If you have been steadily putting money into a Registered Education Savings Plan and relying on stable tuition and strong grant support from OSAP, Ontario’s most recent announcement changes the maths.
The province is raising the cap on tuition after seven years of it being frozen and redesigning the Ontario Student Assistance Program. Over the next four years, the government will put billions into the postsecondary system, but schools will be able to raise tuition again. At the same time, OSAP will start giving out more loans than grants. raising the cap on tuition and more loans than grants will affect families.
This isn’t just a policy headline for families who plan years ahead. It has a direct impact on how much you need to save, how much your child can borrow, and what repayment might look like after they graduate. direct impact on how much you need to save and what repayment might look like.
This in-depth guide goes over what has changed, how tuition increases will work, how OSAP grants are getting smaller, who can get them, and what families should think about doing now. how tuition increases will work and what families should think about doing now.
The Reason Ontario Is Ending the Tuition Freeze
Since 2019, Ontario has not raised tuition for students from Canada. During that time, colleges and universities said that rising tuition, fewer international students, and less government funding put a strain on their finances. rising tuition, fewer international students and less government funding put a strain.
The province now says that more money is needed to keep institutions stable and maintain the quality of long-term programs. Over the course of several years, billions of dollars in new funding have been announced. In exchange, schools will be able to raise tuition again, but only within certain limits. keep institutions stable and maintain the quality and only within certain limits for increases.
The government sees this as a structural reset meant to bring back sustainability. For families, this means that the time of knowing how much tuition will cost is over. structural reset meant to bring back sustainability and knowing how much tuition will cost is over.
How Much Can Tuition Go Up?
According to the new rules, colleges and universities in Ontario can raise tuition by up to 2% each year for the next three years. After that, the most that can be added is 2 percent or the average rate of inflation, whichever is lower. raise tuition by up to 2% each year and average rate of inflation whichever is lower.
At first glance, 2 percent might not seem like a lot. But even little increases add up over time. 2 percent might not seem like a lot and little increases add up over time.
As an example:
- If tuition is $7,000 a year, a 2% rise means about $140 more in the first year.
- That higher base goes up again in the second year.
- Over four years, the total cost can go up by several hundred dollars.
And tuition is just one part of the puzzle. tuition is just one part and part of the puzzle for families.
The True Price of a Year of School
Families often only think about tuition when they plan for college or university. only think about tuition and plan for college or university costs.
A realistic breakdown for a student who lives away from home is as follows:
- Depending on the program, tuition costs between $6,500 and $7,500 a year.
- For books and supplies, you should plan on spending between $1,000 and $1,500 a year.
- $10,000 to $15,000 a year for housing and food
- Transportation and personal costs range from $2,000 to $3,000 a year.
The total cost for the year can easily be $18,000 to $25,000 or more. total cost for the year can easily be and $18,000 to $25,000 or more.
That can be more than $80,000 to $100,000 over four years. more than $80,000 to $100,000 and over four years total expenses.
That total could go up even more because tuition is going up again and grants are going down. tuition is going up again and grants are going down for students.
OSAP Is Changing From Grants to Loans
The Ontario Student Assistance Program is one of the most important things that has changed. most important things that has changed and Ontario Student Assistance Program shift.
A lot of the money for OSAP has been given out as grants that don’t have to be paid back. Most of the help will come in the form of loans under the new structure. grants that don’t have to be paid back and form of loans under the new structure.
The government has said that students will only be able to get 25% of their OSAP funding as grants in the future. The rest will be loans. 25% of their OSAP funding as grants and The rest will be loans.
That is a big change. That is a big change and big change for students graduating.
If you thought that grants would lower your borrowing costs a lot, you’ll now have to deal with more student debt when you graduate. lower your borrowing costs a lot and more student debt when you graduate.
What This Means in Real Life
Let’s look at a simple example. look at a simple example and simple example for students here.
A student who qualified for $10,000 in OSAP support under the old system might have gotten: $8,500 in grants and $1,500 in loans. $10,000 in OSAP support under the old system and $8,500 in grants and $1,500 in loans.
The same $10,000 package under the new system might look more like this:
That difference makes a big difference in how much debt a student has after they graduate. difference makes a big difference in how much and debt a student has after they graduate.
That could mean borrowing tens of thousands of dollars more over the course of four years. borrowing tens of thousands of dollars more and over the course of four years.
OSAP Eligibility Rules
OSAP is still based on income and a number of other factors, even though the ratio of grants to loans is changing. based on income and a number of other and ratio of grants to loans is changing.
Students must:
- Be a Canadian citizen, a permanent resident, or a protected person
- Live in Ontario
- Be a student at an approved college or university
- Show that you need money
The amount of funding is based on:
- Income for the family
- Length of the program
- Costs of living and tuition
- Your marital status and dependents
Families should keep filing their taxes on time and keeping their financial records up to date because OSAP calculations depend a lot on income reporting. filing their taxes on time and OSAP calculations depend a lot on income reporting.
