Canada abolishes interest on federal student loans

The Canadian government has eliminated interest rates on federal student loans, saving borrowers more than C$500 million (£320 million) annually, as part of a broader strategy by the Trudeau government to ease economic pressure across the country. Saving money.

The move to make the coronavirus-era interest accrual suspension permanent is part of a series of steps the government is taking to combat rising inflation and fears of a recession.

“This is a difficult time for many of us,” says Canadian Deputy Prime Minister and Finance Minister Chrystia Freeland. Initiative overview.

There are over 1.7 million student borrowers in Canada with debt of at least C$18 billion, with an average level of about C$26,000. according to Consumer Services Website Reviewlution. Such figures are just a fraction of the situation in the United States, where 43 million borrowers ow him more than $1.6 trillion while waiting for the outcome of the Biden administration’s legal battle over new laws. is. student loan forgiveness program.

Like the more aggressive U.S. plan, the Trudeau administration’s program to end interest rate accumulation has been met with praise from borrowers, criticism from conservatives, and among progressives, even though it is a useful move. , is mixed with concerns that it is far from in need of improvement. Investment in higher education.

“This is a very small first step towards recognizing the debt that students owe,” said Erica Shaker, director of the National Office of the Canadian Center for Policy Alternatives. “But the systemic problems of how the cost of higher education continues to be borne by students and their families, and the personal and public economic and social impacts of graduating generations and burdening them with debt. It does nothing to deal with resistance.”

But Alex Usher, a Toronto-based higher education consultant, said the initiative was politically plausible given that federal law already allows low-income borrowers to avoid paying interest on student loans. In a blog post posted to Higher Education Strategy Associates, Usher said, “Think what the federal government could do with billions of dollars more in research spending.” please give me.

Both noted that Trudeau’s initiative covered an estimated three-quarters of borrowers with government-backed loans, but excluded more than one-third of student borrowers who used private lenders. did.

Nevertheless welcomed It was described by the Canadian Alliance of Student Organizations, the nation’s leading student advocacy group, as “a welcome change for past, present and future student loan borrowers.”

“This is a monumental investment for students across Canada. University of Alberta.

The Trudeau government estimates that permanent interest waivers will cost approximately C$2.7 billion over the first five years and C$556 million per year thereafter.

The government also announced in its Autumn Economic Statement that it plans to spend C$300 million over two years on a youth employment and skills training strategy, C$400 million over two years on a youth summer employment program, and C$50 million this year. Announced. Reduce visa processing time.

paul.basken@timeshighereducation.com

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