Budget in Brief 1998 - 2
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Archived - The Canadian Opportunities Strategy

The key to jobs and growth in the years ahead is knowledge and skills. If Canadians are to enjoy prosperity and a high standard of living in the next century, they must be prepared for the jobs of tomorrow. That is why there can be no wiser investment in the future than investments in knowledge and skills. Preparing Canadians for the 21st century is the goal.

Both the federal and provincial governments have long- established roles in enhancing equality of opportunity for Canadians by assisting those who face financial barriers to learning. The federal role goes back to the post-war years when assistance was provided to veterans so they could go on to post-secondary education. It has developed much since then.

Creating Opportunities for Canadians

This budget proposes a comprehensive Canadian Opportunities Strategy to expand access to the knowledge and skills Canadians will need for jobs that deliver a better standard of living in the 21st century. It builds on numerous actions taken in the 1996 and 1997 budgets to support Canadians in the acquisition of knowledge and skills.

The Canadian Opportunities Strategy acts on seven fronts to:

• promote access to post-secondary education by helping students in financial need cope with rising costs;
• increase assistance for advanced research and graduate students;
• help individuals repaying student loans -- especially those in financial hardship;
• help Canadians upgrade their skills throughout their working lives;
• help families save for their children's education;
• encourage employers to hire young Canadians and help young people make the transition to work; and
• help bring the benefits of information technology into more classrooms and communities across Canada.

Financial Assistance for Students

Canada Millennium Scholarships

To improve access to post-secondary education, the Prime Minister announced in September 1997 that a new arm's-length foundation would be created to provide Millennium Scholarships for thousands of Canadians. This budget provides further details.

• Canada Millennium Scholarships will be awarded to more than 100,000 full- and part-time students each year over 10 years through an initial endowment of $2.5 billion. This constitutes the single largest investment ever made by a federal government to support access to post-secondary education for all Canadians.
• Canada Millennium Scholarships will be awarded to individuals who need help in financing their studies and demonstrate merit. For full-time students, scholarships will average $3,000 a year; part-time students will also be eligible.
• Individuals can receive up to $15,000 over a maximum of four academic years of study towards undergraduate degrees, diplomas or certificates. This could reduce the debt load that many recipients would otherwise incur by half.
• Awards will help recipients of scholarships to study away from home, particularly outside their province, and support limited terms of study outside Canada.
• Canadians of all ages, studying full time or part time in publicly funded universities, community colleges, vocational and technical institutes, and CEGEPs will be eligible.
• The Canada Millennium Scholarship Foundation will be created as an arm's-length body to manage the endowment and to award scholarships.
• Once established, the Foundation will consult closely with provincial governments and the post-secondary education community. The goal will be: to award scholarships by the Foundation to individuals in a manner that avoids duplication in any province; to build on existing provincial needs assessment processes; to complement existing provincial programs; and, most importantly, to significantly increase access to post-secondary education everywhere in Canada for low- and middle-income students.
• The Foundation will have the authority, subject to mutually agreed needs, merit and mobility criteria, to contract with appropriate provincial authorities for the selection of those recipients in a province to whom the Foundation will award Canada Millennium Scholarships.

Canada Study Grants

There are some Canadians whose financial needs and special circumstances cannot be fully met through scholarships and student loans -- including students with dependants, students with disabilities and those with very limited income. Currently, the federal government provides $45 million in grants under the Canada Student Loans Program to part-time students in financial need, students with disabilities and women pursuing doctoral studies.

• To complement other measures in this budget that improve access and affordability, new grants of up to $3,000 a year will be made available to over 25,000 students in financial need who have children or other dependants. These grants will help them whether they pursue their studies full time or on a part-time basis.

Support for Advanced Research and Graduate Students

In the 1997 budget, the government provided $800 million to create the Canada Foundation for Innovation to strengthen research infrastructure at universities and colleges, in research hospitals and not-for-profit research institutions in the areas of health, environment, science and engineering. This year the government is providing new support for researchers themselves.

• Effective in 1998-99, the government will increase financial support to the three granting councils -- the Natural Sciences and Engineering Research Council, the Medical Research Council and the Social Sciences and Humanities Research Council -- to provide research grants, scholarships and fellowships for advanced research and graduate students. By 2000-01, the granting councils will have received more than $400 million in additional resources and their budgets will be at their highest level ever.

Helping Manage Student Debt

This budget proposes measures that will help all students in repaying their student loans, as well as special measures to assist individuals who are having financial difficulty repaying their loans.

