Thousands of B.C. parents are missing out on hundreds of millions of dollars of government grants for their children’s post-secondary education, with calls to re-think how such grants are handed out.
According to the B.C. Ministry of Finance, only just over half of B.C. children are receiving the one-time $1,200 B.C. training and education savings grant (BCTESG) on an annual basis, upon eligibility.
The grant requires no initial deposit; rather a parent must simply enter nearly any bank, credit union or participating financial institution in B.C. and fill out an application. The child must only be a B.C. resident and between the age of six and nine years old.
Mike Schilling, president and CEO of Community Savings Credit Union, says the process is problematic, especially for low-income and financially illiterate individuals.
“Not everyone loves the paperwork; no one's got time to do that. Why do you have to jump through this hoop, which is clearly not working? It’s clearly not accessible. The data shows that,” said Schilling, advocating for a more streamlined process.
The credit union polled British Columbian households, finding 97 per cent of them are aware of Registered Education Savings Plans (RESPs); however, only 70 per cent of them have one. The uptake rate among low-income households is just 51 per cent, compared to 78 per cent for high-income households. Parents with only a high school diploma have a 48 per cent uptake rate, compared to 81 per cent of those with university degrees.
Nine in 10 low-income parents without an RESP for their child state they are financially challenged to save for one.
But Schilling wants those with very low incomes to know that they need not have a dime to access as much as just over $5,000 in tuition money without any contribution, at the age of 18 (and based on an annual four per cent return). First, the federal Canada Learning Bond provides an initial $500 deposit and $100 per year up to a maximum of 15 years, with no required contribution. This $2,000 may be combined with the $1,200 B.C. grant on a child’s sixth birthday.
Schilling says B.C. children are missing a combined $280 million in free government grants and interest toward their education — what he dubs the “RESP gap.”
“When families are under financial pressure, the first thing to go is savings; the money you put in the jam jar at the end of the week, or whatever you do. That’s the first thing that goes and unfortunately, at a time of high inflation when we’re seeing the cost of education increasing, there’s never been a more important time to build those saving habits and take advantage of entitlements and benefits,” said Schilling.
An RESP contribution is not tax deductible and can be withdrawn as such; investment gains are, however, tax deductible but can be used as income for a student, who will typically be in a low tax bracket. An RESP may be used not just for tuition but also student needs, including living expenses and rent, according to Canada Revenue Agency. Any grant money must be used for a student or it will be clawed back. An RESP may remain open for 35 years and a student may have multiple accounts.
The uptake problem, in Schilling’s view, is that financial institutions are not adequately informing clients or possible clients, particularly for the free grants, as there’s little incentive to do so.
“While financial institutions assume a major role as a reliable source of information, only a mere 7% of B.C. parents reported that their decision to open an RESP account was prompted by proactive outreach from their financial institutions. There is a significant opportunity to enhance this engagement and bridge the gap,” noted Schilling’s report to media last week.
Schilling reached out following the results of his credit union’s polling with Angus Reid Institute. His credit union is offering any new account holder $100 to open an RESP, plus $100 to become a member, to counter the prevailing narrative that institutions are disinterested in doing so.
“We do want to give that message that saving even a small amount, over a long period of time really adds up and creating those habits helps them. But, you know, we're not here to lecture families; we know families are under pressure,” said Schilling.
The ministry says it is aware of the lack of robust uptake, especially among low-income and Indigenous households.
Each year, about 28,500 applications are received by the ministry for the $1,200 grant (about 45,000 children are born in B.C. each year, plus an unclear number of immigrants ages six to nine).
“We continue to focus efforts to ensure Indigenous communities, recent immigrants and low-income families are receiving the grant,” the ministry stated in response to Glacier Media.
“The Ministry of Education and Child Care is also working closely with federal partners, who promote Canada RESP grants, to discuss new opportunities for outreach: In June 2023, 34,000 promotional letters were mailed directly to low-income B.C. children between 5.5-8.5 years eligible for the BCTESG and other federal grants,” the ministry added.