As part of the 2022 Fall Economic Statement, the Government of Canada has announced a permanent end to interest payments on Canada Student Loans and Canada Apprentice Loans.
Interest payment on the federal student loans had previously been waived by the government as part of a two-year suspension due to the pandemic.
Minister of Seniors Kamal Khera announced the change at the Centre for Newcomers in Calgary on Nov. 7, as part of minister visits across the nation to talk about the Fall Economic Statement.
“I was actually one of the youngest liberal members to be elected back in 2015, and one of the things that I’ve heard from students is around the question around affordability, and particularly around the interest rate that does pile up as a student as you’re studying,” she said.
“This is actually a very important initiative that our government put forward in the fall economic statement.”
The ending of interest payments is set to begin on April 1, 2023, following the end of the suspension program on March 31. The estimated cost of the elimination of interest payments is $2.7 billion over five years, and then $556 million per year ongoing.
The government said that the average student loan recipient would save approximately $410 per year.
Minister Khera said that the emphasis with the permanent suspension is to make life more affordable for Canadians.
“Our government’s focus has always been to make sure we support Canadians. We support workers, we support seniors, we support students, and that’s been a priority for us since 2015,” she said.
“We’ve had their back throughout the pandemic, we’ve had their back now, and we’re going to continue to make sure we support them as we move forward.”
Good first step: UCalgary Students’ Union
Mateusz Salmassi, VP External for the Students’ Union at the University of Calgary, said it’s welcome news for post-secondary learners.
“It’s a great first step for students. That means students can pay off their loans quicker. It also applies to past students as well as current and future students,” Salmassi said.
“So, it’s a great first step, but we also want to be clear that this doesn’t address affordability for students in Alberta.”
Salmassi said it’s important, given the rising cost of living and skyrocketing tuition, for the province to follow suit.
The UCP did offer student loan repayment relief during the pandemic. They initially deferred student loan repayment for six months, but then reinstated them and increase the interest rates.
“One of the first steps, at bare minimum, is following the federal government’s lead and eliminating interest on student loans,” Salmassi said.
That $400 in the pocket of a student goes a long way – not only to financial viability, but peace of mind as well, Salmassi said.
“At the end of the day, any amount of money in students’ pockets that can help relieve that stress, or make it so that you’re able to live a dignified life a bit easier, maybe you work fewer hours a week to pay off your student loans, maybe you’re able to spend money out there in the economy… all of these things contribute to students’ well being,” he said.
Positive effects on newcomers to Canada says government
Minister Khera said that the suspension would be beneficial to new immigrants and financially vulnerable Canadians.
“We’ve been listening to people on the ground, and that’s precisely why this targeted support for some of those most vulnerable because it ends up being some of those most vulnerable… that want to pursue education.”
She said that the elimination of loan interest payments would help those students who are currently prevented from obtaining additional post-secondary education as a result of student debt.
Centre for Newcomers CEO, Anila Lee Yuen, said that it was very important to do whatever is possible to keep interest rates down for students.
“It’s really important that we do whatever we can at the moment, especially with people still recovering from Covid—not necessarily from having the illness, but from all of the different economic impacts of Covid,” she said.
Yuen expressed concerns over what this would mean for loans for unregulated private career college training, saying that there were possible unintended consequences with higher loan amounts being sought as a result of the program changes.
“When it comes to private career colleges that are not currently regulated… this can cause some problems, because it’s going to be much more attractive to get a student loan. And if you don’t know which are the right schools to go to, then there will be much more vulnerability,” she said.
“So, I think it comes down to us as social services agencies that are working with clients to be able to provide that awareness so that clients do not get into those traps.”
She said that in terms of repayment by some of the most vulnerable Canadians and newcomers, the effects of the suspension would have a bigger impact on students from accredited post-secondary institutions and regulated career colleges.
Federal loan repayment rates are often 20 to 30 per cent less for students at career colleges, as opposed to universities and technical institutes in Calgary, according to data from the Government of Canada.
“My suspicion towards why people are not repaying at the same rate: One will be of course, the vulnerabilities and the inability to repay because they have been you targeted specifically,” Yuen said.
“The other is if you don’t see a value, you don’t necessarily feel that it’s a priority to repay.
– With files from Darren Krause