Regulations Amending Certain Regulations Related to Student Loans and Apprentice Loans: SOR/2023-273

Canada Gazette, Part II, Volume 157, Number 26

Registration
SOR/2023-273 December 8, 2023

CANADA STUDENT LOANS ACT

CANADA STUDENT FINANCIAL ASSISTANCE ACT

APPRENTICE LOANS ACT

P.C. 2023-1224 December 8, 2023

Her Excellency the Governor General in Council, on the recommendation of the Minister of Employment and Social Development, makes the annexed Regulations Amending Certain Regulations Related to Student Loans and Apprentice Loans under

(a) paragraphs 17(e)footnote a, (f)footnote a, (k.1)footnote b, (m)footnote c, (r)footnote d, (r.1)footnote e and (t) of the Canada Student Loans Act footnote f;

(b) paragraphs 15(1)(a), (f.1)footnote g, (g), (i)footnote h, (j), (m), (o)footnote i and (q) of the Canada Student Financial Assistance Act footnote j; and

(c) paragraphs 12(1)(f), (g) and (l) of the Apprentice Loans Act footnote k.

Regulations Amending Certain Regulations Related to Student Loans and Apprentice Loans

Canada Student Loans Act

Canada Student Loans Regulations

1 The long title of the Canada Student Loans Regulations footnote 1 is replaced by the following:

Canada Student Loans Regulations

2 Section 1 of the Regulations and the heading before it are repealed.

3 The definition full-time student in subsection 2(1) of the Regulations is replaced by the following:

full-time student
means a person
  • (a) who
    • (i) during a confirmed period within a period of studies, is enrolled in courses that constitute at least 60 per cent of a course load recognized by the specified educational institution as constituting a full course load,
    • (ii) has as their primary occupation during that confirmed period the pursuit of studies in those courses, and
    • (iii) meets the requirements of subsection 3(1) and section 3.1, if applicable; or
  • (b) who elects to be considered as a full-time student under section 2.1; (étudiant à temps plein)

4 The Regulations are amended by adding the following after section 3:

5 (1) Paragraphs 4.1(1)(b) and (c) of the Regulations are replaced by the following:

(2) Section 4.1 of the Regulations is amended by adding the following after subsection (1):

6 (1) Paragraphs 9(3)(b) and (c) of the Regulations are repealed.

(2) Subsection 9(4) of the Regulations is repealed.

(3) Subsection 9(7) of the Regulations is replaced by the following:

(4) The portion of subsection 9(8) of the Regulations before paragraph (a) is replaced by the following:

(4.1) Paragraph 9(8)(a) of the French version of the Regulations is replaced by the following:

(5) Paragraph 9(8)(c) of the Regulations is replaced by the following:

(6) Subsections 9(9) and 9(10) of the Regulations are repealed.

7 The portion of subsection 10(1) of the Regulations before paragraph (a) is replaced by the following:

8 The headings before section 12.1 and sections 12.1 to 16.5 of the Regulations are repealed.

Canada Student Financial Assistance Act

Canada Student Financial Assistance Regulations

9 The definition full-time student in subsection 2(1) of the Canada Student Financial Assistance Regulations footnote 2 is replaced by the following:

full-time student
means a person
  • (a) who
    • (i) during a confirmed period within a period of studies, is enrolled in courses that constitute at least 60 per cent of a course load recognized by the designated educational institution as constituting a full course load,
    • (ii) has as their primary occupation during that confirmed period the pursuit of studies in those courses, and
    • (iii) meets the requirements of subsection 5(1) or 7(1) or section 7.01 or 33, as the case may be; or
  • (b) who elects to be considered as a full-time student under section 2.1; (étudiant à temps plein)

10 The portion of subsection 7(1) of the Regulations before paragraph (a) is replaced by the following:

7 (1) A borrower shall, in order to continue to be or again become a full-time student,

11 The Regulations are amended by adding the following after section 7:

12 The definition period of postponement of repayment in subsection 7.1(1) of the Regulations is replaced by the following:

period of postponement of repayment
means the period during which, by reason of a medical leave or parental leave, no amount on account of principal or interest is required to be paid by the borrower in respect of a student loan. (différé de remboursement)

13 (1) Paragraphs 8(1)(b) and (c) of the Regulations are replaced by the following:

(2) Section 8 of the Regulations is amended by adding the following after subsection (1):

14 Section 9 of the Regulations is replaced by the following:

9 (1) Sections 8, 10 and 11 and subsection 12(4) of the Act apply in respect of risk-shared loans made to full-time students.

