Higher Education Strategy Associates

How to Fix the Canada Learning Bond

Chances are you’re familiar with Registered Education Savings Plans. Though they’ve been around for 40 years now, it was only with the 1998 budget’s introduction of the Canada Education Savings Grants and their 20% top-ups of RESP contributions that they got big. Nowadays, parents contribute $3.39 billion per year to RESPs, and the CESG program hands out $667.1 million per year.

Of course, people pointed out at the time that the CESGs offered much more to families that could afford to set aside savings for PSE than for those who didn’t. So, in 2004, the feds created the Canada Leaning Bond, a one-time $500 RESP payment at birth to children from low-income families, followed by annual deposits of $100 over the course of the next fifteen years.

Yet the Learning Bond remains dwarfed by the CESG program, meaning the “free money” component of the RESP program still skews towards those who have complex investment portfolios and are good at efficiently managing them – and hardly need the most financial assistance for post-secondary education. On the flipside, families that could really use support lack awareness of these programs, and have few resources to set aside for future educational pursuits.

According to the formative evaluation of the CLB, “although more than half of Canadian parents are aware of some type of government financial assistance program, few are familiar with the… CLB.” The feds rely on banks to do a lot of the RESP legwork, since they offer savings vehicles, and banks aren’t super keen on chasing the business of low-income families. Meanwhile, the evaluation notes that “many of those who indicated that they were moderately aware or unaware of the CESG and CLB mentioned that they would have opened an RESP had they been aware.”

So why not make the CLB automatic? Instead of waiting for low- and moderate-income families to get the paperwork rolling, the Government of Canada would be wise to take the lead. Send each eligible family a voucher for $500 and a list of local banks that can set up an RESP. Include CLB and RESP information in every piece of communication to eligible families – their tax forms, their Universal Childcare Benefit cheques, their National Child Benefit forms, etc.

Don’t underestimate the nudge.

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