Ontario’s 2016 budget proposes to end tuition and education tax credits. In their place, Wynne’s Liberals want a single upfront grant, which they’ll call the Ontario Student Grant (OSG), starting in the 2017-18 school year.
“To the extent they’ve simplified things into a single grant, it’s going to make it easier for families and hence for us [advisors] to factor in what costs might be,” says Graham Westmacott, portfolio manager at PWL Capital in Waterloo.
Tuition and education credits are still available federally, notes Wilmot George, vice-president, Tax, Retirement and Estate Planning at CI Investments in Toronto. “There is mention in the budget paper that if you’re a resident of Ontario as of December 2017 and you’ve got carry-forward tuition education credits, you’ll still be able to claim those. So it’s doesn’t look like you’ll be losing the carry forward if you had these credits from prior years. It just means that going forward, you’re limited to federal [credits].”
Overall, George adds, the proposal appears to re-target tax revenue earmarked for education aid toward lower-income families. A key feature of the proposal is free tuition for students from families with a combined income of $50,000 or less.
Westmacott says the proposal provides more autonomy to the student. The question is how they’ll use it. Different programs of study are priced differently; for example, for a first-year student, the Fall-Winter 2015-2016 cost per unit in a humanities program at McMaster University is $218.20. For engineering, it’s $336.24. “I can see more emphasis being put on the family to say, ‘We’ve established the grant eligibility based on our income, but how are you going to use that grant? Are you going to trade up in terms of the type or quality of the [program you take], or do you just want a degree and not care what it’s in?’
“Your son or daughter may want to think carefully about signing up for the cheapest course and seeing a large lifestyle grant.”
Westmacott adds the new grant program will start right when the tuition cap put in place in 2013 ends (a 3% maximum annual increase on tuition, from 5% pre-2013). “What’s going to replace it? And are the grants going to be [indexed to] any increases in tuition?”