Repealing Federal Student Loan Interest Will Cost Over $550 Million Annually

Finance Minister Chrystia Freeland delivers the fall economic statement in the House of Commons in Ottawa on Nov. 3, 2022. (The Canadian Press/Adrian Wyld)

Repealing federal student loan interest will cost over $550 million every year for as long as Ottawa’s plan to cut the interest continues into the future, says the Department of Employment.

Senators on the national finance committee heard from witnesses on Nov. 22 about various costs associated with the government’s new spending measures outlined in the Fall Economic Statement delivered to the House of Commons by Finance Minister Chrystia Freeland.

One of the measures was to cut interest on the federal portion of all Canada Student Loans and Canada Apprentice Loans starting in April 2023. The government outlined how much the measure would cost over the next five years, as first reported by Blacklock’s Reporter.

“Right now the the investment is 2.7 billion over five years, but then there is an ongoing cost as well of $556.3 million per year ongoing,” said Erin Hetherington, policy director for the Canada Student Financial Assistance Program, while testifying before the Senate national finance committee on Nov. 22.

Hetherington said the estimated cost was calculated based on how much interest revenue the federal government is expected to lose over the next five years because of the measure.

“What stakeholders have been consulted on that? Would it affect future student loans?” asked Sen. Tony Loffreda.

“The reception so far has been positive to change,” Hetherington said. “Many of our students stakeholders have expressed support for this measure.”

“I think we have to help our students,” Loffreda said. “But we don’t want to affect the future loans being made to those same students.”

Over $500 million

MPs on the House of Commons finance committee also questioned the costs of eliminating federal student loan interest in the future, with Conservative MP Adam Chambers asking how many new Canadians will be able to pursue post-secondary studies because of the interest cuts.

“It is difficult to say,” replied Atiq Rahman, assistant deputy minister of the Employment and Social Development Department’s learning branch, on Nov. 21.

“Those [students] who have gone to school and then are in repayment, some of them are struggling, especially with rising costs,” Rahman said.

“We’re going to spend $500 million a year,” replied Chambers. “The question is how many more students are going to be able to get to post-secondary education.”

Rahman replied by saying the measure is targeted at making loan repayment more affordable, adding that his department had not conducted studies on how many new students it would attract.

He also said the average Canadian student exits post-secondary education with $14,000 in federal student loans.

“But then in addition, they also have provincial student loans,” he said.

Chambers said the federal government should’ve considered using the money to incentivize more students to pursue college or university education.

“So we’re going to spend $500 million helping students who are already in post secondary education as opposed to providing the same amount of money in grants to help students who couldn’t otherwise go to school,” he said.

“I know you don’t make the policy decision, but I just wanted to put that on the record.”

Rahul Vaidyanath contributed to this report.