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Get Smart!

I was amused in the run up to last month’s US presidential election to read that Americans with any kind of post-secondary education were much more likely to vote for John Kerry than George Bush. Not very surprising I suppose. What made this even more interesting, in the post-election aftermath, were reports that Canadian immigration authorities have experienced a surge in inquiries from Americans who clearly feel alienated by the prospects of another four years under George W. and his crew.

I’ve got to admit, my prevailing reaction to these developments was to think, ‘Great, let ‘em in!’. Any country that can attract, or develop, a more highly skilled and educated workforce is likely to prosper from the efforts. So let’s take the smart ones, leave them with the rest, and Canada should see it’s economic productivity benefit as a result.

You see I get a little concerned for our country’s future when I hear stories like the one my cousin related to me recently. Elaine is a young lady in her fourth year of teaching, but her first at the Grade 8 level. She was shocked at the lack of writing and composition skills demonstrated by her new students. Most couldn’t come close to putting together a legible sentence, let alone a page of clearly formulated thought. Reading and writing abilities seem to be on the wane amongst our country’s youth, and how will that impact the skills, education and productivity of our future workforce?

I know the Government of Canada understands these concerns as they have made some attempts recently to sweeten the pot for Canadians seeking a post-secondary education. Changes in the budget ready to take effect on Jan 1, 2005 have added to the benefits of starting a Registered Education Savings Plan (RESP) for those on moderate and low incomes.

Without getting into too much detail, the feds currently kick in 20 cents for every dollar (up to prescribed limits) that you salt away in an RESP. Anyone can contribute to such a plan, not just the parents of the child who is beneficiary. Starting January 1st, the feds will sweeten the grant to 30 cents on the dollar where the child’s family earns between $35,000 and $70,000 a year, and 40 cents on the dollar if the family earns less than $35,000 a year. These increased grants will apply to the first $500 contributed to the RESP each year. Not a lot perhaps, but at least our government is moving in the right direction with these changes.

Another new initiative is meant to kick-start education savings for low-income families. The 2004 federal budget proposes to introduce the Canada Learning Bond (CLB), which will provide up to $2,000 of education savings by age 16 for children in families entitled to the National Child Benefit supplement. Starting in 2004 an initial $500 CLB will be provided at birth for children in families that are entitled to the NCB supplement—generally, those are families with incomes under $35,000. Subsequently these children will qualify for up to 15 additional $100 CLB instalments (until age 15), one for each year in which they are entitled to the NCB supplement.

The CLB will be paid into an RESP for the benefit of the child. An additional $25 will be paid with the initial $500 CLB to help families cover transaction and other incidental costs of establishing an RESP. A child in a family entitled to the NCB supplement throughout his or her childhood would receive CLB payments of $2,000, which could accumulate, with a 3.5-per-cent real rate of return, for example, to about $3,000 (in 2004 dollars) by age 18.

As with the CESG, the CLB will be a source of savings for the student solely to cover costs for post-secondary education. It will generally be subject to the same conditions as the CESG. It is proposed that the CLB be effective starting January 1, 2004. The first payment of the CLB will be made after Royal Assent and once delivery systems are in place. Therefore, it is not expected that CLB payments will be made before January 2005.

To encourage entry into post-secondary studies, the Government will also provide eligible first-year post-secondary students from low-income families with a new up-front grant as part of the Canada Student Loans program. The grant will be for one-half of the cost of tuition up to a maximum of $3,000.

Adult students are also encouraged to start, or continue an education through the Lifelong Learning Plan (LLP). This plan provides an opportunity for individuals who want to continue their education but only have funds available in their RRSP. It allows you to withdraw amounts from your RRSP to finance training or education for you or your spouse or common-law partner. You do not have to include the withdrawn amounts in your income, and the RRSP issuer will not withhold tax on these amounts.

The LLP provides an interest-free loan from an RRSP of up to $10,000 a year, to a maximum total of $20,000 over a four-year period, to finance full-time education or training at a qualifying education institution.

If there is any doubt as to the value placed on a good education, consider the thousands of foreign students who flock to universities in Canada every year. Have a look at the names on the graduate rolls. It’s not hard to imagine that there are parents 10,000 miles away who would give everything their family has just to educate one of their children in Canada. They clearly recognize the value of such an investment in securing their family’s future prosperity. This opportunity is increasingly available to everyone in this country.

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