Provincial government limits interest on student loans

On February 21, British Columbia’s Budget 2017 was released, with one very noteworthy inclusion for students: in it, the government announced that interest charged on all post-secondary student loans will now be limited to the prime rate. Interest charges in BC previously averaged prime plus two percent to five percent, one of the highest rates in the country. This reform is expected to save British Columbians and their families an average of $17 million annually.

“Our government has been successful in managing our budget so that we have a completely balanced budget,” says provincial minster of advanced education Andrew Wilkinson. “One of the dividends of that fiscal responsibility is that we have the ability to invest in some things like cutting the student loan interest rate in half.”

This development has some people saying there should be more extensive reforms to the province’s student-loan system.

“We congratulate the government on making this first step,” says Camosun College Student Society executive director Michel Turcotte, “but we would like to move to a point where interest rates on student loans are eliminated. That is the logical conclusion. The next step the government of British Columbia can take would be to implement a student grant program so that it would reduce the indebtedness that BC students would have in terms of the BC student-loan program.”

Wilkinson, however, holds to the government’s belief in interest-based student investment.

“There’s an idea out there that student loans should carry no interest, which means that nobody would ever pay them back,” Wilkinson says. “That’s just the basic economics of it.”

But British Columbia Federation of Students secretary-treasurer Jenelle Davis says that students would pay their student loan off regardless of whether or not there’s interest on it.

“I think it’s an ideological sort of issue that governments and some folks carry about this idea of student debt, this strange idea that if you don’t pay for something, you don’t care for it as much, or you don’t respect it,” she says. “We hear from minister Wilkinson and others in the past, and even now, that if you don’t charge a little bit of interest on something, students are simply not going to repay the money. I don’t think there’s much to that.”

Turcotte says that, regardless of interest charged, students have an attachment to their education.

“If the government believes that students need to have a personal investment in their education, there’s little that we can do to shake that point of view entirely,” he says. “But if students are paying $1,000 or paying $10,000, they’re still going to feel personally invested in their education.”

Now that these changes are happening, all those concerned will be watching the government’s next steps.

“It’s not just a matter of putting in grants for students, but increasing funding [toward] students’ tuitions, so they’re not scrambling at the lack of resources coming their way as well,” says Davis. “There needs to be a comprehensive long-term strategy, figuring out what we can do today, tomorrow, and in five years to ensure that education remains accessible.”