Right Idea, Wrong Vehicle for Post-Secondary Education Funding

March 29, 2011

1-minute read

While the education plank of the Liberal platform recognizes the increasing unaffordability of higher education for students and their families, their plan falls unnecessarily short. Unnecessary, because the amount of money promised could actually go a long way to making higher education more universally accessible.

Tuition fees are on average over $5,000 a year, and while this by no means represents the entire cost of higher education, it is identified as the single greatest expense. But because the Liberal plan directs more money—$1 billion—into the RESP system rather than targeting fees directly, the usefulness of this promise is limited at the outset, and made more complicated by the realities of the RESP program.

The take-up of RESPs (start-up grants for low-income families notwithstanding), is largely by middle-upper income Canadians because it is still based on families’ ability to save (meaning that they have money left over after paying the mortgage, utilities and other monthly expenses) and also be eligible for the “matching” government grants. Remember, RESPs are not just a vehicle to save money privately—there’s a significant public financial component as well.

In fact, it’s such a significant amount of public money that the C.D. Howe Institute in 2002 suggested that the $423 million projected to be spent in the Canadian Education Savings Grant component of RESPs in 2002/03 could have provided free tuition to 21% of university students. That’s back in 2002: the amount of public money directed towards the RESP program (as a result of new incentives as well as more up-take) has increased significantly since then. The CCPA's Alternative Federal Budget cites the CESG amount for 2011/12 at $670 million—money that could go a long way to reducing tuition fees for all students, not just reducing the amount some students will have to pay up front.

By rolling the public component of the RESP system (the Canadian Education Savings Grant, other incentive grants, and this proposed additional funding) into a single plan and applying it directly to the costs of higher education, the Liberals could roll tuition fees for all students back to pre-1992 levels, making it much more universally accessible. This would go a long way towards addressing the crisis of affordability in higher education by reducing fees at the outset. And it would also address the deferred affordability crisis students are faced with after graduation, when their full participation in the community and job market is postponed by the single-minded focus on repaying student loans.

Erika Shaker is Director of the CCPA's Education Project.

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