Ontario Budget Reveals Big Changes to Education Funding
Student groups have long been asking for financial aid that’s more accessible and easier to understand. In the 2016-2017 provincial budget, the Ontario Liberals heard them loud and clear, addressing many of their concerns. The announcement in the Ontario budget of what is being dubbed “free tuition” for low-income families was met with much fanfare and excitement. This is one of the most radical shifts in decades on how student loans and grants are offered to post-secondary students.
The government revealed in its budget most students in college with a family income under $50,000 a year will be eligible for grants that pay for their entire tuition. Meanwhile, for university students, although grants will help pay a significant amount of tuition, it may not be enough to pay the entire amount. In total, about 150,000 students from low- and middle-income families will be eligible for free tuition.
Low-income students aren’t the only ones getting a helping hand from the government. In addition, about half of students with a family income under $83,000 a year will be eligible for non-repayable grants that cover their tuition. The government promises no student will be worse off financially under the new grant system.
The changes promise to help cut the red tape on financial aid by simplifying and modernizing it. The government is rolling several student grant and loan programs into one. The new Ontario Student Grant (OSG) is expected to cost the province $1.3 billion – about the same it’s currently paying out in financial aid.
It’s the government’s hope that more students from low-income families enroll in post-secondary education. Currently, about half as many students from low-income families attend college or university compared to high-income families. The government hopes by making financial aid easier to understand, more low-income students attend college or university. Ontario is currently low on the totem pole of provinces with students attending college or university for the first time.
OSAP Changes on the Way
For students who need to take on debt to finance their education, the Ontario Student Assistance Program (OSAP) changes are on the way. Currently, OSAP expects households that earn $70,000 a year to contribute $2,000 towards their child’s post-secondary education. While a lot of parents from high-income families are willing to help out, some aren’t for a variety of reasons. Under the changes to OSAP, students will get the bulk of their money ahead of time before the semester begins. That means no more waiting until the second disbursement.
In higher tuition programs like engineering, sometimes financial aid isn’t enough. To address this concern, starting next year students will be able to borrow up to an additional $2,500 a year. Meanwhile, low-income students living with their parents would only have $500 in student loans to deal with a year after the grant is taken into consideration. With the changes, the government will be doing away with the education and textbook tax credit.
Why RESPs Still Matter
While the move by the Liberal government to make education more accessible is a move in the right direction, if you’re enrolled in a professional school where tuition fees are higher or you’re from a higher income family, you may still need to shoulder some serious student debt. And remember, tuition isn’t the only thing you’re paying for. Living and travel expenses also have to be taken into account in most cases.
For parents looking to help with the cost of their child’s post-secondary education, Registered Education Savings Plans (RESP) are still the way to go. Unless you have a crystal ball, it’s hard to know which program your child will enroll in or what your family’s income will be. RESPs help take out the guesswork by providing your child with the funds he or she needs to help pay for their education.
Knowledge First Financial is a leading provider of group RESPs. Click here for more information on RESPs and other industry news!