Canadian students owe $28B in government loans, some want feds to stop charging interest
A petition circulating online is calling for the elimination of interest charges on federal and provincial student loans.
With Canadian students collectively owing over $28 billion in student loans to all levels of government, The Canadian Federation of Students has posted several Facebook ads about this issue, in addition to launching an online petition to have interest charges scrapped.
The petition claims that the federal government is using interest fees on student loans as a source of revenue that is projected to earn approximately $862.6 million in revenue from the Canada Student Loans Program (CSLP) in 2018. Public records show that revenues generated by the federal government off student loan interest rates was $662 million during the 2016-2017 school year and $635 million the year prior.
“It doesn’t have to be this way. If the federal government can issue interest-free loans to Bombardier, they can also give them to students,” reads the petition.
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According to data released in 2017 by Statistics Canada, tuition fees increased by over three per cent for undergraduate programs in the 2017-2018 academic years.
Data from the Canada Student Loans Program reveals that in the 2014-2015 fiscal year, the government provided 489,000 full-time students with $2.7 billion in loans and a further $20.9 million in loans to 12,100 part-time students.
Borrowers typically take between nine and 15 years to fully pay off their loan and the period usually overlaps with when Canadians are most likely to start a family. The report also stated university students graduate with an average debt of $16,727. College students have an average debt of $10,172, while doctoral students carry an average debt at graduation of $29,000.
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The students’ petition states that four Canadian provinces have already ceased charging interest on student loans, with B.C. following suit shortly. Manitoba, Nova Scotia and Prince Edward Island do not charge interest on their provincial loans. Newfoundland and Labrador offers non-repayable grants.
The petition adds that the federal government charges more in interest on student loans than many homeowners are paying on their mortgage loans.
The formula for calculating student loans hasn’t been altered since the year 2000. The formula is prime plus 2.5 per cent for variable rate loans and prime plus five per cent for fixed-rate loans. Banks’ best customers usually receive a prime rate of 3.45 per cent, while variable mortgage rates at most major Canadian banks currently sit at around 2.4 per cent.
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The student debt crisis has been acknowledged in the past, and has been highly-cited as a barrier for young people to becoming self-sufficient adults. It has also been a prominent talking point during the current Ontario provincial election.
NDP Leader Andrea Horwath recently advocated for not only eliminating interest rates on provincial student loans during a campaign stop in London, Ont., but also advocated for turning future loans into grants so students wouldn’t be saddled with more debt.
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“Not only in terms of turning or converting future loans to grants, so that there will be no need for those who are eligible for OSAP (Ontario Student Assistance Program) to accumulate further debt, but we will also be getting rid of the provincial portion of the interest on [former] student loans, as well as retroactively paying back the interest they’ve paid already,” Horwath said last month.
In February, the Canadian government took was forced to write off approximately $200 million in outstanding student loan payments that officials will never be able to collect.
Of the $28 billion in student loans owed to all levels of government, approximately $19 billion of that student debt is owed to the federal government.
To ease the burden on students, and to make it easier for governments to collect these payments, the Liberals have increased the minimum annual income students have to make before they are required to make debt payments to $25,000.
-With files from Victoria Hayward
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