Friday, February 23, 2024

Student Loans: Federal budget for 2021 waives student loan interest rates

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Jillian Castillo
Jillian Castillo
"Proud thinker. Tv fanatic. Communicator. Evil student. Food junkie. Passionate coffee geek. Award-winning alcohol advocate."

Students pursuing post-secondary education no longer have to worry about student loan interest, following the 2021 Federal Budget. Though they still have to pay interest charges to the provincial or territorial portion of their loan, charges to the federal portion have been waived until March 31, 2023. This is a huge help to students, especially given that half of all post-secondary students graduate with debt, as stated in the 2018 National Graduates Survey (NGS). Moreover, 74% of students depend on student loan programs from the government to pay for their education.

More time to repay debt, save, and invest in their future

By waiving interest rates for the next two years, students will have more leeway to work on repaying their debt. The government will be actively supporting this, as they recently announced their plan to increase funding to federal job placement programs, like Canada Summer Jobs. They plan to create an additional 215,000 work opportunities, including those for students.

Apart from work income, students also have much to gain if they have a Registered Education Savings Plan (RESP). These accounts have increased the potential to save money given their tax-advantaged benefits. Plus, by investing in more securities, like mutual funds, ETFs, or stocks, students can grow their wealth over the long term. The waived loan interest rates give them more freedom to save and invest as they please, resulting in potentially larger gains in the future. The same goes for students with Tax-free Savings Accounts (TFSAs). Like RESPs, they are tax-advantaged accounts that allow the account owner to invest in multiple securities. Given the aforementioned, now is without doubt the best time for students to save and invest, whether it’s in preparation for repaying debt or for future financial milestones.

It’s worth noting that waived loan interest isn’t the only student benefit set forth by the 2021 Federal Budget. It provides a wide range of actions geared towards alleviating the financial strain on students. For one, it doubles the Canada Student Grant until 2023. Now, full-time students can acquire up to $6,000 from the grant, while part-time students can get up to $3,600. The grant is automatically calculated when you apply for provincial or territorial student aid, so there’s no need to apply for it separately. The government also plans to increase the limit for loan repayment assistance. Before the 2021 Federal Budget, borrowers would stop receiving support after their income rose above $25,000 per year. But now, the threshold stands at $40,000 and will increase with inflation.

Students across the country gain relief amid pandemic

With all that being said, students are pleased with the government’s decisions for the 2021 Federal Budget. The Canadian Alliance of Student Associations (CASA) released a statement praising the comprehensive student aid package, highlighting how it will bring significant relief to students around the country. CASA states that the pandemic has brought about huge financial burdens on students, but the waiving of interest rates alongside the other student aid measures, will help them better manage their financial situation.

While it’s clear that students now have a financial safety net, they are not the only demographic that the 2021 Federal Budget caters to. The government has also put down measures geared towards assisting the agricultural sector, laying the groundwork for a more sustainable economy. Apart from providing funds to processers, temporary foreign workers, and wine growers, there is also an increased budget for climate change mitigation measures. Check out the article to learn more — The Federal Budget: Help for Processors, TFWs, and Wine Growers.

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