Federal Budget 2016: A 50% Increase in Canada Education Grants Highlights the Importance of RESPs

Students came out the big winners in the Liberals’ rookie budget. The federal government is implementing a number of strategies to make post-secondary education more affordable and accessible for low- and middle-income families.

Similar to the Ontario budget, the federal budget is a boon for students. The changes help to level the playing field, while giving recent grads a chance to get on their feet financially before paying back student loans.

Upping Canada Student Grants

The Liberals’ biggest change is to Canada Student Grants. The Grits are making college and university more affordable by upping the federal grant amount by 50 percent. If you’re from a low-income family, you’ll be eligible for $3,000 in federal grant money – that’s up from $2,000. Middle-income families aren’t left out in the cold, however – eligible families will receive $1,200 in federal grants, up from $800. The grant money will be available beginning in the 2016-17 academic year. The Liberals estimate over 347,000 students will benefit from higher federal grants. Grants are key in providing students with the financial support they need while pursuing a post-secondary education.

Current Program Proposed Changes Impact
Enhancing Canada Student Grants
  • $2,000 per year for students from low-income families
  • $800 per year for students from middle-income families
  • $1,200 per year for part-time students
  • $3,000 per year for students from low-income families
  • $1,200 per year for students from middle-income families
  • $1,800 per year for part-time students
These changes will help students cover the costs of their education without increasing student debt.

Further enhancements to expand eligibility for Canada Student Grants will be in place for the 2017-2018 academic year.

The above chart — the full government chart is located in this section of the budget website — gives you an idea of what to expect once the changes have been rolled out.

Modernizing Eligibility for Student Financial Aid

Another big change on the way by the Liberals is to “modernize” eligibility for student financial aid. In the current system, students who work during the school year are often unfairly punished with a reduction in financial aid. That’s because a student’s income, along with his or her financial assets, are used to determine how much in federal loans and grants he or she receives.

The budget does away with this unfair practice. It introduces a yet-to-be-announced flat-rate contribution model for students. Here’s how it works: students kick in a yearly flat amount to cover the cost of their schooling. In exchange, the federal government will no longer count their income and financial assets. The students that benefit the most are those who want to work during the school year to earn some extra money.

Relaxing Student Loan Repayment

Current students aren’t the only ones benefiting; recent grads are getting a helping hand. Graduating students will be able to earn more without having to pay back their student loans. The threshold for paying back student loans is being lifted by almost $5,000 – from $20,210 to $25,000. This give students some much-needed breathing room before they have to start paying back money borrowed under the Repayment Assistance Plan.

How the Budget Affects Families With and Without RESPs

While there’s no doubt students are better off after the federal budget, Registered Education Savings Plans (RESPs) still matter. If you’re planning to enroll in a program where tuition fees are higher or your family earns a lot, student loans and government grants may not be enough. You’ll still have to pay a fair chunk of change for tuition fees, books, student housing and other costs. Although Ontario has introduced “free tuition” for many students, students in other provinces still have to pay their fair share of tuition fees.

It’s still important for parents to keep saving. The best way to save for college or university is with an RESP. If you don’t have an RESP for your child/children, although your son or daughter may get the financial aid they need, they’ll have to shoulder more of the debt. Students with RESPs have a leg up. With a government grant of 20% (CESG), RESPs are still the best way to save for post-secondary education.


To learn more about RESPs, including up-to-date information on how you can save for your child’s post-secondary education, and leverage the government grants available to you, download a copy of our FREE RESP Guide.