(2) Section 8 and subsection 12(4) of the Act apply in respect of direct loans made to full-time students.

15 (1) The portion of paragraph 15(2)(a) of the English version of the Regulations before subparagraph (i) is replaced by the following:

(2) Paragraph 15(2)(b) of the Regulations is replaced by the following:

(3) Subsection 15(8) of the Regulations is replaced by the following:

(4) The portion of subsection 15(9) of the Regulations before paragraph (a) is replaced by the following:

(5) Paragraph 15(9)(c) of the Regulations is replaced by the following:

(6) The portion of subsection 15(10) of the Regulations before paragraph (a) is replaced by the following:

16 (1) The portion of subsection 16(1) of the Regulations before paragraph (a) is replaced by the following:

(2) Paragraph 16(1)(c) of the English version of the Regulations is replaced by the following:

(3) Subsection 16(5) of the Regulations is replaced by the following:

17 Subsections 19.1(2) and (3) of the Regulations are repealed.

Apprentice Loans Act

Apprentice Loans Regulations

18 Section 3 of the Apprentice Loans Regulations footnote 3 and the heading before it are repealed.

19 Section 4 of the Regulations is replaced by the following:

Payment-deferred period

4 (1) For the purpose of subsection 8(2) of the Act, the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid by the borrower starts on the day on which the loan is made and ends on the earlier of

Loan received erroneously

(2) Despite paragraph 1(b), if an event described in paragraph 6(2)(a) occurs in respect of an apprentice loan made to a borrower and, subsequent to that event, the borrower erroneously receives an apprentice loan, the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid by the borrower ends on the last day of the technical training period for which the apprentice loan was made.

Exception — continuation of payment-deferred period

(3) Despite paragraph (1)(b), if, before the last day of the apprenticeship program in which the borrower is registered at the time the event occurs, an event described in any of paragraphs 6(2)(b) to (f) occurs in respect of an apprentice loan made to a borrower, the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid ends on the earlier of

New payment-deferred period

4.1 (1) Subject to subsections (4) and (6), if the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid ended under paragraph 4(1)(b) because of the occurrence of an event described in paragraph 6(2)(a) or (h), a new period begins when the conditions set out in paragraphs 7(1)(a) and (b) are met.

Bankruptcy or insolvency

(2) Subject to subsections (4) and (6), if the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid ended under paragraph 4(1)(b) because of the occurrence of an event described in any of paragraphs 6(2)(b) to (f), a new period begins when one of the conditions described in any of paragraphs 7(2)(a) to (d) occurs.

Offence related to loan

(3) Subject to subsections (4) and (6), if the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid ended under paragraph 4(1)(b) because of the occurrence of an event described in paragraph 6(2)(g), a new period begins when the conditions set out in paragraphs 7(3)(a) to (d) are met.

Borrower who was a minor

(4) If the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid ended under paragraph 4(1)(b) and the borrower was a minor when they received an apprentice loan and has refused to ratify that loan as an adult, a new period begins when the borrower ratifies that loan and, to the extent that they apply, the conditions set out in subsection (1), (2) or (3) are met.

Repayment assistance

(5) Subject to subsection (6), if the period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid ended under paragraph 4(1)(b) because of the occurrence of an event described in paragraph 6(2)(i), the borrower is entitled to a new period during which no amount on account of principal or interest in respect of an apprentice loan is required to be paid when they have paid in full the outstanding balance of their apprentice loans.

Judgment

(6) If a judgment has been obtained against a borrower, a new period does not begin unless the borrower has been released from that judgment and, to the extent that they apply, the conditions set out in subsection (1), (2) or (3) are met.

20 (1) Paragraph 6(2)(a) of the Regulations is replaced by the following:

(2) Paragraph 6(2)(j) of the Regulations is replaced by the following:

(3) Subsection 6(3) of the Regulations is replaced by the following:

Denial of loan

(3) Subject to subsections (5) and (7), if an event described in any of paragraphs (2)(a) to (n) occurs, the Minister may, effective on the applicable day for that event, deny the borrower a new apprentice loan.

