By Sherina Harris
Federal student loans won’t gather interest during the six-month grace period after a student graduates, according to changes in the 2019 federal budget announced today.
“Lowering the interest rate and making the grace period interest-free will make post-secondary education more affordable and help students transition to the labour market successfully after leaving school,” the budget reads.
This is at odds with changes announced to the Ontario Student Assistance Program in January, one of which included starting to charge interest during the six-month grace period.
This would “align Ontario’s repayment terms with that of the federal government” and “reduce complexity for students,” the provincial government said in their January press release.
Under the province’s framework, students could wait for six months before beginning to pay off their loans, but the interest would start accumulating during that period.
Floating interest rate to be lowered
The floating interest will be lowered to prime, instead of its current rate of prime plus 2.5 points. This, the budget says, will help students manage the pressure of higher living costs and the changing nature of work.
Provinces and territories will also receive more funding to assist with costs related to the changes proposed in the budget. Over the next five years, the amount given to provinces and territories will be $20 million.
For students taking a break from their studies, the government announced interest-free and payment-free leaves, which can be taken in stackable six-month periods for a maximum of 18 months. This includes mental health leave.
People who default on their student loan will now have an increased eligibility for loan rehabilitation. This will allow “financially vulnerable borrowers in default [to] access supports such as the Repayment Assistance Plan” and begin to make payments toward their debt, the budget says.
The budget also included investing $15 million over the next five years towards modernizing the Canadian Student Loans Program.
Support for students who have disabilities
The federal government will also give $12,000 more to the Canada Student Grant for Services and Equipment for Students with Permanent Disabilities, and expand eligibility for the Severe Permanent Disability Benefit so more students who have severe permanent disabilities can qualify for loan forgiveness.
The government will also remove the restriction that people using the Repayment Assistance Plan for Borrowers with a Permanent Disability who have been out of school for five years can’t receive further loans until their previous loans were paid. This will benefit students who have a permanent disability and are returning to school after a long absence, the budget says.