The Canadian government announced it will eliminate interest on federal student loans, drawing both celebration and calls for further action from student advocates.
As part of its fiscal update on November 3 — which heavily featured affordability — the federal government announced plans to eliminate interest on federal student and apprentice loans starting from April 1, 2023, immediately after the two-year freeze on student loan interest expires.
Student debt remains a significant barrier to socioeconomic mobility for young Canadians. Between 2000 to 2015, one in two post secondary graduates carried student debt past graduation, with an average debt burden of $28,000 that usually takes between 9 to 15 years to pay off with the Student Financial Assistance program.
The announcement follows another change from the government on how student loans are paid.
On November 1, changes to the Repayment Assistance Plan (RAP) — an application-based program that assists those facing financial difficulty to repay their loans — took effect. Single-member households making below $40,000 a year can now qualify for a zero-payment plan, which is more inclusive than the previous $25,000 threshold. The new threshold will also be indexed to annual inflation.
Additionally, monthly payments for those who make more than $40,000 a year will be capped at 10 per cent of their household income, instead of 20 per cent under the previous iteration.
“Starting today, more graduates can focus on building their careers, instead of worrying about student loans,” said Carla Qualtrough, the minister of Employment, Workforce Development and Disability Inclusion, in a news release from November 1. “A strong, skilled workforce depends on affordable, accessible education, and this change will ensure more Canadians have more flexibility when paying for school.”
For now, the changes to RAP are not applicable to the BC Repayment Assistance Plan. The new threshold also falls short of the Liberal government’s promised target of $50,000.
Chris Fischer, a fifth-year biology student from rural BC, is the first person in his family to attend university. He said while his parents fully supported his decision to attend UBC, the financial burden of paying for university fell almost entirely on him.
Fischer relied on a mix of grants, scholarships and government loans to finance his education, which meant that he will be graduating with around $30,000 in student loan debt next spring. He said that the prospect of having to pay off the loan plus interest, in addition to financing medical school and covering living costs, was “pretty terrifying,” so he was pleased to hear the federal government’s plan to eliminate interest.
“It’ll just make education more accessible for a lot of low-income students like myself,” Fischer said. “I feel like we are oftentimes overlooked.”
Some student advocates have pointed out that neither of the recent policy changes affect private loans or lines of credit, which tend to have higher interest rates and account for around 30 per cent of all student loans. The changes also do not provide long-term solutions to the debt crisis, such as unconditional loan forgiveness, increased availability of grants and a provincial tuition freeze.
Erin Co, the AMS vice-president external and chair of the Undergraduates of Research Intensive Universities (UCRU), has been involved in student debt campaigns since she started working for the AMS three years ago. Co said that while the recent changes are “no small feat,” there is more work to be done.
Co said policies like loan forgiveness are still needed to address the skyrocketing cost of living facing graduates. She also said navigating the loan regime is a “daunting task” that students are often ill-equipped for.
“No one should be paying off student loans thirty years after graduating, it’s simply not feasible if someone wants to start a family and buy a house,” Co said.
In the upcoming federal lobby week, Co and other advocates from student organizations across Canada will be raising these and other affordability concerns to policymakers with the hopes that they can gain more ground.
“It’s a great step forward, but hopefully not the end.”