Interest-free Medical and Parental Loan Leave

Summary#

This is a proposed change, published in the Canada Gazette, Part I on February 8, 2020, that would let some student loan borrowers pause payments and stop interest for short periods when they take time off school for medical or parental reasons (including mental health). The change would add an interest-free, payment-free leave of up to 18 months for eligible borrowers. The proposal came from Employment and Social Development Canada and was open for comment for 30 days.

What it does#

• Adds rules to the Canada Student Financial Assistance Regulations (and related loan rules) to let eligible borrowers apply for a leave from loan payments and interest.
• Applies to both full-time and part-time Canada Student Loans borrowers. Leave is granted in 6‑month periods and can be extended to 12 months and then to 18 months.
• Borrowers must apply within 6 months after leaving school and no later than 12 months after the medical event or the date a child joins the family. Extensions must be requested within 30 days before or after the end of the current leave period.
• While on approved leave, no payments are required and no interest is charged for the approved period.
• Time on medical or parental leave would not count toward a borrower’s maximum weeks of student-loan support.
• The leave is not available to borrowers who have already begun regular loan repayment (i.e., those who are no longer in school and whose six-month non‑repayment period after leaving school has ended).
• The government expected to bring the rules into force on August 1, 2020 (if approved).

Who's affected#

• Primary: students with Canada Student Loans who need a temporary leave for medical reasons (including mental health) or parental reasons (birth, adoption, guardianship). The government estimated an average of 7,000 borrowers would directly benefit per year.
• Especially likely to help: students with disabilities, student parents (the measure is expected to benefit many women), and borrowers with mental‑health needs.
• Indirectly affected: the Government of Canada (through forgone interest and borrowing costs estimated at $27.0 million net present value over 10 years) and provincial/territorial partners who deliver student aid and may choose whether to align their programs.
• The proposal includes safeguards (medical attestations or proof of birth/adoption) and penalties for false claims (including a possible fine of $1,000).

Why it matters#

• It reduces immediate financial pressure on students who must pause studies because of illness or a new child. That can make it easier to focus on recovery or caregiving instead of loan payments.
• By stopping interest and payments during the leave, it may help borrowers return to school and complete their studies, which improves long-term job and health outcomes.
• The change targets groups that research shows face greater obstacles in post‑secondary education (low‑income students, students with disabilities, and student parents).
• It has a measurable fiscal cost to the government (estimated $27.0 million over 10 years) but was designed to be a targeted support for vulnerable borrowers. The measure was still a proposal at publication and required final approval to become law.