Tomorrow, August 1, Newfoundland and Labrador will become the first province in Canada to eliminate interest on its student loans. And, because interest will be eliminated on all new, current, and outstanding student loans, the measure will benefit more than 49,000 students and graduates.
In 2007, the Williams government reduced the interest charged on provincial student loans from prime plus 2.5 per cent to prime. Earlier this year, with 12,000+ signatures in hand, provincial student leaders petitioned the minister of education to drop the interest to zero, and government subsequently saw fit to take their advice.
The provincial student federation held a packed news conference this morning to mark the day and perform a symbolic countdown to the elimination of interest charges with recently minted education minister Dr. Darin King.
Newfoundland and Labrador Chairperson of the Canadian Federation of Students Daniel Smith, who is perhaps the envy of all other student leaders in the country, rather triumphantly noted the following:
By continuing the tuition fee freeze, increasing core funding for our public college and university, expanding upon the up-front grant program and eliminating the interest rate charges on student financial assistance this government has clearly listened to students and their families for the need to lessen obstacles to education and reduce student debt.When I was a student leader in the mid-1990's we were called communist for suggesting that institutions stop increasing tuition fees. Times have clearly changed.
Eliminating all nominal interest? Meaning that after inflation, the NL government is paying students to borrow?
ReplyDeleteLet's see how long that lasts if interest rates rise and oil prices stay low.
Thanks for the optimism Alex! You must be a real hoot at parties.
ReplyDeleteAlex, it's fundamentally an issue of fairness for students from low- and middle-income backgrounds. Why should they have to pay more for their education, when interest is factored in, than those who can afford to pay up front? Of course governments should make expenditures to equalize the financial barriers across income levels. They should go a lot further as well and reduce the financial barriers for students from lower-income backgrounds.
ReplyDeleteAnonymous 2, your first point is a fallacy - it is only true if you assume money has no time value. Paying interest doesn't mean borrowers are paying more than non-borrowers. Families that don't borrow and pay up front instead are losing a roughly equivalent amount in foregone interest on that capital.
ReplyDeleteThe rest of your point is valid, though - in order to equalize participation, you have to make financial costs for low-income families much *less* than they are for higher income families. NL's policies are the opposite, though - aimed at reducing costs for all, instead of concentrating aid to the neediest.