Budget gives students break on loans
NDP also promises $531-million increase in spending on academic institutions
A dollar saved is a dollar earned.
The NDP government eliminated interest charges on the provincial portion of post-secondary student loans in Tuesday’s budget, effective immediately.
“As far as I can tell, there is no down side,” Stewart McGillivray, government relations strategist with the BCIT Student Association, said after coming out of the budget lockup. “It will save people money, every little bit helps.”
The B.C. government estimates the provincial share of a post-secondary student loan upon graduation averages out to $11,200 of a combined federal/provincial student-loan debt of about $28,000. The loans are made by the federal and B.C. governments, but payments are integrated and administered by National Student Loan Services.
Eliminating the provincial portion of interest payments (which were at prime, currently 3.95 per cent) would save a student about $2,300 over 10 years, according to budget estimates.
For the federal portion of a student loan taken out since 1995, interest rates are either floating (prime plus 2.5 per cent, so 6.45 per cent) or fixed (prime plus five per cent, so 8.95 per cent)
“This is an incredible announcement,” Aran Armutlu, chairperson of the B.C. Federation of Students (BCFS), said.
“Students with loans will immediately have money put back in their pockets. So often we see an announcement come out and it doesn’t take effect for a year or two years or three years. This is right away, that’s great.”
“Instead of worrying about growing debt, young people will be able to focus on learning, and graduates will be able to put their energy into their next steps in life,” said Finance Minister Carole James.
She also announced a $531-million increase in spending on academic institutions over three years, an 8.4-per-cent hike. A further $557 million has been budgeted for capital works at post-secondary schools.
“Affordability for students has definitely changed over the decades,” BCFS’s Armutlu said. “It’s extremely costly for students today.”
Tuition, textbooks and rent costs have soared and the BCFS says half of all students are forced to take on loans for post-secondary education. Student debt in B.C. has risen 88 per cent since 1999, the Federation says, and the average balance upon graduation is more than $30,000.
Based on the current prime rate, a student loan of $25,000 has an additional $8,000 in interest charged during a 10-year repayment, the Federation says. Those with $40,000 of debt upon graduation could expect to pay an additional $12,700 in interest.
“This budget announcement doesn’t just help current and future students, it also benefits students who are still struggling to make loan repayments,” Armutlu said.
Students with loans will immediately have money put back in their pockets.”
Aran Armutlu