In an effort to help low- and middle-income Canadians save for their children’s post-secondary education, the federal government has sweetened the Canada Education Savings Grant and introduced the Canada Learning Bond.

For a child whose family has annual income of less than $35,000, the CESG matching rate doubles to 40% from 20% on the first $500 contributed each year to a registered education savings plan. That means Ottawa contributes $200.

For a child whose family has annual income of more than $35,000 but less than $70,000, the CESG matching rate increases to 30% from 20% on the first $500 contributed to an RESP. That means Ottawa contributes $150.

In both cases, for contributions of more than $500 up to the previous $2,000 limit, the matching rate remains 20%.

The Canada Learning Bond targets families entitled to the national child benefit, generally those with annual incomes of less than $35,000. Starting in 2004, a $500 bond will be paid at the birth of a child in an NCB-entitled family into an RESP. The child will qualify each year for an additional $100 CLB instalment up to age 15, as long as the family is entitled to NCB supplements.

Those children who do not qualify initially may subsequently qualify if their families become entitled to the NCB.

A child who receives the full CBL entitlement would accumulate an RESP of $2,000. With a 3.5% real rate of return, the budget calculates, that could grow to $3,000 in 2004 dollars. The CBL will be subject to the same conditions as the CESG.

The enhanced CESG is expected to cost $80 million annually and be available to more than 4.5 million children. The CLB carries a $85-million pricetag in each of the first two fiscal years reaching $325 million annually at maturity. It is expected to benefit 120,000 newborns in 2004-05.

According to Ottawa, RESP savings increased to $11.4 billion in 2003 from $2.4 billion in 1997, but savings in low- and middle-income families has been “relatively modest.”

The budget is also proposing education grants for students from low-income families and disabled students. Beginning Aug. 1, 2005, first-year students at post-secondary whose families are entitled to NCB will receive a $3,000 grant. Disabled students may receive a new upfront grant of $2,000 a year.