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CAUT Bulletin Archives

November 2004

CAUT Criticizes New Learning Bonds

The federal government should refocus its efforts on improving access to higher education, a parliamentary committee was told last month. Appearing before the standing committee on human resources development, CAUT associate executive director, research and advocacy, David Robinson said that proposals to encourage low-income families to save for their children's education are the wrong answers to the problem of promoting access to post-secondary education.

"A savings-based approach to financing education is a good example of a very bad social policy tool," Robinson told the committee. "It rewards those who have the disposable income to save, rather than targets those most in need."

Robinson's comments were made as the committee begins hearings on Bill C-5 — the Education Savings Act. The proposed bill would establish a Canada Learning Bond and enrich contributions made under existing education savings grants for low-income families.

"We're pleased the government recognizes there are serious financial barriers confronting more and more students and their families," Robinson said. "Unfortunately, the learning bonds and enhanced grants as proposed in Bill C-5, though perhaps well intentioned, will actually do little to assist students from low and middle-income families."

The learning bonds will provide $500 for each child of families eligible for the National Child Benefit — socially disadvantaged families with incomes of less than $35,000. Families will see an additional $100 added for each year a child remains eligible, to a maximum of $2,000.

"Assuming a 3.5 per cent real rate of return, the total value of the bond by the time a child reaches 18 would be $3,000 in current dollars," Robinson said. "That's not even enough to cover one year of tuition in most provinces today, let alone living costs and expenses. Note also the bonds do nothing to provide assistance to those students and would-be students who need it now, not 18 years in the future."

He added that a proposal in Bill C-5 to increase the Canada education savings grant matching rate for low and middle-income contributors will also do little to widen access. Under the current scheme, the federal government awards 20 per cent of the value of contributions made to a privately held Registered Education Savings Plan each year to a maximum of $400.

Bill C-5 intends to provide greater incentives for lower-income families to save by enriching the matching rate to 40 per cent of the first $500 of contributions made by low-income families and 30 per cent for modest-income earners.

"The poor aren't saving, not because they lack the motivation or incentive, but because they lack the resources," Robinson said. "Right now, families earning less than $50,000 a year claim less than 20 per cent of the Canada education savings grant. Surely that tells us this is not the vehicle you use to help those most in need."

The resources committed to the savings grants are not trivial and could be better spent in other ways, Robinson reported. The $400 million subsidy for the education savings grants in 2003-2004 could have provided free tuition to about 20 per cent of university students across the country, he estimated.
"A far better way to help those students and their families in financial need would be to convert the learning bonds and savings program into a fully needs-based grant," he argued. "This would provide immediate benefits for economically disadvantaged students and help decrease student debt loads."

Robinson also told the committee that more had to be done to address the underlying cause of rising tuition fees — the inadequate levels of core operating funding for universities and colleges. "By not tackling this, we're simply tinkering around the edges of the real problem," he said. "Our continuing failure to remove the financial barriers that prevent any person from attaining a university or college education is the equivalent of burying a fortune of opportunities. We simply cannot afford to leave this treasure in the ground to decay."