Updated: April 2025  |  bremo.io financial guides

Student Loan Interest in Canada — 2023 Changes Explained

In 2023, the federal government made one of the most significant improvements to Canada's student loan system in decades: it completely eliminated interest on Canada Student Loans. If you have a federal student loan — either currently in school, in repayment, or somewhere in between — you no longer pay any interest.

This page explains what changed, what didn't, and what it means for current and future borrowers.

What Changed on April 1, 2023

Before April 2023, Canada Student Loans charged interest during the repayment period at either:

• The prime rate (floating rate option)
• Prime + 2% (fixed rate option)

During school and the 6-month non-repayment period after graduation, interest accrued under the floating rate but could be covered by the government for eligible students. Many borrowers faced growing balances even while making payments, as interest outpaced their monthly amounts.

After April 1, 2023, interest is set to 0% across all Canada Student Loans, for all borrowers, permanently. The federal government made this change through the Budget Implementation Act, 2023.

Who Benefits

This change helped three groups of borrowers:

1. Current Students

No interest accrues during school or during the 6-month grace period after graduation. Your loan balance when you start repayment is exactly what you borrowed, with no interest additions.

2. Existing Repayment Borrowers

If you were already repaying your loan as of April 1, 2023, interest stopped accruing on that date. Every payment you've made since then has gone entirely toward reducing your principal.

3. New Borrowers

All Canada Student Loans issued since April 2023 are interest-free from disbursement through full repayment.

What Did Not Change

The 2023 change applied only to the federal Canada Student Loan. Provincial student loans were not affected by this federal policy:

• BC: BC eliminated provincial interest in 2019 — BC students pay 0% on both portions
• Manitoba: Manitoba also eliminated provincial loan interest
• Nova Scotia, PEI, Newfoundland: These provinces have also eliminated interest on provincial loans
• Ontario: The Ontario portion of OSAP still charges interest (prime + 1% floating or prime + 2% fixed) during repayment
• Alberta: Alberta provincial loans still charge interest at prime rate
• Saskatchewan, New Brunswick: Provincial loans still carry interest

Check with your provincial student aid office for current rates on the provincial portion of your loan.

Impact on Monthly Payments

The elimination of interest doesn't automatically change your required monthly payment amount — but it dramatically changes what that payment accomplishes. Before the change, a significant portion of each payment went toward interest. Now, every dollar goes directly to reducing principal.

Example: A borrower with $30,000 in federal student loans at the old rate of prime + 0% (approximately 7% in 2022–2023) was paying roughly $175/month in interest alone. That same borrower now has all payments going to principal — effectively accelerating debt payoff with the same payment amount.

The Tax Deduction for Student Loan Interest

Previously, you could claim a 15% federal non-refundable tax credit on interest paid toward your Canada Student Loan. Since federal loans are now interest-free, this federal credit is no longer applicable to federal loans.

However, if your provincial loan still carries interest, you can still claim that interest on your tax return. The credit applies to the provincial interest portion.

Strategic Implications for Repayment

With federal loans now interest-free:

• There is less urgency to aggressively pay off federal student loans faster than required
• If you also have a provincial loan with interest, prioritize paying that down first
• The federal loan at 0% is now essentially equivalent to a 0% instalment plan — there's no cost to taking the full 10-year repayment term
• If you have the financial flexibility, investing extra money in a TFSA or RRSP may generate better returns than paying off your interest-free federal loan early

Summary: Key Facts

• Canada Student Loans: 0% interest since April 1, 2023
• Applies to all loans — in school, grace period, and repayment
• Provincial loans: interest status varies by province
• Repayment Assistance Plan (RAP) remains available for income-based relief
• 10-year repayment term and RAP forgiveness are unchanged