MP calls for elimination of student loan interest
Kootenay-Columbia MP Wayne Stetski has written to the Minister of Finance and the Minister of Employment, Workforce Development and Labour calling for the elimination of interest on federal student loans in the 2019 budget.
The request follows the decision by British Columbia’s NDP government to stop charging interest on provincial student loans last month.
Stetski, the federal NDP’s BC Caucus Chair, highlighted that federal student loans make up a larger portion of the debt many young Canadians are graduating with, and these loans have relatively high interest rates.
The interest formula for federal student loans has not changed since 2000 and the federal government currently charges higher interest rates than some bank offerings for student lines of credit. The interest rate is either variable at prime + 2.5% (currently 6.45%) or fixed at prime + 5% per cent (currently 8.95%), Stetski pointed out.
He called the interest charges, “a penalty on low and middle-income students who cannot pay for their education outright.”
Students relying on loans pay thousands more for their education over the course of repayment, which can take more than a decade.
Stetski said interest relief is needed at the federal level because young Canadians are graduating with record educational debt in a time of stagnant wages and soaring housing costs.
Removing the interest on federal student loans could help young Canadians move towards other financial goals like home ownership or saving for their children’s education or retirement, he said.