If you have federal student loans, many changes have been made recently and here’s what you need to know about repayments and interest!
The federal government has reworked parts of the Canada Student Loans and Canada Apprentice Loans programs in an attempt to ease the debt burden on borrowers.
This includes changes to repayments and an interest freeze as well as the proposed permanent elimination of part of national student loans.
Freeze interest on student loans
The federal government has waived interest on Canada Student Loans until March 2023.
When you take out a loan to help pay for your post-secondary education, you don’t have to repay your loan for six months after you graduate and no interest is earned during that time.
Then, when those six months are up, you usually have to start paying off your Canada student loan.
Plus, that’s when the interest starts accumulating.
With this freeze, you will earn no interest on your loans until March 2023, even if the usual grace period has already ended.
Increase in non-payment income threshold
Effective November 1, 2022, the non-payment income threshold for Canada Student Loans and Canada Apprentice Loans is increased to $40,000.
Borrowers who earn less than $40,000 no longer have to start paying off their student loans until they earn at least that much money.
Prior to this, graduates had to start repaying their loans once their annual salary was $25,000.
The federal government has said it is committed to keeping the zero payment income threshold in line with inflation each year.
Lower cap on affordable monthly payments
Effective November 1, 2022, the affordable monthly payment cap is lowered from 20% of an individual’s household income to 10%.
This means that the maximum amount that post-secondary graduates must set aside to repay their loans each month can only be 10% of their household income.
Elimination of interest on student loans
The federal government has announced its intention to waive interest on federal student loans for all new and existing federal student and apprentice loans.
If Royal Assent is granted, the elimination of interest would come into effect on April 1, 2023.
This is the day after the end of the interest freeze on student loans.
Paying no interest on student loans would save the average student borrower $410 a year, according to the government.