Liberals Raise Student Loan Repayment Threshold to $25,000

KSA, CFS representatives argue the increase is not enough to help indebted students

The federal government has announced that Canadian graduates won’t have to begin paying off their student loans until they are making $25,000 per year. The announcement, made by Employment and Social Development Canada, increased the minimum necessary salary by $5,000 starting Nov. 1.

“I think [the threshold] could be higher,” says Alex McGowan, president and vice-president external of the Kwantlen Student Association. “I think $30,000 would be a more optimum threshold.”

Chairperson of the Canadian Federation of Students, Bilan Arte, agrees that the change provides no reason to celebrate, as even earning $25,000 a year still puts students below the poverty line.

“It’s clear from our perspective that these small reforms or tinkering to the student loan system isn’t actually initiating any widespread change,” says Arte. “If we’re going to be serious about addressing inaccessibility to post-secondary education, then we need to just eliminate tuition fees altogether and have a free system of postsecondary [education] across the country.”

According to the CFS, the current generation of post-secondary students in Canada already owe approximately 28 billion dollars in student loans to the federal government. That figure excludes debt owed to the provincial government and other private debt.

“From our perspective, [the change] fails to address the root cause of student debt,” says Arte.

According to a study by Citizen’s Financial Group, millennial college graduates with student loans are now spending nearly one fifth of their annual salaries on repayments. This study also reports that many recent graduates with student loans underestimated their monthly expenditures and now expect to be making payments into their 40s.

“The realities of debt are pretty hard hitting for students in our province, as they are for students across the country,” says Arte. “We know that high student debt comes from high tuition fees and we have a completely unregulated system of costs associated with attending higher education from coast to coast.”

The Canadian Student Loans Program charges interest upon graduation, even though repayment isn’t due during the first six months. The government still charges interest on the loan during that time, which can cause students to owe more than their base cost because of high interest rates.

These high interest rates result in a discrepancy between what’s owed and what’s paid. The difference between the two is “profit that’s collect by the federal government off of students who couldn’t go to school in the first place,” according to Arte.

Saddling young people with debt strains them financially and fails to encourage young people to begin their adult lives. Fresh graduates may not be in a position to repay their loans, even if they are earning $25,000 annually.

“We can sympathize with people in that position, but also very importantly, it’s just not good for the economy to force people to find a job really quickly,” says Alex McGowan. “It’s the reason we have unemployment insurance—when you lose a job you should have a buffer of time until you have to find your next job.

The KSA currently collects over $100,000 from students every year for advocacy funds and, according to McGowan, the raising of the repayment threshold is an example of what those funds can accomplish. However, student advocacy groups will continue to work towards persuading the government to do more to eliminate student debt.

“It’s about whether we recognize access to post-secondary as something that should be universal, as something that is a public service,” says Arte.