Plan well ahead to make post-secondary school affordable

Rising tuition fees could push a post-secondary education out of reach for thousands of Canadian families if parents don't start a regular savings plan early in life to prepare for the spiraling costs.

That's the warning issued by Brian Munholland, president and COO of USC Education Savings Plans Inc., who says tuition fees will likely continue to climb five per cent per year - just as they have done on average for the past 25 years.

That means a child born today could be faced with a bill of almost $123,000 to complete a four-year university degree. The costs are staggering and they're only expected to get worse. Currently, Ontario students are looking at an average cost of almost $14,000 for their first year, including residence and incidentals.

Ontario is the second most expensive province to attend university. I should know. I've been monitoring the fee hikes in recent years.

My two-year-old son, Matthew - a cute little guy who loves reading but prefers to play hockey and be rough just like the pros - was enrolled in an education savings plan before he could crawl. I studied the graphs and charts prior to his birth and discovered that a four-year degree with residence will cost me roughly the same as what I paid for my first house.

Currently, the first $2,000 per child invested in a Registered Education Savings Plan receives a 20 per cent Canada Education Savings Grant (CESG), thanks to the federal government. That's a $400 gift!

Although the success of the program has quadrupled RESP savings from $2.5-billion to $10-billion since the grant was introduced in 1998, industry lobbyists are now hopeful that Ontario will follow suit by offering incentives similar to the CESG - possibly in the form of tax credits, since additional grants would require more spending. Other provinces are considering proposals that would offer extra incentives for low-income families.

"Education is a provincial responsibility, and we're asking the provinces to step up to the plate," says Munholland, noting the RESP industry is pushing provinces to legislate matching "top-up" grants. The additional funding would also help to reduce the default rate on Ontario student loans, which currently sits around 15 per cent and costs the province almost $40 million annually.

Jason Levy, a senior district manager with the Canadian Scholarship Trust Plan, has watched business sales explode in recent years, thanks to demographics and a volatile stock market. His plan, which only invests in fixed income, has drawn new clients disillusioned by the performance of their equity mutual funds.

Although I'm hopeful - like many parents - that my son will keep swinging his hockey stick and go on to land a scholarship at a prestigious university in the United States, the odds are stacked against him.

The Ontario Minor Hockey Association (OMHA) did a study and tracked the whereabouts of 30,000 players -- all born in 1975. It found that only 15 went on to play more than one full season in the NHL.

"You're likely better off going to school and getting a good education," says Kevin Boston of the OMHA.

Oh well, wishful thinking. I suspect my son will one day have to set his hockey gear aside and focus on his studies if he ever expects to land a good job. Then again, he may not have a choice. Statistics Canada has recently said that 66 per cent of all jobs in Canada now require a post-secondary education.

One of the keys to making the cost of an education affordable - and having the funds available when needed -- is to start the savings process early. But the clock is ticking and time is running out for thousands of Canadian families with young children who aren't participating in an education savings plan.

In fact, a recent study shows that only 25 per cent of Canadians take advantage of the RESP program - and the "free money" shelled out by Ottawa. It's a shame, but one of the greatest challenges facing the RESP industry is education, especially among low- and moderate-income families.

Knowledge of the program varies widely across provinces. Munholland says the biggest obstacle he sees is that many parents aren't aware of the enormous costs they'll be faced with down the road. Others don't see an RESP as a priority or haven't taken the time to research various investment or savings plans, while some parents live from pay to pay and can't afford the monthly contributions.

Surprisingly, almost 80 per cent of parents think their child will receive a scholarship, says Munholland. So, just in case I don't become a father who can watch his son's career develop from box seats, I enrolled my son at the first opportunity. It's a wise decision, and one I won't regret - even if, by chance, he makes it to the pros.