How the Government Will Pay for Your Child's Education, So You Don't Have To

If your child chooses to attend post-secondary education away from home in Canada, you could be looking at up to $11,000 annually in costs - estimates that are pushing parents' plans further from reality. But with little to no investment by you, the Federal and Provincial Government can help with the majority of those costs.

RESPs

Like RRSPs - a retirement planning investment - you can put money for your children's educations into a range of investments, to accrue interest until they need it. Unlike RRSPs, this investment is not tax-exempt so you will still be taxed as you would having just thrown some cash into a shoe-box, but the Government is still trying to help you out, don't worry.

They allow this investment to grow, tax-free, until your child withdraws the funds for use in their education. These tax-sheltered earnings benefit not only your child, in the form of accrued interest (and therefore free money!), but also you because when you consider the penalty of saving that same amount in a non-registered vehicle, such as a savings account, the interest is taxable. In your name.

Added bonuses include the Canada Education Savings Grant and the Canada Learning Bond.

Canada Educations Savings Grant

This grant is based in part on your income and in part on the amount that you contribute to your children's RESP. Regardless of your income, at least 20 cents for every dollar of the first $2,000 you invest will be granted by the Government.

Having an income below $37,178 annually increases the grant to 40 cents on the first $500 invested and the usual grant for the remaining $1,500 allowance. If you should earn above this amount, but less than $74,357, the first five hundred dollars will earn a 30 cent grant.

There is a lifetime limit of $7,200 that the grant will provide before your child's 17th birthday, so if you can afford to, start early and contribute often!

Canada Learning Bond

The Canada Learning Bond is offered to moderate-low income families to help put funds into their children's RESPs where there typically would be none. If your child was born in 2004 or later and you receive the National Child Benefit Supplement as part of your Child Tax Benefit payment, your child will likely receive the bond once you have registered an RESP for them.

The first payment of the bond is $500 and then for every year that you continue to receive the National Child Benefit, the RESP will have an additional $100 deposited into it. Also, the Government will include an initial $25, to cover RESP opening costs with the primary $500 investment.

This Bond's lifetime limit is $2,000 for each child - one of the few reasons to open separate RESPs for each child, instead of a family RESP that would cover all of your children.

All you have to do to receive this Bond is fill out the necessary paperwork at the bank when you open an RESP. The Government will do everything else on their end and then one day, you'll notice a fatter investment.

Canada Student Loans

Your child can apply for a Canada Student Loan upon acceptance to an allowable post-secondary education program. The amounts of the loans vary based on:

• your income
• their independence from your household
• their pre-study income and any they may earn during the period of study
• their savings and RESPs
• amounts of any scholarships or bursaries and so on.

The great thing about these loans is that during full-time studies at an accredited institution, they require no payments - in fact, payments are not expected until at least six months after completing full-time studies, and are allowable for ten years.

The lifetime limit for funding is 80 months of non-doctoral education. However, if the loan is paid in full, this limit doesn't apply.

Provincial Student Loans

When your child applies for a Federal loan, they will automatically be considered for and likely also receive a Provincial Student Loan. The eligibility factors are similar to federal requirements, as are the lifetime endowment limits.

Grants, Scholarships and Bursaries

All sorts of free money is offered by the Federal and Provincial Governments, based on:

• income,
• GPA,
• areas of study,
• marital status,
• disability status,
• number of dependants
• and level of study.

For example, if your child were to become a single parent to a child, living independently from you and with an income of less than the prescribed moderate standard of living, she'd likely be eligible for grants based on her single parent status, as well as her low income status. If she were attending graduate school with a focus on technology, a few more grants and scholarship opportunities just opened up, too. Have a close family member who was a member of the Canadian Armed Forces? There's another door open.

It really is worth the research and application process to see what types of fund your child is eligible for - they could end up being awarded most of the first years' costs in various forms of free money, alone, without taking a loan at all!

Keep in mind that the lifetime limits on these awards that the Government offers are normally quite low in proportion to the normal loan limits, but anything helps and grants are one of the best ways to go for your child, especially, since they are non-repayable.