Students and their families will feel some relief following today’s federal budget. After years of rising tuition fees and record levels of student debt, Budget 2019 announces a reduction in interest charged on federal student loans.
“Students are pleased that the government listened to their call, and has taken this important step towards mitigating student debt,” said Aran Armutlu, Chairperson of the BC Federation of Students (BCFS). “This announcement will not only help current and future students, but also those who have completed their studies and are struggling to make loan payments.”
Budget 2019 limits interest charged on student loans to the prime rate of interest; the existing interest rate ranges from prime plus 2.5% to prime plus 5%. Additionally, it removes interest charged on student loans during the six-month grace period following the end of studies. Government estimates suggest this change will save borrowers an average of $2,000 over the loan repayment period.
Student debt in Canada has increased 78% since 1999, and the average student loan balance upon graduation is over $30,000. A recent study showed that student debt holds young people back not only professionally, but also in other important ways: because of rising debt, recent graduates in Canada are delaying major life events like getting married, buying a home, or starting a family.
The British Columbia government announced the elimination of interest on its provincial loans in its 2019 Budget. This follows the lead of four other provinces which also do not charge interest on provincial student loans.
“With tuition fees at an all-time high, student debt in BC continues to grow as students and their families struggle to afford the education they need to enter the workforce,” said Armutlu. “Eliminating interest on student loans relieves some of the pressure faced by those who have to borrow to access education.”
Though students are pleased with the government’s action on interest rates, the move falls short of what is needed. The BCFS’ Knock Out Interest campaign advocates for the complete elimination of interest charged on federal student loans. Learn more about the campaign at www.KnockOutInterest.ca.