The Federal government’s recent decision to extend the moratorium on student loan repayment is being applauded as an important action to support Canadians. While technically non-binding, the resolution passed in the House of Commons by unanimous consent which means it has the support of all parties – including the governing Liberal Party. With such widespread support it is expected to be implemented and, once it is, loan payments and interest accrual will be paused until May 2021.
The federal and BC governments paused loan repayments in the initial phase of the pandemic; however that initiative ended September 30. The resumption of student loan payments and interest accrual has put pressure on individual borrowers at a particularly trying time.
“Young Canadians have been amongst the hardest hit with the economic slowdown caused by the COVID–19 pandemic,” said Tanysha Klassen, Chairperson of the BC Federation of Students (BCFS). “As the government struggles to restart the economy, providing recent graduates with a little more flexibility in their finances through pausing loan payments will help the process.”
Over one million Canadians have a student loan from the federal government, collectively owing more than $11 billion. Pausing student loan repayments in this time can keep hundreds of dollars each month in the pockets of these individuals, many of whom are struggling with unemployment and underemployment due to the pandemic. As the move is expected to be retroactive to the expiration of the previous moratorium, it is anticipated that those who were unable to make payments during that time will not be penalized.
“Pausing student loan repayment in this difficult time is an important step to support Canadians; however, it is expected that economic recovery will take several years, even post-pandemic,” said Klassen. “To continue to support recent and future graduates, the federal government should permanently eliminate interest charged on student loans.”
The Member of Parliament who put forward the motion tweeted about the vote, including a video:
Students & recent graduates have been devastated by COVID-19.— Heather McPherson (@HMcPhersonMP) November 24, 2020
Today I brought forward a motion calling on the gov't to extend the loan repayment moratorium until 2021. The motion passed with unanimous consent!
This is the good news that recent graduates needed!#cdnpoli pic.twitter.com/uZrQRqygGq
On average, students pay up to $5,000 in interest over the course of repaying their student loans, and this number only represents interest charged on the federal portion of the loan. Charging interest on student loans, in effect, is a tax on those from low- and middle-income families who cannot afford to pay for their education up-front. Studies show that student debt is causing young people to put off major life events like getting married, having children, or purchasing a home; and these decisions are only exacerbated by the pandemic.
Post-secondary education will be a powerful economic driver that will help bring post-pandemic stability to the country. Eliminating interest on student loans would help ensure those who need to return to school for retraining to restart our economy are not penalized for doing so.
The BCFS runs a campaign that calls on Justin Trudeau to eliminate interest on student loans. More information about the Knock Out Interest campaign can be found here.
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