Over the past decade, we have witnessed rising university tuition costs and more students graduating with debt. In addition, after the 2019 OSAP changes from the government cuts to education, recent graduates and students face additional obstacles preventing them from paying off their student loans and graduating.
In this article, I will explain what were the 2019 OSAP changes and the impact on students and recent graduates. There are 3 main changes that I will discuss.
1. Changes to Grant Eligibility:
Before 2019
- Students from household income of $170,000 were able to qualify for government grants.
- Federal Budget for OSAP was $2.04B.
After 2019
- Only students from household income of $140,000 are able to qualify for government grants.
- Federal Budget for OSAP was cut to $1.37B.
Impact:
These changes seem to give more students from low-income families more opportunities to receive grants. However, due to the cuts to the federal budget for OSAP, students will receive overall less grants. Therefore, students from low-income families are pretty much in a similar situation, while the remaining students will receive less or no funding.
2. Changes to the Grace Period:
Before 2019
- For 6 months, interest does not accrue on the Provincial portion of the OSAP loans.
- 6 months where students do not need to start loan repayment.
After 2019
- Interest on both the Federal and Provincial loan accrues immediately after graduation.
- 6 months where students do not need to start loan repayment.
Impact:
If you read my previous article on How to Calculate Interest on OSAP, your OSAP loans are split between the federal and provincial portion 70% and 30% respectively.
Before the 2019 OSAP changes, you would only accrue interest on the Federal portion so 70% of your loan. But now if you graduate after September 2019, interest accrues on 100% of your loan immediately. This means that recent graduates will have will have an increased pressure to find a job immediately after graduation to pay off their student loans.
Although graduates do not need to start paying back their loans until 6 months after graduation, letting the interest accrue for 6 months at 100% of your loan will really negatively affect their ability to pay off their loans.
I would argue, this shouldn’t even be considered a “GRACE” period.
3. Changes to the definition of an Independent Student:
Before 2019
- Independent Student: A student out of high school for 4 years or more.
After 2019
- Independent Student: A student out of high school for 6 years or more.
Impact:
A mature/independent student is likely to receive MORE funding because their parental income is not taken into consideration, and it is the opposite for non-mature/dependent students.
As a result, it will be increasingly difficult for students that want to pursue higher level education (masters/graduate programs) because they will receive less funding due to the new definition of an independent student. This will likely disincentive students to pursue additional education simply because they can not afford it without sufficient support from the Canadian government.
Future Impact of the 2019 OSAP Changes
In macroeconomics, an indicator of a healthy economy is a skilled workforce. When a workforce is highly educated in the STEM (Science, technology, engineering, and mathematics) this can help to grow industries and positively influence the country’s economy.
Overall, these cuts to education have serious short-term effects where students are unable to graduate or pay off their loans. However, there are also negative long-term effects to the Canadian economy if our citizens are unable to receive a proper education.
In conclusion, these are the impacts of the 2019 OSAP changes and it does not look great. Although I may not know how to change these policies, I do know that I can help you create a loan repayment strategy to help you be DEBT free.
Feel free to DM me directly and we can chat about how to tackle your student loans.
