Changes to the Canada Student and Apprentice Loan Programs were recently announced by the Government of Canada, including more flexible student loan repayment plans.
Minister for Jobs, Workforce Development and Disability Inclusion, Carla Qualtrough, announced that effective November 1, the zero-payment income threshold – the annual income required before student loan repayment – for a one-person family will increase from $25,000 to $40,000.
This threshold will be further increased depending on the size of the family. The cap on monthly payments will also be lowered from 20% to 10% of a person’s household income.
The federal government projects that these changes will positively impact 180,000 people each year.
Two days later, more changes to Canada Student Loans were announced.
As part of the federal government Fall Economic Statement 2022Canadian Deputy Prime Minister and Finance Minister Chrystia Freeland has introduced a new program that will permanently eliminate interest on the federal portion of all Canada Student and Apprentice Loans, including those already repaid.
The new program is expected to begin in April.
According to Jesse Hajer, assistant professor of economics and labor studies at the University of Manitoba, student loan programs aim to improve access to education and public services. He said these programs are a response to the private market, which governments say is not sufficiently meeting the needs of the public.
One of the federal government’s goals in eliminating interest on Canada Student Loans is to help ease the burden of paying them back.
Hajer said accumulated debt can have various impacts on individuals, such as preventing them from buying a home, starting a family or enjoying life after college. It can also shape his choice of career path.
“If you have to take on huge student debt to become a lawyer, for example, the type of jobs you are willing to take on as a practicing lawyer after completing your program may be limited to those that pay very high salaries. . or a high salary,” he said.
Hajer also added that having a lot of debt in a population reduces the amount of money available to spend, which reduces demand in the economy.
Although the Liberal government has emphasized the need for this program in its election platform, Hajer believes that the pressure of inflation and the rising cost of living, as well as student loan forgiveness programs in the United States, helped influence the timing of the recent government announcement. .
He’s confident these changes will help keep more money in people’s pockets, though he added that the average Canadian student is only expected to save $410 a year.
However, Hajer thinks there are other options that would be more beneficial to students and the economy. He pointed to countries in Europe that use a model offering higher education for little or no tuition, and that offer financial supports that make college almost universally accessible.
With tuition fees rapidly outpacing the rate of inflation, as well as a model based on the premise that students should pay for most of their education through tuition fees, Hajer said Canada has far removed from what other countries are doing. He believes there is a strong case for an accessible, low-barrier education.
He pointed out that even if tuition were free, many students would still need to work, which could affect their learning.
“If we want to have a high-productivity, high-wage economy, we need more people to succeed in post-secondary education,” Hajer said.
“That means not only are people going to college, but they have the resources while they’re in university and college to be successful. So not having to work full time while going to school to make ends meet.
“I think we need to take a step back and really look at supporting students in a more comprehensive way.”