By: Cam Fortems (Kamloops This Week)
Students still in school and those already graduated will pay less in loan repayments with a change announced in Tuesday’s provincial budget.
Finance Minister Mike de Jong said the B.C. Liberal government will lower interest rates from today’s prime plus 2.5 per cent to straight prime.
“So, for example, with prime at 2.7 per cent right now, those in repayment would have to pay 5.2 per cent today,” de Jong told the legislature. “After August 1, they will just pay that prime amount.”
Thompson Rivers University’s students’ union has long pushed for reform of the loan system, most recently advocating for a needs-based grant system.
Vice-president external Amber Storvold said the measure will help those graduating with student debt.
“We’re very happy to see a reduction in the interest rate. It’s a good step in making post-secondary education more affordable,” she said.
While the rate that students pay once they are out of school will fall by half with the measure, federal student loans remain in the five per cent range.
Storvold noted the announcement puts B.C. in line with many other provinces.
The province currently has the highest rates in Canada.
The average debt for students who carry a loan in Canada is about $25,000 a year.
Doug Thode, a insolvency trustee in Kamloops, acknowledged the rate cut will help those with debt, noting it would reduce payments on $10,000 by about $250 a year, for example.
He said through his 27 years in assisting those in dire financial trouble, he has noticed increasingly higher levels of student debt. Unlike many other forms of debt, however, student loan debt is generally not dischargeable until a student is out of school for at least seven years.
“For people who come see me, it doesn’t matter if their student debt is $140 a month or $150. They can’t pay it anyway.”
Thode also said he’s seeing a trend of people coming through his door who have obtained student loans to attend private colleges. Even if they find a job, it’s often at no higher a wage than they were making before they went to school.
“The biggest issue is people are led astray at the start,” he said.
De Jong estimated the measure will cost the provincial treasury about $17 million a year.
While the announcement is an improvement for B.C. students, the new rate pales compared to Newfoundland and Manitoba, where the provinces do not charge any interest.