Eliminating interest on federal student loans could cost more than original $2.7 billion: report

Recent steps to eliminate interest on federal student and apprentice loans could cost more than $2.7 billion over the next five years the Department of Employment first gave a congressional committee, new figures show. is showing.

According to Blacklock’s Reporter, a recent Departmental inquiry before the House of Representatives found that the government claimed interest on federal student loans totaling nearly $750 million in 2019 (the year before the pandemic hit). , which raised about $415 million.

The government suspended interest charging and collection in early 2020 as a pandemic relief.

Bill C-32, enacted on December 15, entitled “Act to Implement Certain Provisions of the Fall Economic Statement,” provides the government with a future provision for the federal portion of all Canadian student loans and Canadian apprenticeship loans. interest has been withdrawn.

This measure will come into force in April 2023.

The Senate National Finance Committee had previously heard from the Department of Jobs that the government would cost about $2.7 billion to lower student loan rates over the next five years.

When testifying before the committee on Nov. 22, Erin Hetherington, policy director for the Department of Employment’s Canadian Student Financial Assistance Program, said, “But there are also ongoing annual costs of $556.3 million.” said.

Hetherington said the estimated price tag of $2.7 billion over five years was calculated using historical loan interest collection earnings figures, but the total interest on federal student loans charged in 2019 alone was 700 million. You didn’t mention that it reached nearly $50 million.

“This reflects the costs the federal government will not receive in permanently waiving interest,” she told the commission.

student loan

The liberal movement will reduce the repayment threshold by abolishing interest on student loans. $50,000 For unmarried graduates — that is, graduates whose annual income is less than that amount do not have to repay the loan until their income exceeds the threshold.

Earlier in November, Employment Minister Carla Quartrau announced a similar measure, but reduced the repayment amount to $40,000.

“This will support an estimated 180,000 borrowers each year,” she said.

The average Canadian student finishes secondary school with about $14,000 in debt in the federal portion of the loan alone.

“But on top of that, they also have state student loans,” said Deputy Employment Minister Atik Rahman while testifying before the House Finance Committee on Nov. 21.

Conservatives have criticized the government for lowering student loan rates, saying the cost of doing so will inevitably fall on Canadians.

“Who is paying interest on these loans? It will be Canadians,” Conservative MP Kevin Waugh said in the House of Commons on 6 December.

“It was a good gesture,” he added. “I don’t know how long we can keep it up because of liberal spending. I see interest rates going up in this country almost every couple of weeks because of the money they are spending. increase.”

peter wilson

Peter Wilson is a reporter based in Ontario, Canada.