Ottawa plans to make permanent its pandemic-era pause on student loan interest in an effort to reduce some of the current financial pressures on young Canadians as the cost of living rises.
As part of its fall fiscal update tabled Thursday, the federal government outlined plans to permanently eliminate interest on all federal student loans and apprentice loans including loans currently being repaid.While this move is helpful for students graduating, said Rebekah Young, director of fiscal and provincial economics at Scotiabank, it is ultimately relief for interest payments on debt rather than money toward tuition or other post-secondary school expenses.
The Liberal government suspended the accumulation of interest on student loans in 2021 due to the effects of the pandemic on graduating students as they entered a unique job market. The measure was set to expire in March.An average student loan borrower will save $410 per year as a result of their loan being interest-free, the government said in the fiscal update.
Young said some may fear the decision could stoke inflation, but that it isn't be a particularly strong argument as the measure is a relatively small, contained one.
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