Graduates No Longer Have to Repay Student Loans Until Making Over $40,000

Employment Minister Carla Qualtrough rises during question period in Ottawa on April 4, 2022. Adrian Wyld/The Canadian Press

Canadian graduates earning under $40,000 a year will no longer have to repay their government-issued student loans until after they have a higher income, the federal government announced Tuesday.

“Graduates will not have to start repaying their federal loans until they earn at least $40,000 per year and maximum payments will also be lowered from 20 percent to 10 percent of household income,” said employment minister Carla Qualtrough during question period in the House of Commons on Nov. 1.

“This will support an estimated 180,000 borrowers each year,” she said.

Leading up to the federal election in September 2021, the Liberals promised that, upon reelection, they would increase the student-loan repayment assistance threshold to $50,000 for unmarried graduates, but have yet to do so.

Prior to Tuesday’s announcement, only single graduates earning below $25,000 annually were exempt from repaying their student loans. The government also announced Tuesday that the cap on monthly affordable loan payments would be lowered from 20 to 10 percent of a borrower’s household income.

The government further says it will increase the non-repayment income threshold every year in order to keep pace with inflation.

Manitoba, Newfoundland and Labrador, Saskatchewan, New Brunswick, and Nova Scotia are all expected to follow the federal government’s lead on increasing the non-repayment threshold for their own provincially-issued student loans, but some other provinces, such as Ontario, Alberta, and British Columbia, have not announced similar measures for their student loan programs.

Quebec, the Northwest Territories, and Nunavut do not participate in the Canada Student Financial Assistance Program.

US Debt Forgiveness

The Canadian government’s announcement comes just over a month after U.S. President Joe Biden introduced an important condition on his promise to forgive up to $10,000 or $20,000 of all federal student loans if borrowers consolidated their debt into the federal Direct Loan (DL) program.

Biden’s administration made a pivotal change to the promise on Sept. 29 by announcing that only federal student loans owned by the Department of Education would be eligible for forgiveness, thus disqualifying all graduates with privately-owned student loans unless they had applied to consolidate their loans into the DL program before Sept. 29.

Katabella Roberts contributed to this report.