(4) Subsections 6(5) and (6) of the Regulations are replaced by the following:

Loan received erroneously

(5) If an event described in paragraph (2)(a) occurs in respect of an apprentice loan made to a borrower and, subsequent to that event, the borrower erroneously receives an apprentice loan, the borrower is entitled to the apprentice loan.

New loan

(6) If, before the last day of the apprenticeship program in which the borrower is registered at the time the event occurs, an event described in any of paragraphs (2)(b) to (f) occurs in respect of an apprentice loan made to a borrower, the borrower is entitled, if otherwise eligible, to a new apprentice loan for that apprenticeship program.

(5) The portion of subsection 6(7) of the Regulations before paragraph (a) is replaced by the following:

Subsection (3) measure delayed

(7) If the borrower receives a new apprentice loan under subsection (6), the measure referred to in subsection (3) takes effect on the earlier of

21 (1) The portion of subsection 7(1) of the Regulations before paragraph (a) is replaced by the following:

New loan and repayment assistance

7 (1) Subject to subsection (6), a borrower who has been subject to a measure taken under subsection 6(3) or (4) because of the occurrence of an event described in paragraph 6(2)(a) or (h) is entitled to a new apprentice loan and further repayment assistance under section 10 or 12 if

(2) The portion of paragraph 7(1)(b) of the Regulations before subparagraph (i) is replaced by the following:

(3) Paragraph 7(4)(b) of the English version of the Regulations is replaced by the following:

(4) Subsection 7(6) of the Regulations is replaced by the following:

Judgment

(6) If a judgment has been obtained against a borrower, the borrower is not entitled to the rights referred to in subsection (1) unless the borrower has been released from that judgment and, to the extent that they apply, the conditions set out in subsection (1), (2) or (3) are met.

22 Paragraph 10(1)(b) of the Regulations is replaced by the following:

23 Subsection 11(2) of the Regulations is repealed.

24 Paragraph 14(b) of the Regulations is replaced by the following:

25 Paragraph 19(1)(b) of the Regulations is repealed.

Coming into Force

26 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Fall Economic Statement Implementation Act, 2022 included legislative amendments to the Canada Student Loans Act, the Canada Student Financial Assistance Act, and the Apprentice Loans Act to permanently eliminate the accrual of interest on Canada Student Loans (CSLs) and Canada Apprentice Loans (CALs). The amendments received royal assent on December 15, 2022, and came into force on April 1, 2023. The related Canada Student Financial Assistance Regulations (CSFAR), Canada Student Loans Regulations (CSLR) and Apprentice Loans Regulations (ALR), however, are not aligned with legislative amendments and refer to the accrual of interest in several places, which could cause confusion among stakeholders. This could also make it difficult for borrowers to understand the repayment terms of their loans and could lead to increased inquiries to the Canada Student Financial Assistance (CSFA) Program.

Background

The CSFA Program helps to make post-secondary education more affordable for individuals from low- and middle-income families by providing eligible students with grants and loans — specifically, Canada Student Grants (CSGs), CSLs and CALs — to help them pay for post-secondary education at a designated college, university, or other post-secondary institution.

The CSFA Program operates under three separate acts and three separate regulations. The Canada Student Loans Act and the CSLR provide authority to administer guaranteed CSLs, issued from 1964 to 1995 by private lenders who could claim any losses to the Government of Canada for full reimbursement. The Canada Student Financial Assistance Act and the CSFAR provide authority to administer risk-shared CSLs, issued from 1995 to 2000 by private lenders to whom the Government of Canada paid a 5% risk premium for each disbursement to cover the risk of defaults, and direct CSLs, issued and administered since 2000 directly by the Government of Canada via the National Student Loans Service Centre. In addition, the Apprentice Loans Act and the ALR provide the CSFA Program authority to administer CALs, issued since 2015, to help apprentices in a Red Seal trade (listed in Schedule 1 of the ALR) with the cost of technical training to complete their apprenticeship program. Apprentices are generally not able to access CSLs or CSGs, and CALs provide up to $4,000 per technical training period for up to five technical training periods.

