Here's What You Need To Know About Recent Changes To Student Loans In Canada
The federal government is planning on eliminating student loan interest.
People on the McGill University campus. Right: Canadian money.
If you have federal student loans, quite a few changes have been made recently and here's what you need to know about repayments and interest!
The federal government has reworked some parts of the Canada Student Loans and Canada Apprentice Loans programs to try and help ease the burden of debt for borrowers.
That includes changes to repayments and a freeze on interest along with the proposed permanent elimination of part of national student loans.
Student loan interest freeze
The federal government has waived interest on Canada Student Loans until March 2023.
When you take a loan to help pay for your post-secondary education, you don't have to pay back your loan for six months after you graduate and no interest is earned during that time.
Then, when those six months are over, you typically have to start repaying your Canada Student Loan.
Also, that's when the interest starts racking up.
With this freeze, you won't be earning any interest on your loans until March 2023, even if the usual grace period has already ended.
Increased zero-payment income threshold
As of November 1, 2022, the zero-payment income threshold for Canada Student Loans and Canada Apprentice Loans is increased to $40,000.
Borrowers who earn under $40,000 no longer have to start repaying student loans until they make at least that much money.
Before this, graduates had to start paying off their loans once their yearly salary was $25,000.
The federal government said it's committed to keeping the zero-payment income threshold in line with inflation every year.
Lowered cap on monthly affordable payments
As of November 1, 2022, the cap on monthly affordable payments is lowered from 20% of an individual's household income down to 10%.
That means the maximum amount that post-secondary graduates need to put down when repaying their loans each month can only be 10% of their household income.
Student loan interest elimination
The federal government has announced plans to scrap federal student loan interest for all new and existing federal student and apprentice loans.
If given Royal Assent, the elimination of interest would take effect on April 1, 2023.
That's the day after the student loan interest freeze is set to end.
Not paying interest on student loans would save the average student borrower $410 per year, according to the government.