OTTAWA — The Truth Test is a project of The Canadian Press that examines the accuracy of statements made by politicians. Each claim is researched and analyzed to provide Canadians with facts instead of spin.
"Since coming to power, Trudeau has profited off of student debt, to the tune of nearly $4 billion in interest payments." — Federal NDP Leader Jagmeet Singh, in a Twitter post, Aug. 28, 2021.
Singh posted the tweet about Liberal Leader Justin Trudeau following an NDP campaign event Saturday morning at Ontario's University of Sudbury, where he vowed to do away with interest on federal student loans "immediately and permanently" as well as forgive student debt.
The commitment reiterated a plan New Democrats first laid out in March to offer financial breaks to students by cancelling up to $20,000 in tuition, freezing loan payments through July 2022 and scrapping interest payments, among other measures.
That campaign-style pledge earlier this year came as federal parties prepared to battle it out for the hearts and ballots of young voters ahead of the anticipated election, now set for Sept. 20.
In a May report, parliamentary budget officer Yves Giroux said the NDP proposal would cost $3.95 billion over five years, with the reduction of as much as $20,000 per student borrower by far the priciest plank.
Statistics Canada found last fall that more than 60 per cent of post-secondary students were concerned about using up their savings and taking on more debt.
The Liberals imposed a moratorium on Canada Student Loan payments between April and September 2020, and after a six-month thaw opted in April to suspend interest again until March 31, 2023, at the urging of student groups.
The April budget also proposed to allow graduates to avoid making repayments until they earn at least $40,000 per year, up from $25,000.
The federal government does generate revenue from interest on student loans. But all that income goes toward covering the cost of no-interest loans while students are enrolled, the repayment assistance program that suspends interest payments and annual writeoffs that can top $200 million, said Alex Usher, president of Higher Education Strategy Associates, a research and analysis firm that consults for governments and post-secondary institutions.
"It's a ridiculous use of the word profit," he stated, calling the characterization a "pretty medieval view of money."
"Cross-subsidizing of students who can repay their loans to students who can't is probably a more accurate way to put it."
Profit suggests financial gain — the difference between cash earned and cash spent — Usher said. However, all of the proceeds from federal interest payments go directly into various student support programs. (Usher presumes Singh did not mean to suggest Trudeau is profiting personally off student debt.)
"No interest on loans, that's a legitimate policy," he added, citing German universities as an example.
Singh stood by his statement Monday.
“It is a fact that in the six years that Justin Trudeau has been prime minister, if you look at the federal interest that’s been collected for student debt, that has been a $4-billion cost for students. And the prime minister has been responsible for that," he told reporters at a campaign stop across the Rideau Canal from Parliament.
In 2018-19, the federal government took in $841.4 million in interest on student loans, according to Employment and Social Development Canada.
Some 625,000 post-secondary students borrowed $3.6 billion via the Canada Student Loans program that year.
The Liberal government is drawing revenue from interest on student debt, but, as Usher says, is feeding money back into post-secondary loan programs.
This report by The Canadian Press was first published Aug. 30, 2021.
Christopher Reynolds, The Canadian Press