What will happen to private career colleges
Students who go to private career colleges will no longer be able to get OSAP grants because of changes made by the federal government. They will only be able to get loans. private career colleges will no longer be able and only be able to get loans.
This change makes it even harder for students who want to get certain vocational or specialised training to pay for it. even harder for students who want to get and vocational or specialised training to pay for it.
When looking at private schools, families should keep in mind that they won’t get any grant money. looking at private schools families should keep and won’t get any grant money.
What the Government Says About the Change
The province says that demand for OSAP has gone up a lot and that the old structure, which relied heavily on grants, was not financially viable. demand for OSAP has gone up a lot and relied heavily on grants was not viable.
Officials say that moving to loans will make the program last for a long time. The point is that future students will still be able to get money, even if the makeup of the group changes. moving to loans will make the program last and future students will still be able to get money.
From the point of view of the institution, the extra multi-year funding commitment gives them more financial stability and the ability to plan for the long term. extra multi-year funding commitment gives them more financial and ability to plan for the long term.
But for families, the change makes them more dependent on student loans. more dependent on student loans and change makes them more dependent.
How it affects planning for RESP
You might need to rethink how much you want to save if you’ve been putting money into a Registered Education Savings Plan. rethink how much you want to save and Registered Education Savings Plan contributions.
A lot of families thought:
- The cost of tuition would stay the same.
- OSAP grants would cover a big part
- It would be possible to handle student debt.
Your RESP may need to do more work now that tuition is going up and grants are going down. RESP may need to do more work and tuition is going up again.
Think about:
- If possible, making monthly contributions bigger
- Looking at the expected costs of education every year
- Taking into account inflation in addition to tuition
The Canada Education Savings Grant still matches contributions up to a certain amount each year, so it’s still important to make the most of those benefits. Canada Education Savings Grant still matches contributions and make the most of those benefits.
How Much Debt Could Students Have?
If grant money goes down and borrowing goes up, the average amount of student debt may go up. grant money goes down and average amount of student debt may go up.
Even small increases in borrowing each year can add up over four years. small increases in borrowing each year can and add up over four years.
For instance:
- If you borrow an extra $5,000 a year, you’ll have $20,000 more debt when you graduate.
- With interest, the total amount owed could be much higher than that amount over time.
In this new world, it’s very important to know how long it will take to pay back a loan and how interest works. very important to know how long it will and how interest works over time.
Things to think about when paying back
Most of the time, student loans start to be paid back after graduation, but there may be grace periods. student loans start to be paid back and there may be grace periods available.
Things that affect repayment are:
- Total amount owed on the loan
- Rates of interest
- How much money you make after graduation
- Who can get help with paying back loans
When choosing a program of study, families shouldn’t just think about how much money they can borrow; they should also think about how much money they can make after graduation. choosing a program of study families shouldn’t and how much money they can make after graduation.
Ongoing Education and Grant Payments
Even though loans are becoming more popular, OSAP funding will still be given out at the beginning of each school term. loans are becoming more popular and beginning of each school term funding.
For students who qualify, payment will come in the form of scheduled funding releases that are linked to checking enrolment. scheduled funding releases that are linked to and checking enrolment before payment release.
Families should know, though, that they will have to pay back a bigger part of that money. pay back a bigger part and bigger part of that money.
At the start of each term, it will be more important than ever to make a budget. start of each term and more important than ever to make a budget.
How Families Can Move Forward
- Find the new total cost of education.
- Use new estimates for tuition that include a 2% rise each year.
- Put more money into savings when you can.
Even small monthly increases in RESP contributions can help you borrow less in the long run. small monthly increases in RESP contributions can and borrow less in the long run.
Look at different living situations
Living at home can cut down on the total cost of education by a lot. Living at home can cut down on and total cost of education by a lot.
Think about the program’s ROI
Look at how much money you could make after graduation compared to how much debt you expect to have. how much money you could make after and how much debt you expect to have.
Support Part-Time Work
Working part-time while in school can help you borrow less money. Working part-time while in school can and help you borrow less money.
The Bigger Financial Picture
Ontario’s decision is part of a larger trend of putting more financial responsibility on students and their families. larger trend of putting more financial responsibility and students and their families burden.
While institutions get more stable funding, families have to deal with:
- Tuition costs going up
- Less help that doesn’t have to be paid back
- More borrowing
Families who are already juggling mortgage payments, retirement savings, and daily living costs now need to be even more careful when planning for education. already juggling mortgage payments retirement savings and more careful when planning for education.
Questions that are often asked
Will tuition go up right away?
Starting with the next academic cycles, institutions may be able to raise their prices by up to 2%. next academic cycles institutions may be able and raise their prices by up to 2%.
Is OSAP going away?
No. OSAP is still going on, but the ratio of grants to loans is changing. OSAP is still going on but ratio of grants to loans is changing.
Will students with less money still get grants?
Yes, but the amount of grant money will be less than the total amount of help. amount of grant money will be less and total amount of help available.
Should families be worried?
No, but it’s important to plan ahead. important to plan ahead and plan ahead for education costs.
