Interest-free Medical and Parental Loan Leave

Summary#

These final regulations change the Canada Student Financial Assistance Regulations to give Canada Student Loan borrowers an interest‑free, payment‑free leave when they take a temporary break from studies for medical or parental reasons. The new rules take effect October 1, 2020 and allow up to 18 months of such leave in stages. The government estimates about 7,000 borrowers will benefit each year.

What it does#

• Creates definitions for medical leave (includes mental health and pregnancy‑related medical time) and parental leave.
• Lets a borrower who stops being a full‑time or part‑time student on or after October 1, 2020 apply for a postponement of loan repayment that is both interest‑free and payment‑free.
• Application timing:
  • Apply within 6 months after the end of the most recent study period, but no later than 12 months after the medical date or the date a child joined the family (birth, adoption, or start of guardianship/tutorship).
• Length and extensions:
  • Initial approved leave is a 6‑month period (the borrower is treated as still a student for that period).
  • The leave can be extended to 12 months, and later to 18 months, if the borrower requests the extension in a window that starts 30 days before the current leave ends and ends 30 days after it ends.
  • A borrower who has an approved leave cannot apply for a new leave for 30 days after the first day of their current confirmed leave.
• Other effects:
  • Time on these leaves does not count toward the program’s maximum weeks of support.
  • Both full‑time and part‑time borrowers are covered.
  • The rules align timing so the leave begins on the first day of the month after the month the borrower leaves school.

Who's affected#

• Current and future Canada Student Loan borrowers who stop studies for medical reasons (including mental health or pregnancy issues) or to care for a new child. Both full‑time and part‑time students are covered if they cease studies on or after October 1, 2020.
• The federal program that runs these loans, the Canada Student Loans Program, administers the leave and will process applications.
• The Government of Canada bears the direct cost of forgone interest and extra borrowing costs. Provincial and territorial partners are indirectly affected because they work with the federal program and may choose whether to align their own rules.

Why it matters#

• It removes immediate loan payments and interest for borrowers who must pause studies for health or parenting reasons, easing financial pressure during vulnerable times.
• By reducing the financial barrier during leave, it aims to help more students return to and complete their post‑secondary studies.
• It is expected to particularly help students with disabilities, student parents (who are often women), and those with mental‑health needs.
• The government estimates the net present value cost over 10 years is $27.1 million, but that cost is largely a transfer (forgone interest) to student borrowers rather than a net social loss.