Interest rates on CSLs and CALs are not included in the legislation that governs the CSFA Program but are specified in student and apprentice loan agreements. These agreements include the Master Student Financial Assistance Agreement (MSFAA) for risk-shared and direct loans, and the Canada Apprentice Loan Application and Agreement (CALAA) for CALs. The MSFAA and CALAA are legal agreements which outline the terms and conditions of accepting and repaying CSLs and CALs to borrowers.

These student and apprentice loan agreements allow borrowers to choose between a fixed or floating interest rate (the vast majority choose a floating rate). The interest rates for guaranteed CSLs are currently set according to formulas in the CSLR. In November 2019, the interest rate for risk-shared and direct CSL and CALs was reduced from prime plus 5% to prime plus 2% for borrowers who had chosen a floating interest rate. For borrowers who chose a fixed interest rate, interest was reduced from prime plus 2.5% to prime.

In addition to changes to interest rates, the Government of Canada introduced several temporary measures affecting the accrual of interest on CSLs and CALs during the COVID-19 pandemic. These included the following temporary changes:

On November 3, 2022, the Government of Canada announced the permanent elimination of interest accrual on CSLs and CALs as part of the 2022 Fall Economic Statement. This included funding authority in the amount of $2.7 billion over five years and $556.3 million per year ongoing. Legislative amendments to enact the permanent elimination of interest accrual received royal assent on December 15, 2022, through the Fall Economic Statement Implementation Act, 2022. These amendments, which included amendments to the Canada Student Loans Act, the Canada Student Financial Assistance Act, and the Apprentice Loans Act, came into force on April 1, 2023. This implementation date prevented a gap between the temporary waiver of interest and the permanent elimination of interest accrual, ensuring CSL and CAL borrowers did not accrue interest following the end of the temporary interest waiver on March 31, 2023. Regulatory amendments to the CSFAR, CSLR and ALR and changes to the MSFAA and CALAA are being made to reflect the legislative amendments and to minimize borrower confusion.

Federal student financial assistance is available to students from nine participating provinces and Yukon (Quebec, Northwest Territories, and Nunavut have their own student financial assistance programs). In collaboration with these 10 participating jurisdictions, the CSFA Program provides up to 60% of a student’s calculated financial need in federal grants and loans, while participating provinces/territories (P/Ts) cover the student’s remaining need. As participating P/Ts operate their own respective student financial assistance programs, they have the flexibility to decide whether to align their respective policies with those of the Government of Canada. For example, although the accrual of interest was permanently eliminated from CSLs as of April 1, 2023, P/Ts may still choose to charge interest on provincial/territorial student loans. However, they remain responsible for delivering CSFA Program supports.

Objective

The objective of the regulatory amendments is to align the regulations with the legislative amendments to eliminate the accrual of interest on CSLs and CALs, therefore mitigating possible stakeholder confusion.

Description

The regulatory amendments will align the CSFAR, CSLR, and ALR with the corresponding legislation that eliminated the accrual of interest on CSLs and CALs as of April 1, 2023, while ensuring that borrowers remain liable to pay any interest that may have accrued prior to the elimination of interest accrual (“arrears interest”). The regulatory amendments will also ensure that aspects of the CSFA Program not directly related to, or affected by, the elimination of interest accrual continue to work as they did before the accrual of interest was eliminated.

General amendments common to all three regulations (the CSFAR, CSLR, and ALR) are as follows:

In addition to these general amendments, the following specific amendments will also be made:

CSLR

ALR

The agreements which govern the repayment relationships between borrowers and lenders (the MSFAA and CALAA) will be updated to reflect the elimination of interest accrual, as well as to clarify that borrowers remain responsible for payment of any interest that may have accrued before April 1, 2023. These changes require Governor in Council approval, with the concurrence of the Minister of Finance, given the financial impact of the amendments. This approval will be sought at the same time as the current regulatory amendments.

