Right Idea, Wrong Vehicle for Post-Secondary Education Funding

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.


  1. Students are drowning in debt now! This plan assumes that this generation will be educated and able to save for their children. What if they can’t graduate because they can’t afford the fees. Do they save for their children by putting aside a few pennies from their minimum wage job? that is if you can find one as 70 percent of jobs require post secondary education. Hardly! Get Real!

  2. Good sustainable jobs are a thing of the past! When our government realizes this, we will see change. Until then we will have to settle for Mcjobs! Because this is the only job creation that is going on with the current government programs. Don’t condemn the unions because it would seem to me that they are the only ones fighting for the cause.

  3. I understand this analysis and I agree that public money going into RESPs has benefited middle and upper income families because they not only have the means to save, but also understand the advantage of using this tool to do so (precisely because of the public subsidies). However, the reality is that this public subsidy to RESPs does encourage people to put money aside to save for their children’s education and encourages kids to work towards getting a post-secondary education. I know its anecdotal, but if my step children’s grandmother hadn’t invested in RESPs when they were very young, and throughout their youth, the eldest would most likely not be in her first year of university right now, and the youngest, (who finds school more difficult), would most likely not be as motivated to work her butt off to get accepted into a university program. An incentive to save is important, and aprox. 9$ per month from the time your child is born is affordable for a large majority of Canadians, especially if it pays for your child’s post-secondary education.
    I would support making it a public program so that the banks are not making a cut, especially since there are public monies involved, and why not make it mandatory, along the lines of the Canadian Pension Plan.
    It should never be seen as a replacement for adequate direct public financing of post-secondary institutions (enough to keep tuition fees down), or loans and bursaries for students. However, we know that our society is not willing to fully fund post-secondary education, and we know that this is not about to change, (with Harper on the verge of a majority), so why not have publicly subsidized (and publicly run?) RESPs as a compliment to better direct funding of post-secondary education, preceisely because it accomplishes something that direct funding doesn’t, and that is it encourages parents to take partial responsibility for investing in their children’s post-secondary education and encourages students to aim high.

    1. lise, the problem is that RESPs are overwhelmingly used by upper-middle income earners, meaning that the public funding component of RESPs ensures that those public incentives disproportionately benefit people with significantly greater wealth–by a lot. it’s much more efficient and equitable to use public money from RESPs and this new proposed funding to reduce tuition fees up-front for all students rather than provide individualized “incentives” for people who can afford to take fullest advantage of programs of this sort.

      i’m not convinced that the way to make people appreciate something and work hard for it is to require them to save for it privately. on the contrary, when a program is publicly funded it demonstrates the degree to which it is held in high esteem by all taxpayers who contribute to it. paying for education publicly does not necessarily mean it is less appreciated–just look at the degree to which education is held in extremely high regard in countries that support it publicly far more generously that we do.

      i do, however, like your idea of a mandatory public program to pay for higher education–perhaps we can do this nationally, and have Canadians pay into a publicly-administered fund to ensure that all kids can go on to pursue higher education. we could expand it to include a wide range of programs from which we all benefit and to which we all contribute. and perhaps we could streamline it by having everyone do it on april 30 of each year (grin!). because while the assumption is that people don’t want to pay more in taxes, poll after poll indicates that this is precisely what parents would be prepared to do if it meant higher education would be affordable, and graduates would be able to start their careers without a crushing debt. And that’s very promising.


  4. RESPs seem a greater boon to the mutual fund industry than to anyone else. Your analysis is very helpful. Direct help to current students would have a more beneficial impact than this plan promises.

  5. As a boomer, the RESP program helps me to contribute to my grandchildren’s future education. Their parents would find it difficult to put aside any significant funds for an RESP. Reducing tuitions may not really help us as taxpayers since post-secondary education is primarily already heavily subsidized by governments. Paying a credible tuition also does provide one strong incentive for individuals to recognize the extent of their personal investment and the need to do well in their studies. Individuals and society do benefit from a highly educated workforce. If more people can help to finance the post-secondary education of young people through programs such as the RESP, then more public funding would be available for those who are qualified and require student loans or grants because they come from low income families. Issues concerning how we currently provide student loans and how they are to be repaid need to be addressed to deal with the apparent hardships of students and graduates in today’s economy. We owe it to our youth and society at large to act quickly on such issues.

    1. Hi, Brian, and thanks for your comments. People like yourself recognize the importance of education, and want to ensure their children and grandchildren have the opportunity to pursue higher learning. But because the majority of RESP investors are upper-middle income earners, the vast majority of the public funding component of RESPs (the CESG) is also going to people in this income bracket. Many Canadians–much like your grandchildren’s parents–are already so stretched financially that the prospect of saving privately for their children’s education is difficult to contemplate.

      I’ve heard the argument before: those who can pay privately should, leaving more public funding for those who need and deserve it–but would you apply this theory to other public programs…like health care? Because of course we already have a means-tested way of paying for programs like higher education–the income tax system, though which you–and all taxpayers–do contribute to your grandchildren’s future education.

      Unfortunately, post secondary education is far less subsidized by the taxpayer (read: publicly funded) than it once was–we’re currently hovering at around 50%, down from 80%. Yet poll after poll indicates that people would accept a tax increase if it meant making higher education more affordable.

      A parallel private system like RESPs reinforces social and economic inequities rather than working to mitigate them. It’s far more effective and efficient to fund higher education at the source, ensuring affordability for all students. It also addresses the deferred affordability at the end when loans are due–$28,000 on average for Ontario students after one degree (before interest), and this does not include private loans. As you point out, in today’s economy this creates a significant problem, one we need to address quickly and comprehensively.

  6. As a grandparent of a child living in relative poverty, I am very happy that I have the opportunity to put money aside for his education and am happy that the government is also making a contribution to the RESP. I am not a wealthy investor, in fact I live close to the povery line, but this is a great vehicle for us. To give this money directly to the family would help them in the short term but would almost certainly leave my grandson with nothing for post-secondary education. It is here and now, and if there is a better way, let’s hear it and implement a new program if it truly will improve the situation.

  7. It’s important to have options for funding post-secondary education. RESPs may be a more viable option for people who have the discretionary income to invest in them. They do benefit the mutual fund industry and are subject to the vagaries of the market. The scholarship plans are also a good option and the principal investment is protected. A small amount invested from birth and redeemed 17 or 18 years later can help. The government loans and grants program is also valuable although, today, students can be left with massive debt. I was fortunate to benefit from loans and grants 30 years ago when university education was much more affordable and had minimal debt to repay. Ensuring that post-secondary education is well funded is also critical. A well-educated population is the foundation of a healthy society (economically, politically, and quality of life). Availability of scholarships based on more than stellar marks is also important. I could go on and on but there are multiple ways to provide funding. Education is absolutely fundamental to the well-being of Canada and its citizens!

  8. As a current university student, I’m glad my parents were able to save in RESPs for me. They are not rich (combined income of less than 70K, but education has always been a priority. I still need loans, but every little bit helps. Of course I would prefer cheaper schools (as many european countries have) but there are still too many uneducated conservatives out there. Oh well, maybe someday

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