Minister Solberg announces income contingent student loan repayment -

Minister Solberg announces income contingent student loan repayment

Critics decry lack of interest rate cut


Repayment of Canada Student Loans will now be based upon the borrower’s income and ability to pay. The new policy will start next year and is part of wide-ranging changes announced by Minister of Human Resources and Social Development Canada Monte Solberg in Kitchener today.

“We know from our own research that young people from many low and medium income families don’t even consider post-secondary education because they think it will be too expensive,” said Solberg. “Today we are telling them and we are telling their families that a low income should not be a barrier to anyone.”

Currently, student loan borrowers in repayment are required to continue to making payments on their student loans regardless of their financial situation or how long ago their incurred that debt. Today, Solberg indicated that would change. Repayment will be tied to income and borrowers will only have to make payments equal to a maximum of twenty per cent of their income. There is also a time limit on repayment. Any debt a student still owes after fifteen years will be forgiven by the government.

“At that time it will be forgiven and we’re of the mind that if people are in the situation after 15 years where they are still struggling to pay, it’s not worth it for us to pursue it,” said Solberg. “Secondly, we want people to get on with their lives. It’s a lot of burden; no one’s going to choose to be pursued for fifteen years by the government in terms of repayment.”

Students will face less paperwork as well. Currently, students must fill out separate agreements for both their federal and provincial loans each year of their post-secondary education. Starting in 2009/10, students will only fill out one form in their first year which will be valid for each year they continue in their original program.

Solberg also highlighted the new Canada Student Grant Program that will launch next year. “If students are from a lower income family, they will receive a $250 upfront cash grant each month they are in school,” he said. “In other words, if you are a low-income student in a four-year program, you will receive eight-thousand in Canada Student Grants over the course of your education.” The government expects 240,000 students will receive grants each year.

To the disappointment of critics, the government didn’t announce any decrease to the federal student loan interest rate, presently set at 2.5 per cent above prime.

Julian Benedict of the Coalition for Student Loan Fairness said students need relief from high interest rates. “If they are going to income contingent loan repayment … the problem with that is that if there is no interest rate adjustment we’ll be expanding the time to which people repay their loans which means they’ll pay more interest at these high rates,” he said of the new Repayment Assistance Plan. He pointed out that most countries with income contingent repayment plans charge interest rates which are below the prime rate.

Solberg believes his changes will be more helpful to students than decreasing the interest rate. “The issue really isn’t student interest rates, it’s the ability of students to repay,” said Solberg. These changes “go a lot further than reducing interest rates a point.”

“Interest rates are only one aspect,” according to Solberg. “The changes we’ve put in place really help people no matter what their situation.”

When asked if he disagrees with interest rate decreases implemented by three provinces this last year, Solberg said, “It’s up to the provinces to decide how they want to do it, but we’ve taken an approach that we think is more universal, that captures all the reasons that people struggle to pay.”

Student lobbying organizations have expressed pleasure with the changes unveiled today. “Minister Solberg’s commitment to help improve access for low and middle-income students and the government’s new initiative to help relieve student debt is reassuring for those who are faced with the burden of such barriers,” said Zach Churchill, national director of the Canadian Alliance of Student Associations.

Students, parents, and graduates can find out more about these changes by visiting the government’s post-secondary portal at

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