Student Loans Interest Free Canada 2023 — What Changed

On April 1, 2023, Canada permanently eliminated interest on federal student loans. Here is exactly what changed, who it affects, and how it reshapes repayment strategy.

The 2023 Change — What Happened

Before April 1, 2023, Canada Student Loans accrued interest after graduation at the prime rate plus 1% (floating) or prime plus 2% (fixed). At 2022–23 interest rates, that meant graduates were paying 7–8% interest on their federal student loan balance. The federal government eliminated this interest permanently, effective April 1, 2023.

This is a permanent legislative change — not a temporary pandemic measure. All Canada Student Loans in repayment or entering repayment after April 1, 2023 are now 0% interest for the life of the loan. Borrowers who already had interest accrued on their balance before this date still carry that historical interest, but no new interest has accumulated since.

Who Benefits?

• Current students: Your federal student loan will never accrue interest. The balance you graduate with is the balance you repay.
• Recent graduates already in repayment: Interest stopped accruing on your Canada Student Loan on April 1, 2023. Only the principal remains.
• Graduates on RAP: The Repayment Assistance Plan previously required the government to cover interest for RAP participants — now that interest is zero, RAP focuses entirely on reducing principal for those with very low incomes.

Provincial Loans Are Different

The 2023 interest elimination applies only to the federal Canada Student Loan portion. Provincial student loans are governed by provincial legislation and most still carry interest. Ontario's provincial student loan component, for example, continues to accrue interest at prime rate plus a set spread.

If you have both federal and provincial loan components (common for OSAP borrowers), your federal portion is interest-free while your provincial portion may still carry interest. Check your loan statements carefully to understand which portion is which.

Loan Type	Interest Since April 2023
Canada Student Loan (federal)	0% — permanently interest-free
Ontario Student Loan (provincial)	Prime rate + spread (check current rate)
BC StudentAid provincial portion	Varies — check provincial rules
Private student line of credit	Prime + 1–2% (market rate)

How This Changes Repayment Strategy

Before 2023, the standard advice was to pay down federal student loans as aggressively as possible to minimize interest costs. Now, with federal loans at 0%, the math has fundamentally changed:

• There is no financial penalty for taking the full 10-year repayment period on your federal student loan.
• Extra cash is better deployed toward high-interest debt (credit cards, private lines of credit), TFSA investments, or building an emergency fund.
• Only if your provincial loan carries significant interest should you prioritize accelerated repayment.

The Interest Deduction Is Also Gone

Previously, students could claim a federal tax credit for interest paid on Canada Student Loans. Because federal loans are now interest-free, there is no interest to deduct federally. The provincial student loan interest deduction still applies to interest paid on provincial loan components where interest still accrues. Keep your provincial loan interest statements for your tax return.

What This Means for Future Students

Students entering school today or in the coming years will graduate with the most favourable federal student loan terms in Canadian history. A $35,000 federal student loan balance at graduation, paid over 10 years at 0% interest, costs exactly $35,000 — compared to approximately $47,000 under the previous 7% floating rate regime. That $12,000 difference is a genuine and significant improvement in student financial outcomes.