Frances Woolley is a professor of economics at Carleton University
The Canada Learning Bond sounds like a good program: low-income parents can apply for a $500 grant to save for their children's education, plus additional grants of $100 per year, adding up to $2,000 by the time a child graduates from high school. The bond can be placed in a Registered Education Savings Plan (RESP), and parents don't have to contribute a penny.
Yet the Canada Learning Bond (CLB) is ineffective.
It does not reach the families it is intended to reach. According to a Human Resources and Skills Development Canada program evaluation, in 2009 about one in six eligible children received the CLB. Take-up is low because few people are aware of the program, and taking advantage of it requires planning and organization. Children must be signed up while young – the bond is only available to children born after January 1, 2003 – and must have a social insurance number.
Yet many people, such as graduate students, experience poverty for a time when their children are young. Those competent enough to get a SIN for their child and figure out about the CLB program may find their way out of poverty by the time their children are of university age. The students who struggle to access post-secondary education are those who live in poor families at age 17. Being in a poor family at the age of three is an imperfect measure of future need.
Even when the Canada Learning Bond does reach low-income families, the maximum total payment of $2,000 is a small fraction of the cost of higher education, currently estimated at more than $40,000 for a four-year degree, even without residence fees.
And the CLB is an expensive way of delivering cash. For the government, it involves making regular payments for up to 16 years. For parents, there are RESP administration fees. At say $25 per year for ten years, these could add up to more than 10 percent of the total CLB. Financial institutions, too, must bear paperwork costs.
Because of these low take-up rates, questionable targeting, and high administrative costs, I consider the Canada Learning Bond to be a wasteful program.
Yet the CLB demonstrates the difficulties that any would be waste slasher encounters.
First, cutting the CLB could hurt vulnerable families. Usually anyone receiving the CLB has a family income below $40,970 per year. The CLB could be replaced with a more effective policy, such as an expansion of existing work-study or bursary programs, but expanding programs would be difficult in the current policy climate.
Second, there's just not that much money involved. The cost of the CLB program, $35.7-million in 2007/8, is a tiny fraction of the $31.9-billion 2008/9 federal deficit. Eliminating the program entirely, and even generating a few million additional dollars in administrative savings, would not make any noticeable difference to the government's financial picture.
Eliminating waste is always desirable, but restoring fiscal balance by doing so is an unrealistic policy goal.
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