Full report. - Social Research and Demonstration Corp

learn$ave Project: Final ReportBox AAsset-based education savings incentivesin CanadaThe Canada Education Savings Grant matches family RESPcontributions at a basic rate of $0.20 for each $1 saved (up to theannual maximum of $500 in matching grants on $2,500 in familycontributions). As of 2004, for low and modest income families, thefirst $500 saved can be matched at higher rates of $0.30 or $0.40for each $1 saved. The government grant is only available after afamily deposits money into an eligible account for an eligible child.When the account matures and the beneficiary student begins to drawfrom the fund (in education assistance payments), these are taxed aspart of the student’s income. In 2004, the federal government alsointroduced the Canada Learning Bond to encourage more low-incomefamilies to save for their children’s education. No family contributionsare required to receive the initial grant of $500 and then annualtop-ups of $100 in each year the child is eligible. However familiesmust open an RESP and the policy aims to kick-start educationsavings by more low-income families.Alberta, BC and Quebec now all have similar provincial measures topromote education savings. Alberta’s Centennial Education SavingsPlan pays grants of $500 at birth and top-ups of $100 each ages8, 11, 14 into RESPs for all children born or living in the province in2005 and later. As with the Canada Learning Bond, families must firstopen an RESP to receive the provincial grant. BC’s plan works verydifferently as funds are saved by the provincial treasury in a pooledaccount and are then paid out as eligible recipients turn 17 and enrolin PSE. Quebec’s Education Savings Incentive program is most similarto the CESG in offering a match of up to 10 per cent on RESP savingsup to a maximum of $250 per year in QESI grants or $300 forlow-income families.While these bond and grant measures have much in common with asavings project like learn$ave and, in many cases, were informed bythe experience of the design and implementation of learn$ave, noneis available to adult learners. In all cases, these education savingsincentives are aimed strictly at savings for children in primary orsecondary education with the hope that small amounts, saved overtime and benefitting from compound interest, can result in significantdollar amounts to promote secondary school completion and PSEplanning and participation.returning to education or training. In the case of RESPs itis primarily because the savings incentives are targetedentirely toward younger students. In the case of RRSPs,the LLP is available only for full-time studies, likelydiscouraging many adult learners. Furthermore, the taxbenefits from RRSP savings are largest for those withlarger incomes who can afford larger contributions andwho have larger tax liabilities.Comparing assisted education savings and other policy instrumentsEmployers might be engaged in contributing to educationsavings plans but so far this has not been the case inCanada outside of a handful of unionized environmentsand even now has been the subject of cost-reductionmeasures (Canadian Autoworkers Union, 2009).Furthermore, given the current balance in how trainingand education costs are covered in Canada, it is unclearwhether public incentives could meaningfully increaseemployer contributions, particularly in a copaymentsystem with employees.While in-kind services may increase the supply ofadult learning opportunities, it appears that they cannoton their own to generate or support the demand-sideof the equation. Here, assisted education savings maybe able to both generate demand for more and bettereducational opportunities for adults and other students,and to provide support to cover the financial costs oflearning. Direct transfers or grants appear to be a criticalinstrument for reaching low-income learners and arenot incompatible with education savings, as the CanadaLearning Bond demonstrates. However, they may not havethe same attitudinal or behavioural impacts of a savingsbasedinstrument if the latter is able to strengthenindividual aspirations and commitment to attain a futuregoal through the mechanism of regular deposits towardsthat goal. As compared with social insurance-fundedapproaches, assisted savings need not be tied to eligibilityfor particular income benefits or to past labour marketparticipation and may be more flexible to life-courseand labour market changes over time. As comparedwith repayable assistance, matching savings as depositsare made may be a more efficient approach per dollarof government funding than providing up-front loansand trying to collect later on. Furthermore, the evidence(Bynner and Paxton, 2001; Andres and Adamuti-Trache,2008) suggests that debt can have adverse effects on lifeoutcomes following the transition out of school into theworkforce.However, assisted education savings instruments doenforce a delay between the decision to plan for a returnto school and access to the public benefits that supportthat decision. For low-income families, it will take time,even with generous savings incentives, to save up anamount sufficient to cover most or even some of theexpenses related to education or training. The interveningperiod may increase the likelihood that life course events,such as job changes, illness, family changes or others,will overtake the original plan, leaving the saver withSocial Research and Demonstration Corporation Appendix A | 113