Band funding can’t cover spiralling education costs

April 18, 2013

Alex Hebert, citizen of Dokis First Nation with his grandmother Denise at his Kindergarten graduation. When Alex graduates from high school, it will cost an estimated $111,028 for a four-year university program away from home. – Photo by Marci Becking

By Marcia Manitowabi
Don’t rely on your First Nation to provide funding for little Johnny when it’s time for him to go to university.
The cost of post-secondary education in Canada is high and rapidly getting higher. Tuition fees have been growing much faster than inflation. Tuition fees in Canadian Universities have seen an average annual increase of 4.4% between 1998 and 2008. It is estimated that a 4-year undergraduate degree from a Canadian University in 2030 could cost over $150,000.
First Nation Communities are experiencing a high volume of post-secondary applications, and with limited federal funding that each community receives, not all students will be able to attain a higher level education with support from their respective communities.
First Nation funding also does not accommodate the inflationary rise in cost-of- living expenses. As an example; a First Nation student who received band funding to attend post-secondary education in 1999 would have received the same amount of living expenses received today in 2013. Many students live below poverty levels while working towards their degrees.
The Canadian Government enhances your savings within a Registered Education Savings Plan (RESP) as an incentive to save for your children’s education.
1)   The Canada Education Savings Grant (CESG). Human Resources and Skills development Canada (HRSDC) pay a basic grant of annual contributions made to an eligible RESP. For every dollar you put into the RESP, HRSDC will top it up 20% to a life time maximum of $7200. The CESG is deposited directly into the RESP.
2)   The Additional Canada Education Savings Grant. HRSDC pays an additional 40% of annual contributions made to an eligible RESP for families with a net income of less than $38,832.
3)   The Canada Learning Bond. This grant is available to children born after December 31, 2003 and who receive the Canada Child Tax Benefit, which includes the National Child Benefit Supplement. In the first year of eligibility, the CLB will pay $500 into the RESP account. In each subsequent year that the family is eligible, $100 is paid until the student reaches 15 years of age, for a maximum of $2000.
The grants are a few of the benefits available to saving for your child’s education. Other benefits include: Tax Savings on income earned and Tax Free Compound Interest. Remember: government grants must be returned if the beneficiary does not attend post-secondary education.
When it comes time to use your RESP, the principal will be returned to the subscriber (parent, aunt, uncle – the person who has been saving) less any fees. Income earned within, and grants paid to, an RESP will be paid to the beneficiary (student) in the form of Educational Assistance Payments (EAPs) to pay for eligible post-secondary education costs.
If the beneficiary does not pursue post-secondary education, the subscriber may still withdraw the income earned in the RESP in the form of Accumulated Income Payments (AIPs). AIPs may be transferred to the subscriber’s RRSP (or spousal RRSP) to the extent of any unused RRSP contribution room. Any portion of an AIP that is not contributed by the subscriber to an RRSP will be taxed as income and will be subjected to tax penalties.

Marcia D. Manitowabi, citizen of Wikwemikong Unceded Indian Reserve, is a graduate of the Accounting Program at Canadore College. Upon graduation, she furthered her studies in the financial industry and received certification from the Registered Education Savings Plan Dealers Association of Canada.