Close X
Thursday, November 14, 2024
ADVT 
National

Feds to permanently end interest on student loans

Darpan News Desk The Canadian Press, 03 Nov, 2022 03:39 PM
  • Feds to permanently end interest on student loans

Ottawa plans to make permanent its pandemic-era pause on student loan interest in an effort to reduce some of the current financial pressures on young Canadians as the cost of living rises.

As part of its fall fiscal update tabled Thursday, the federal government outlined plans to permanently eliminate interest on all federal student loans and apprentice loans including loans currently being repaid.

Interest rates will still apply on the provincial portion of a student’s loan.

While this move is helpful for students graduating, said Rebekah Young, director of fiscal and provincial economics at Scotiabank, it is ultimately relief for interest payments on debt rather than money toward tuition or other post-secondary school expenses.

“In the bigger picture, they're still confronting elevated expenditures across the board,” she said.

More than 1.8 million Canadian students owe the federal government a total of $20.5 billion, based on 2019 data from the Government of Canada website, with the average loan balance at about $13,367 at the time of leaving school.

The average undergraduate tuition fee is $6,482 for an academic year as of 2022, according to Statistics Canada, while the average graduate tuition fee is $7,053 as of 2022.

The Liberal government suspended the accumulation of interest on student loans in 2021 due to the effects of the pandemic on graduating students as they entered a unique job market. The measure was set to expire in March.

The elimination of interest will begin April 1, 2023, the fiscal update said.

An average student loan borrower will save $410 per year as a result of their loan being interest-free, the government said in the fiscal update. (Student loan interest is calculated either at a fixed rate of 2 per cent plus prime, or a variable rate equal to the prime rate.)

The elimination of interest on these loans is estimated to cost of $2.7 billion over five years and $556.3 million ongoing, the federal government said.

The permanent elimination of interest on federal student loans was a Liberal campaign promise during the last federal election.

Young said some may fear the decision could stoke inflation, but that it isn’t be a particularly strong argument as the measure is a relatively small, contained one.

Ottawa said graduating students will still be able to use its repayment assistance plan, allowing them to pause student loan repayment until they are making at least $40,000 per year, and reducing payments for those earning slightly above that amount.

Earlier this week, the zero-payment income threshold for student loans increased from $25,000 to $40,000 for a household of one. The threshold increases based on the size of the household.

This move to tackle student loans comes just a few months after U.S. President Joe Biden announced a decision to cancel $10,000 for most student loan borrowers, and up to $20,000 for those borrowers who received a federal Pell Grant. It has received significant pushback.

The White House said Thursday that it has already approved 16 million requests. Close to 26 million Americans have applied for student loan forgiveness.

MORE National ARTICLES

Two homicides believed connected in Saanich, B.C.

Two homicides believed connected in Saanich, B.C.
One man is in custody. Police say the public is not believed to be at risk. A statement from the Saanich Police Department says its officers are working with major crime investigators.

Two homicides believed connected in Saanich, B.C.

David Eby to be named B.C. NDP leader Friday

David Eby to be named B.C. NDP leader Friday
Eby, the New Democrat government's former attorney general and minister responsible for housing, will officially be declared the leader of the B.C. New Democratic Party Friday, which paves the way for him to be sworn in as premier.

David Eby to be named B.C. NDP leader Friday

Dental benefit for children would cost $703M: PBO

Dental benefit for children would cost $703M: PBO
The benefit would provide up to $650 annually to cover the dental costs for children whose families who don't already have coverage and earn less than $90,000 per year.  

Dental benefit for children would cost $703M: PBO

B.C. NDP leadership contender ousted as candidate

B.C. NDP leadership contender ousted as candidate
A report by NDP chief electoral officer Elizabeth Cull obtained by The Canadian Press concluded Appadurai "engaged in serious improper conduct" by working with third parties for membership drives on her behalf. The report concluded that the harm from the misconduct can't be remedied with anything short of disqualification of the Appadurai Campaign.

B.C. NDP leadership contender ousted as candidate

Road closure in the area of 140th Street in Surrey due to residential fire

Road closure in the area of 140th Street in Surrey due to residential fire
On Thursday morning just before 8:00 a.m. a police officer discovered a residential fire in the 14000-block of 100A Avenue while passing through the area. Surrey Fire Service was notified and police worked quickly to evacuate neighboring residences.  Multiple persons have been displaced as a result of this fire.

Road closure in the area of 140th Street in Surrey due to residential fire

A divide in Chinatown over Vancouver's new mayor

A divide in Chinatown over Vancouver's new mayor
Fred Kwok, chair of the Chinese Cultural Centre in Chinatown, said Sim's background made immigrants feel he was representative of the community. But what was more important was how his election platform resonated in the neighbourhood, with his promises of more police and a city hall office in Chinatown.

A divide in Chinatown over Vancouver's new mayor