Canada Federal Student Loan interest eliminated permanently

It was said that we should only borrow to invest in assets that appreciate. A house and education are two such assets. Thus, mortgage and student loan are considered good debts.

The Federal government suspended the accumulation of interest on student loans in 2021 as part of the pandemic relief efforts. It was set to expire in March. This new program to eliminate Federal student loan interest took effect on April 1, 2023. This only applies to Federal Student loans not provincial ones.

An average student loan borrower is estimated to save $410 per year as a result per the government fiscal update. Student loan interest is calculated either at a fixed rate of 2 per cent plus prime, or a variable rate equal to the prime rate. This will cost the government $2.7 billion over five years and $556.3 million ongoing.

I think that is the right thing to do. The living expense increase across the board including housing, food, gas, etc. The wage increase doesn’t catch up with inflation. It is harder for the young people these days. Their parents can work part time to pay off tuition which was much lower back then. It is much harder these days. I heard so many people blamed the young people being lazy. This situation is their own doing. I am not quite sure that I agree with them.

Just like the grocery rebate also part of the Federal 2023 budget, it is far from enough, but it is still better than none. 😊 Saving $410 per year is probably only good for less than 1-month grocery for one person. However, better than nothing.

Besides, government pauses student loan repayment until they are making at least $40,000 per year, and reduces payments for those earning slightly above that amount. 

Some people argued that this can add to inflation. It seems any effort to help the vulnerable financially results in this debate. Perhaps we should look somewhere else to stem inflation. For example, enhance anti-trust law to reduce concentrations on a few big players in so many industries. Stimulate competition and innovation to drive price down.

Published by Worthfy

Financial literacy and counselling

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