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Alan McIsaac, Minister of Education and Early Learning, says the elimination of student loan interest shows his government's support for learning. (CBC)

The Prince Edward Island government is eliminating interest on provincial student loans in a bid to make post-secondary education more affordable.

Premier Robert Ghiz made the announcement Friday at Holland College.

The reduction applies to loans dating back to 2001. Those recipients will no longer be required to pay interest on the principle, starting in October this year. For new applicants, the reduction will apply to anyone who has been an Island resident for the past twelve months.

Alan McIsaac, Minister of Education and Early Learning, said the announcement shows his government's support for learning.

"We have been encouraging students to take up post-secondary education, as many as possible, and this is one way we feel we can encourage that. We're very, very big on education," McIsaac said.

About 2,600 Islanders are currently repaying provincial student loans. The average P.E.I. student loan is $20,000 for a four-year degree. The change will save students about $1,000 per year on average.

The initiative will cost the provincial government about $500,000 annually.

Post-secondary institutions on P.E.I. saw their provincial funding reduced by three per cent in the spring budget.

The new zero-percent interest rate kicks in Oct. 1.