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University of Toronto students work at the Ontario Institute for Studies in Education building Monday, November 15, 2010.

Darren Calabrese for The Globe and Mail/darren calabrese The Globe and Mail

A $420-million program to offer about half of Ontario's postsecondary students up to $1,600 in tuition rebates will be funded by cutting expenditures, and not with new money, the Ontario government says.

The province unveiled the details of the program, which is now open for applications, on Thursday. Students had both praise and criticism for the grants, which will hand most full-time undergraduate students whose parents make less than $160,000 a refund equal to 30 per cent of the average undergraduate arts and science tuition.

In the first full academic year of the program, which begins in September, eligible university students will receive $1,600, and college students will get $730. Cheques for half those amounts to cover the second term of the current academic year will start arriving in the coming weeks. The grant will be indexed to rise in step with future fees.

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The province has taken heat in recent months because the program excludes many students, such as those in graduate and part-time programs, those out of high school more than four years, and international students.

The Canadian Federation of Students-Ontario said the grant excludes too many worthy students, and estimated the government could instead have slashed tuition fees by 13 per cent across the board using the same annual envelope of $420-million.

"If they want the most efficient use of this money, targeting everybody to make sure everybody has access to this money is a better way to go about it," said Nora Loreto, the organization's communications co-ordinator.

Glen Murray, the Minster for Training, Colleges and Universities, said Premier Dalton McGuinty devised the program to "solve a very particular [financial]challenge for a large number of middle-class families," particularly those with multiple children in higher education. He also pointed out that students who have been out of high school for five or more years can receive more student aid because they are deemed independent of their parents.

"This is part of a very large menu of assistance programs," Mr. Murray said. "Every time we do these things, we discover the next unmet need."

Sam Andrey, executive director of the Ontario Undergraduate Student Alliance, praised the move as "a very real and a very significant relief to students." But he said the decision to pay for some of the grant by cancelling a trio of existing supports – the Textbook and Technology Grant, the Trust for Student Support and the Queen Elizabeth II Aiming for the Top Scholarships – is disappointing.

"It's too bad," he said, "especially the textbook and technology grant being cut – for those that aren't eligible for the new tuition grant, it's a real cut. They're getting $150 less."

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Mr. Murray said axing the programs saves the government tens of millions of dollars, and deeming them less relevant with other scholarships proliferating and arguing they are giving way to "a larger and more relevant program."

"We have to be agile. Programs are out there for the conditions of the time, and you have to revisit and repurpose them," he said.

Some eligible students hailed the grant as a welcome elixir to Ontario's steadily rising tuition fees – already the country's highest at $6,640 on average. Huzaifa Saeed, a fourth-year student at McMaster University, called it "a massive step." He works three part-time jobs – at a gas station, as a soccer referee, and with McMaster's student union – and although he'll receive only $800 before he graduates, he has a brother finishing high school who will reap its full rewards.

"When I get this grant, it's only $800, but I could quit one or two of those jobs and then have weekends to study," he said. "It's these minor differences that make a big impact."

About 160,000 students already receiving Ontario Student Assistance Program (OSAP) funds will automatically get the grant, but the remaining eligible students must apply online, meaning both the government and student groups have to get the word out.

"It's another important step forward in what is a long journey," Mr. Murray said.

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