Federal student loans will be interest-free, Freeland says in financial update

Finance Minister Chrystia Freeland has announced plans to abolish interest on federal student and apprentice loans. Government Fall Fiscal Update.

The move, made amid rising costs of living and the threat of a looming recession, will bring relief to many budget-strapped young Canadians who have borrowed money to finance their education. If so, it will begin on April 1, the day after the federal interest accrual was temporarily frozen. student loan Expired.

At that point, the loan will be interest-free, even if you are currently repaying it.

However, the new policy will have no effect on variable rate student credit lines offered by private financial institutions. Students and recent graduates with balances in LOC have seen their borrowing costs rise in recent months as the Bank of Canada raised its trend-setting interest rates to combat inflation.

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Due to restrictions on the amount of money students can borrow from the government, they often need to use financial institutions to obtain additional funding, often in the form of student LOCs. Credit line balances in excess of $100,000 are not uncommon for students pursuing professional degrees in fields such as medicine and law.

Nor does this policy preclude any interest associated with state or territory funding.

Student groups enthusiastically welcomed the news as a positive change in higher education funding.

“This is a monumental investment for students across Canada. “Interest free for all Canadian student loans and Canadian apprentice loans is a welcome change for past, present and future student loan borrowers.”

But some education experts say the changes won’t curb tuition fees or turn repayable loans into grants.

Erica Shaker, National Office Director of the Canadian Center for Policy Alternatives, a left-leaning think tank, called the proposed reforms “welcome” but “very much needed to address the student debt crisis.” Also called “the first small step to ”

half of Canadian tertiary students The federal government said in a fall update released Thursday that it relies on student loans to pay for tuition. Eliminating interest on the federal portion of government loans would save the average borrower $410 a year, he added.

The government estimates that the proposed changes will cost taxpayers $2.7 billion over five years and $556.3 million annually thereafter.

The new policy will not affect a student’s ability to access repayment assistance plans.

Ottawa has stopped accumulating federal student loan interest from April 2021 in response to the economic turmoil caused by the pandemic that has disproportionately affected students and young workers. Faced with a record affordability crisis in both the housing and rental markets, with young Canadians particularly affected by rising rents and rising mortgage costs, Canada has made a permanent investment in interest. We are making a new proposal to eliminate

Using Joe Friesen’s file

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