Are you ready to postpone retirement to help your children with education costs?

BY ANDREW STEWART

A Student Debt Survey, conducted on behalf of FP Canada, found many Canadian parents will have to postpone their retirement to help their children pay for post-secondary education.

Eighty-two percent of Canadians with children under 18 say they intend to help their children pay for their education, and nearly half (48%) say they expect they will have to postpone their retirement as a result. In addition, 42% say they expect it will prevent them from paying off their debt. Prices for education can range from free/low cost to several thousand dollars per year. When I meet with parents to talk about their wish to prepare for their children’s education, I suggest we start by answering a few simple questions.

1. What was it they studied? What was their highest level of education completed? How were the education costs paid for? This gets them to focus on what it was like for them and either the hardships they had to endure or the help and privilege they received.
2. What financial experience do they want to be different or the same for their children?
3. How severe does saving money for education change their current monthly budget and lifestyle?
4. What is the amount they wish to contribute each month or annually?

At the end of the questions, we recap the needs addressed and then talk about the next steps. The great thing I love about these conversations is that it’s not about having to uncover a need for a potential loss. It’s about helping educate them about financial resources at their disposal and the different mediums they can use to reach their desired goal. Between tuition, textbooks, housing, and meals, post-secondary education comes with a big price tag. It’s clear that many parents are willing to making major financial sacrifices to help their kids with these costs. There are financial resources that parents may be able to take advantage of to help with the cost in addition to the money they save.

Government funding – Ontario Student Assistance Plan (OSAP) for example.

• Applicants must be Canadian citizens, permanent residents or a protected person, meeting academic requirements, be studying an OSAP-approved program and demonstrate financial need.
• Loans are to be repaid starting six months after school is done, with monthly interest; grants do not need to be repaid. Repayment assistance is available.
• OSAP is for part-time or full-time students taking most college/university programs at any level including diploma, undergraduate or graduate degrees (other than continuing education certificates, with some exceptions).
• Apply online, at no cost, at least six weeks prior to program start date. Funding is based on financial information provided by the student, course load, program, and other factors.

Scholarships and bursaries offered by the school and insurance companies

• Scholarships offered directly by a school are awarded based on merit (e.g. academic, community work). Typically, students don’t need to apply for these (unless otherwise instructed); they’re given out automatically by the school to outstanding students on the basis of grades or other achievements.
• Bursaries are based on financial need. Students apply for these in the late summer through their school (typically through their online student account). The student’s application should demonstrate financial aid and bursaries may be awarded based on their need and available funds and is usually a credit toward their tuition. Once enrolled in a college/university, emergency bursaries are available as well.
• Foresters Insurance Competitive Scholarship. To be eligible you must be a Foresters member, their spouse, child or grandchild. You must have completed 40 hours of volunteer work, have a minimum grade of 70% or GPA of a least 2.8 and enrolling in a minimum two-year, full-time program in Canada.

Student debt

Canadian students collectively owe over $28 billion in student loans to all levels of government and 85% of Canadians believe students are taking on too much debt in order to pursue post-secondary education. According to data released in 2017 by Statistics Canada, tuition fees increased by over 3% for undergraduate programs in the 2017-2018 academic years. Borrowers typically take between nine and fifteen years to fully pay off their loan and the period usually overlaps with when Canadians are most likely to start a family. The report also stated university students graduate with an average debt of $16,727. College students have an average debt of $10,172, while doctoral students carry an average debt at graduation of $29,000.