Learning bonds to kick-start saving for tuition fees

February 20, 2004

Canada will provide a grant to help parents on low incomes start saving early for the ever-rising costs of their children's university education.

Canadian students pay an average of just over C$4,000 (£1,607) in tuition fees a year for an undergraduate degree - double what they paid ten years earlier - and more than C$9,000 for medical school. Many families fear that costs will continue to rise steeply, and an increasing number are setting aside money for their children's time at university. Total savings for the registered education savings plans (Resps), a locked-in fund partly subsidised by the federal government, rose from C$4 billion in 1998 to C$10 billion in 2002.

Seven out of ten Canadian families with incomes above C$85,000 save for university or college, but only 26 per cent of parents in households earning less than C$25,000 are savers.

The federal government has decided to give a "learning bond" to those who lack the disposable income to start an investment portfolio. A grant will be made available for every child born into a low-income family to try to increase Resp participation. The details of how much will be provided will be announced in the federal budget, expected soon.

Joe Volpe, Canada's minister of human resources and skills development, said many parents took advantage of savings incentives - Canada rebates 20 per cent of the savings to a maximum of C$400 a year - but he would like to see more low-income families participate. "There's been some good uptake.

But the more disposable income you have, the more likely it is that you will make that kind of investment," Mr Volpe said. The government was intent on casting a wider net, he said.

He did not want to scoop the prime minister's budget speech, but he said the initial grant would be in the C$400 range. The government will also introduce other changes that will affect those now attending university, including making available a grant for low-income students entering their first year of university and allowing tax write-offs for such things as computers and software.

Canada has also answered a long-time call to increase the individual amounts of money made available to students through government loans, which have not risen since 1994. Mr Volpe said providing the learning bond, raising loan limits and making more items tax-deductible was a way for the government to "look forward".

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