Regulatory development

Consultation

The CSFA Program regularly engages with stakeholders, including student groups, borrowers, and P/Ts, through the National Advisory Group on Student Financial Assistance (NAGSFA) and the Intergovernmental Consultative Committee on Student Financial Assistance (ICCSFA). NAGSFA is comprised of representatives from student associations (e.g. National Educational Association of Disabled Students, Canadian Alliance of Student Associations, etc.), post-secondary institutions and associations, student financial aid administrators, and federal and provincial representatives. ICCSFA is comprised of representatives from all 10 P/Ts participating in the CSFA Program, and the Government of Canada.

The CSFA Program did not undertake consultations specifically on the regulatory amendments as they are low impact and no cost. In particular, they provide regulatory alignment with the existing legislative amendments to permanently eliminate the accrual of interest on CSLs and CALs and support the operationalization of this measure. Additionally, the amendments do not offer many parameters or details on which stakeholder feedback could be sought, because there is very little flexibility on how the regulatory amendments can be made.

For the reasons detailed above, the regulatory proposal was granted an exemption from prepublication in the Canada Gazette, Part I.

Modern treaty obligations and Indigenous engagement and consultation

As per Government of Canada’s obligations regarding rights protected by section 35 of the Constitution Act, 1982 — specifically, modern treaties and international human rights obligations — the regulatory amendments are not expected to have differential impacts on Indigenous peoples or negative implications for modern treaties.

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted as part of the development of this regulation. The assessment found no impacts on existing modern treaty obligations.

Instrument choice

The permanent elimination of interest accrual has been enacted through the implementation of legislative amendments, and the regulatory amendments will support the operationalization of this measure. Changes to support the operationalization of the permanent elimination of interest accrual can only be made through regulatory amendments and revisions to the terms and conditions of the student and apprentice loan agreements. As a result, non-regulatory options were not considered.

Regulatory analysis

Benefits and costs

The legislative amendments that came into force on April 1, 2023, provided the authority to permanently eliminate the accrual of interest, meaning that, in the absence of these regulatory amendments, there was already sufficient legal authority to implement this measure. The regulatory amendments will align the regulations with the legislation and support the implementation of the legislation, making it easier for borrowers to understand the repayment terms of their loans. The regulatory amendments will have no incremental costs. Instead, the costs to permanently eliminate the accrual of interest on CSLs and CALs are attributable to the legislative amendments alone. The 2022 Fall Economic Statement estimated these costs at $2.7 billion over five years and $556.3 million ongoing. The Government of Canada will compensate private lenders of guaranteed and risk-shared student loans for the loss of revenue, as they will no longer be able to charge borrowers interest on these loans. Compensation to lenders, and the manner of calculating compensation, is found in the agreements between the Government of Canada and private lenders.

Small business lens

Analysis under the small business lens concluded that the proposed regulations will not impact Canadian small businesses.

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in administrative burden on business and no regulatory titles are repealed or introduced.

Regulatory cooperation and alignment

This proposal is not related to any commitment under a formal regulatory cooperation forum. P/T financial assistance is governed by P/T laws and regulations, and so the amendments to federal laws and regulations to eliminate the accrual of interest on federal student loans will not affect P/T loans. P/Ts will have the option to align or not with the elimination of interest accrual on federal student loans. Operationally, it is not a challenge for federal and P/T loans to have different interest rates; this is already the case with some jurisdictions.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

A gender-based analysis plus (GBA+) was conducted for the elimination of interest accrual as part of the development of this initiative and also for the 2022 Fall Economic Statement proposal. These analyses found that the measure will have a positive impact on all student borrowers, as it will reduce their monthly required payments, making their loan repayment more affordable. In particular, the measure will benefit recent graduates, individuals who experience difficulty in repayment, have high debt loads, are middle income and do not qualify for financial assistance through the Repayment Assistance Plan. In terms of CSL borrowers, women will particularly benefit as they represent 60% of all CSL borrowers and owe 61% of the CSL amounts currently in repayment. In terms of CAL borrowers, men will particularly benefit as they represent 93% of CAL recipients.

Implementation, compliance and enforcement, and service standards

Implementation

The legislative amendments enacting the permanent elimination of interest accrual came into force on April 1, 2023. The regulatory amendments will come into force upon registration.

Contact

Erin Hetherington
Director
Program Policy
Canada Student Financial Assistance Program
Employment and Social Development Canada
Email: erin.hetherington@hrsdc-rhdcc.gc.ca