Unfortunately, each year, 130,000 disadvantaged children who would be entitled to a BEC do not benefit from it. Despite its charming acronym, the Canada Learning Bond is still sorely lacking in notoriety, two decades after its creation. Low-income families are thus depriving themselves of a gift of up to $2,000, not counting the returns that accumulate over the years.
This problem will finally be resolved.
Ottawa will itself open Registered Education Savings Plans (RESPs) for children to pay in the CLBs to which they are entitled.
The BEC program provides for the payment of a subsidy of $500 for the child’s first year of life and $100 for subsequent years, if the family is eligible, for a total of $2,000.
Concretely, the parents of a newborn will now receive a letter to encourage them to open an RESP, which should have been done a long time ago. And if, after four years, the account has still not been opened, the government will do it for them. Once the account is opened, the BECs will be paid retroactively, for the first four years of life, therefore.
In this way, all children for whom the program was created should participate.
It was time to act and put automation at the service of education.
Because the BEC program, which aims to encourage children from poor families to pursue post-secondary studies, has never achieved its noble objectives. We see this when we see the costs of the program, which are much lower than forecast.
When it was created in 2004, Ottawa anticipated a bill of $325 million per year, at maturity. However, in 2022, it was half as much, or 151 million. This shows how many families are missing out. In fact, there are 658,000 beneficiaries rather than the 2.2 million expected, also reports Luc Godbout, holder of the Chair in taxation and public finance at the University of Sherbrooke. In other words, only 30% of young people eligible for BEC benefit from it.
More targeted communications to low-income parents would clearly have been necessary for the program to be fully used. Ottawa knows them, it wasn’t that complicated. We cannot expect families with modest incomes, immigrant backgrounds or low levels of financial literacy to rush to banks to open an RESP when their child is born to obtain CLBs. Many parents are unaware that they do not need to contribute to the account for the vouchers to be paid.
We do not yet know in which Ottawa bank will open these thousands of RESPs or in what way the children’s money will be invested. In all likelihood, the government will enter into an agreement with a financial institution, as it did with Sun Life to administer dental insurance earlier this year.
Ottawa specifies that parents who wish can, at any time, “take charge of their child’s RESP” and contribute to it to receive the subsidies offered by Quebec and Ottawa (30%). Hopefully this means the account can be transferred to the financial institution of their choice.
Starting in 2028, parents of children born before 2024 will also be able to ask Employment and Social Development Canada to open an RESP for their child, a strange possibility since the same request can be made to their bank.
The Freeland budget also increases the maximum age for retroactively requesting BECs from 20 to 30 years. This measure will allow a greater number of adults to benefit from the Ottawa grant to undertake post-secondary studies. If a 23-year-old decides to attend college, they should be encouraged to pursue their dreams by paying them the money they deserve.
I also welcome Ottawa’s idea of wanting to help tenants improve their credit report.
Minister Chrystia Freeland is asking the financial industry to prioritize the launch of tools that will allow tenants to report their payment history to credit agencies. The incentives to act, if any, have not been revealed, but let us hope that this original invitation will be welcomed as a challenge to be taken up quickly.
Currently, paying rent in full and on time is not considered in the affordability assessment because the information is not reported to credit agencies like Equifax and TransUnion. This loophole can harm first-time mortgage applicants, among other adverse effects. A low credit score can prevent a person from getting a job or getting cheap auto and home insurance, for example.
This issue is particularly critical for young people and immigrants who do not have an extensive credit history.
Ideally, the entire operation of the credit file would be reviewed. But this small step toward potential improvement is better than the status quo.
reference: www.lapresse.ca