Where to Find Financial Assistance for Post-Secondary Education

With post-secondary tuition costs set to rise in Ontario, saving for your child's education is becoming a greater challenge every year. It's good to know that there are a number of resources available to help.

"The most accessible resource is the Registered Education Savings Plan (RESP) available to parents and relatives, who would like to assist in saving for their children's education," says Maureen Peacock, CA, CFP, a Financial Advisor in Caledonia.

"There are no deductions for contributing to an RESP but the income earned in the plan is tax-sheltered until it is withdrawn to fund the child's education. Often times this means no tax is paid on the withdrawals as students usually have sufficient tax credit to offset income.

"The bonus of contributing to an RESP is that the government will contribute a 20 per cent education savings grant for each dollar of contribution, each year in the plan. The maximum grant that can be earned in a plan each year is $400, based upon $2,000 of contributions," explains Peacock.

Eligibility for grant money carries forward and starts in either 1998 or the year the child was born, if after 1998. Maximum contributions of $4,000 per year can be made and are eligible if there is unclaimed grant money from prior years. The new rules are much less restrictive and more flexible in the event your child does not go on to post-secondary education.

"Families with available funding should consider making contributions each year, per child to take advantage of tax sheltering and income-splitting," advises Peacock.

Sandra Daga, CA, Senior Lecturer in Accounting, Supervisor of Studies in Management at University of Toronto, agrees that RESPs offer a great way to save and advises, "Just get started. I suggest that parents and students try to put away 10 per cent of their earnings and you'd be surprised how it can add up. I strongly believe that parents shouldn't be totally responsible for a child's education, no matter what their income level, and that students should participate in raising some funds for their own education."

Peacock adds that low-income families qualify for Education Savings Grants at a rate of 40 per cent on the first $500 of contributions in the year, instead of the 20 per cent as noted above."

This group also has other options. In the 2004 budget, the government introduced a new source of education savings for children from low-income families called the Canada Learning Bond (CLB). This program, effective for children born on or after January 1, 2004, will provide a CLB in each year that the child's family is entitled to the National Child Benefit (NCB) supplement, up to and including the year the child turns 15. The amount of the CLB in the first year of entitlement will be $500, and any subsequent CLBs will be $100. The CLB is payable into an RESP of which the child is a beneficiary and does not affect RESP or CESG contribution limits. A family only needs to open an RESP for a child if they qualify to get the CLB. In the first year, an extra $25 is provided by the government to offset the cost of opening the plan.

"Ontario students from lower income families may also qualify for the Ontario Student Assistance Program (OSAP), which is made up of both grants and loans. The amount and eligibility is based upon several factors including: parents' income, if the student has been out of high school less than four years, how far the post-secondary school is from home, the cost of the program and the number of other dependents the family has in school, post-secondary facilities and at home," clarifies Peacock.

She also points out that OSAP can be applied for online, as can many scholarships and bursaries. High school student services offices, along with most universities and college offices, can assist students face-to-face.

Daga adds that most schools offer scholarships, so it's a good idea to do your research and apply to the ones that are most suitable.

"Some schools offer a substantial amount up front but then don't sustain it. Other schools offer a steady flow of scholarships to sustain students throughout their schooling. I do know that a lot of people don't apply for scholarships so it's a venue worth looking at."

"Look into apprentice programs for the trades, and co-op programs that often provide paid work terms. There is quite a diversity of opportunity through co-ops for business, in the arts and sciences. Not only can students make some extra money, they also gain invaluable experience that helps them achieve their career goals."

Daga offers one last piece of advice. "Don't overlook the free information resources at your fingertips including talking to high school guidance counsellors who can offer a wealth of knowledge about scholarships and work options."
 

For more information contact a Chartered Accountant.

Brought to you by the Institute of Chartered Accountants of Ontario.