Close X
Saturday, November 23, 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

Surrey RCMP arrest a 17 year old Calgary resident upon seizure of two stolen vehicles with full jerry cans inside

Surrey RCMP arrest a 17 year old Calgary resident upon seizure of two stolen vehicles with full jerry cans inside
Mounties set up surveillance on the vehicle, which lead to the arrest of one youth, and the recovery of two stolen vehicles. Both recovered vehicles were found to have jerry cans full of gasoline inside. A 17-year-old Calgary resident has been charged with possession of stolen property and remains in custody. 

Surrey RCMP arrest a 17 year old Calgary resident upon seizure of two stolen vehicles with full jerry cans inside

Behind B.C.'s fondness for fireworks on Halloween

Behind B.C.'s fondness for fireworks on Halloween
Fireworks have long been part of Halloween in B.C.'s Lower Mainland and historians suggest the tradition may involve a combination of English and Chinese heritage. While they remain a noisy Halloween fixture in many communities, they are now often subject to regulation.

Behind B.C.'s fondness for fireworks on Halloween

B.C.'s next premier meets with lieutenant-governor

B.C.'s next premier meets with lieutenant-governor
British Columbia's incoming premier David Eby has been asked by the province's lieutenant-governor to begin the process of forming government in a step toward transitioning into his new role. However, Eby will remain premier-designate until he is officially sworn in as premier at a date that has yet to be announced.  

B.C.'s next premier meets with lieutenant-governor

Drenching rain predicted after B.C. drought, heat

Drenching rain predicted after B.C. drought, heat
The ministry says the River Forecast Centre is monitoring weather patterns and river conditions for flood hazards, while Emergency Management BC is working with communities to prepare for possible floods.

Drenching rain predicted after B.C. drought, heat

Funeral plan released for B.C. Const. Shaelyn Yang

Funeral plan released for B.C. Const. Shaelyn Yang
The 31-year-old officer was stabbed to death last week in a Metro Vancouver park while she helped a City of Burnaby employee notify a man in a tent that he wasn't allowed to live in the park. Thirty-seven-year-old Jongwon Ham has been charged with first-degree murder in Yang's death and remains in custody.

Funeral plan released for B.C. Const. Shaelyn Yang

Canadian city gets first turban-wearing Sikh woman councillor

Canadian city gets first turban-wearing Sikh woman councillor
Brar, a respiratory therapist and a mother of three, won the race for City Councillor in Wards 2 and 6, beating Jermaine Chambers, a former Conservative MP candidate for Brampton West. Brar had 28.85 per cent of the votes cast on Monday with Chambers as nearest contender with 22.59 per cent, and Carmen Wilson coming in third at 15.41 per cent, the Brampton Guardian reported.

Canadian city gets first turban-wearing Sikh woman councillor