that to happen, esp in this situation.  

 

Second year is when  "...couple of years into his degree, Robson began to display signs of bipolar disorder that were negatively impacting his health, causing him to frequently be absent from school, and therefore, affecting his academic performance."'

 

Edit: Most schools have almost zero attrition rates, so it's clearly a situation that is avoided as much as possible.

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Repeated for emphasis:  it's a small world, and there are likely people here who know this individual. 

 

Before you hit "Post" on anything, think about how you would feel if it was your personal life being discussed on a public, semi-anonymous forum...

 

I agree - but on the other hand, the individual clearly wants to increase awareness through the public record (multiple articles and interviews).  So, I think respectful and constructive posts could be helpful.  

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Exactly. He already went public, and besides his personal life is not dissected here - only the facts relevant to the issue (debt and illness).

 

I would think that medical students community will rally around the unfortunate colleague rather than offering sanctimonious slogans ("one should repaid his debts") and defending the bank that clearly shown unreasonably rigid approach and greed under particular circumstances.  This is in contrast to our lenient bankruptcy laws that give lots of crook easy way out.  

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Exactly. He already went public, and besides his personal life is not dissected here - only the facts relevant to the issue (debt and illness).

 

I would think that medical students community will rally around the unfortunate colleague rather than offering sanctimonious slogans ("one should repaid his debts") and defending the bank that clearly shown unreasonably rigid approach and greed under particular circumstances.  This is in contrast to our lenient bankruptcy laws that give lots of crook easy way out.  

Either way the bank is in a tight situation:

 

1. They can either cut the person off from accessing funds, so that they don't overspend - but then people would say they are using the persons psychiatric condition to discriminate against them

 

2. They don't cut off the person, but then they overspend, end up in huge debt - and then the bank gets in trouble for wanting to recover their money. 

 

 

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Either way the bank is in a tight situation:

 

1. They can either cut the person off from accessing funds, so that they don't overspend - but then people would say they are using the persons psychiatric condition to discriminate against them

 

2. They don't cut off the person, but then they overspend, end up in huge debt - and then the bank gets in trouble for wanting to recover their money. 

 

 

 

it will come off that way I suspect -  again not good for anyone. 

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Now, that doesn't make any sense.

 

The bank could have enacted simple measure when granting student's loan for 4-year course - advance 25% each year, the next portion upon completion of the previous year. Not discriminatory, psychiatric condition or not. Some RESPs work that way,  you have to produce proof of enrollment for the consecutive year before any more money is advanced. Student's loan in UK work the same way, you have a tuition loan for the entire course but you have to apply every year. Same for bursary loan for living expenses.

 

This is not fool-proof solution because in extreme case, one might have completed full 4 years and still fail to work in the profession and repay the loan. But this would be rare, most people drop out  earlier thus substantially reducing risk exposure. The point is in numbers - how many bad loans banks suffer?  You can be sure that  they still make enough money on student loans to offset the risk of few bad loans and gain substantial profits.

 

The bank failed to take a simple precaution, so who is to blame?

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Now, that doesn't make any sense.

 

The bank could have enacted simple measure when granting student's loan for 4-year course - advance 25% each year, the next portion upon completion of the previous year. Not discriminatory, psychiatric condition or not. Some RESPs work that way,  you have to produce proof of enrollment for the consecutive year before any more money is advanced. Student's loan in UK work the same way, you have a tuition loan for the entire course but you have to apply every year. Same for bursary loan for living expenses.

 

This is not fool-proof solution because in extreme case, one might have completed full 4 years and still fail to work in the profession and repay the loan. But this would be rare, most people drop out  earlier thus substantially reducing risk exposure. The point is in numbers - how many bad loans banks suffer?  You can be sure that  they still make enough money on student loans to offset the risk of few bad loans and gain substantial profits.

 

The bank failed to take a simple precaution, so who is to blame?

 

it is a simple solution - in fact it is the one that scotia uses with its loans to both protect itself and indirectly students (if you are going through more than 25% a year then that is a warning sign - having an automatic pause sounds like a good idea for most).

 

The result? Every time people start talking about loans it is brought up as a negative about scotia. Even though for the vast major of people is is beyond irrelevant (take the loan, any osap, bursaries, and in many cases some help from the parents etc even though it is not really needed). Now tuition has gone up (so has the max amount though) but I used less and 1/2 of the LOC. There is a lot of wiggle room. In particular after year one I had always just tons of room on the LOC as the left over just kept accumulating (with OSAP again it was something like 90K available at the start of year 2). 

 

Still that negative - as small as it really is - is used against scotia. That affects their business - even though they have otherwise top features of their stuff. Every year there is pressure on scotia (and the others that have graduated plans like them) to change. There are market forces at play. 

 

Also the bank be all that harmed long term if you made it through the program and didn't be a doctor. You cannot discharge the debit by bankruptcy if you have the asset of the education (which is cold but the more I think about it is still kind of fair). You can pay off 170K loan given enough time even if you are not a doctor - it would be a long time but the bank would just keep at it. Not to say it wouldn't suck of course.  

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It's true that more protection for the lender means less flexibility, so borrowers would choose another bank that does not impose too many conditions.. Unless the other bank suffers so many bad loans that they rise interest rates for students. But this is not the case, actually banks compete for this business. Which is just reinforcing the point that banks, including RBC, are not on the losing end with students loans. That's why RBC's  vicious action in truly exceptional case is a miss -  both financially and reputationally.

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it is a simple solution - in fact it is the one that scotia uses with its loans to both protect itself and indirectly students (if you are going through more than 25% a year then that is a warning sign - having an automatic pause sounds like a good idea for most).

 

The result? Every time people start talking about loans it is brought up as a negative about scotia. Even though for the vast major of people is is beyond irrelevant (take the loan, any osap, bursaries, and in many cases some help from the parents etc even though it is not really needed). Now tuition has gone up (so has the max amount though) but I used less and 1/2 of the LOC. There is a lot of wiggle room. In particular after year one I had always just tons of room on the LOC as the left over just kept accumulating (with OSAP again it was something like 90K available at the start of year 2). 

 

Still that negative - as small as it really is - is used against scotia. That affects their business - even though they have otherwise top features of their stuff. Every year there is pressure on scotia (and the others that have graduated plans like them) to change. There are market forces at play. 

 

Also the bank be all that harmed long term if you made it through the program and didn't be a doctor. You cannot discharge the debit by bankruptcy if you have the asset of the education (which is cold but the more I think about it is still kind of fair). You can pay off 170K loan given enough time even if you are not a doctor - it would be a long time but the bank would just keep at it. Not to say it wouldn't suck of course.  

 

Scotia has been giving the full 200k (and then a further 75k during residency) immediately for the last few months.

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Scotia has been giving the full 200k (and then a further 75k during residency) immediately for the last few months.

 

interesting! pretty sure they aren't doing that everywhere yet but if not it would only be a matter of time. 

 

another example of market pressure - I had discussions with some of their bankers over a few years about changing it that way. They were frustrated that kept coming up - particularly when they couldn't really understand why it was so important even. A constant annoyance :)

 

I guess that kind of reinforces my point - on paper it may should like sure banks should have all these self guards but if you actually do have them you get market place pressure to remove them. Doesn't give them as many options in the long run. 

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