Tax Relief for Interest on Student Loans

• For the first time, all students will get tax relief for interest payments on their student loans. Effective this year, individuals will receive a 17-per-cent federal tax credit on payments of the interest portion of federal and provincial student loans.

Improvements to the Canada Student Loans Program

• Interest relief: Effective April 1998, changes will be made so that a person can earn more and still be eligible for interest relief. This will be done by raising the income thresholds used to qualify for interest relief by 9 per cent. Then, beginning in 1999, partial interest relief will be available further up the income scale for graduates facing financial difficulties. These measures will assist about 100,000 more individuals.
• Repayment period extension: For individuals who have used 30 months of interest relief, the lending institution will be asked to extend the loan repayment period from 10 to 15 years. At current interest rates, this will lower monthly payments by nearly 25 per cent.
• Extension of interest relief: If, after extending the repayment period, an individual remains in financial difficulty, interest relief will be extended from 30 months to up to 54 months during the five years after leaving school.
• Debt reduction: For the minority of individuals who remain in financial difficulty after these relief measures, effective this year, the government will reduce the loan principal if annual payments exceed, on average, 15 per cent of the individual's income. The maximum assistance will be $10,000 or 50 per cent of the loan, whichever is less. To qualify, five years must have passed since the completion of studies and the individual must have exhausted interest relief.
• Performance and accountability: In order to ensure that Canada Student Loans continue to provide as much assistance as they can to those who need it, the government is taking steps to ensure that both educational institutions and students use the program as it is intended. The federal government will also work with the provinces that participate in the Canada Student Loans Program to better co-ordinate federal and provincial student financial assistance and move toward a single loan product.

Helping Canadians Upgrade Their Skills

Tax-Free RRSP Withdrawals for Lifelong Learning

To keep their job or get a new one, many Canadians who are already in the workforce want to take time away from work to upgrade their skills through full-time study. Yet many do not have reasonable access to the financial resources this requires.

• To meet this challenge, effective January 1, 1999, Canadians will be able to make tax-free withdrawals from their registered retirement savings plans (RRSPs) to support full-time education and training of at least three months during the year. Withdrawals will be repayable to the individual's RRSP in equal instalments over a 10-year period.
• Students with disabilities using RRSPs for lifelong learning will be exempt from the requirement that their studies be on a full-time basis.

There are few things more critical to ensuring an adequate income in retirement than ensuring a good income when working. Providing opportunity to improve skills is an important way to make sure that happens.

Tax Relief for Part-Time Students

The government provides assistance to full-time post-secondary students, yet many Canadians pursue learning on a part-time basis.

• Therefore, for the first time, beginning in 1998, about 250,000 part-time students enrolled in eligible post-secondary programs will be able to claim a portion of the education tax credit.
• Also, for the first time, beginning in 1998, about 50,000 part-time students with dependants will be able to deduct child care expenses.

As a result of these two measures, the tax savings for a typical part-time student with two young children could more than triple -- from about $300 to almost $1,000 per year.

Encouraging Families to Save for Education

The Canada Education Savings Grant

One way the government assists Canadians in saving for their children's education is through registered education savings plans (RESPs). Money placed in these plans grows tax free until the child is ready for post-secondary education. Virtually all full-time post-secondary education is eligible.

The two previous budgets included measures to make RESPs more attractive: the annual contribution limits were raised from $1,500 to $4,000 and the lifetime limit from $31,500 to $42,000; and RESPs were made more flexible by allowing contributors to transfer RESP income into their RRSPs if the child does not pursue higher education.

The government will now invest alongside parents who save for their children's education.

• Effective January 1, 1998 the government will provide a Canada Education Savings Grant that gives parents and others even greater incentive to save through RESPs. The grant will be 20 per cent on the first $2,000 in annual contributions for children up to age 18. The maximum grant will be $400 per year.
• If the contributor is unable to take advantage of the full Canada Education Savings Grant in one year, grant contribution room can be carried forward to future years up to an annual contribution of $4,000 per child.

Supporting Youth Employment

Although the majority of Canada's youth are well equipped to participate in the economy, unemployment among Canada's young people remains significantly higher than for other Canadians.

To help address this problem, the government launched a Youth Employment Strategy in February last year. As part of that strategy, more than 120,000 career summer placements and over 50,000 internships are being created over two years.

Encouraging Employers to Hire Young Canadians

While governments have a role to play in helping to tackle youth unemployment, they cannot solve this serious problem alone. Many private sector employers are already responding to the youth unemployment challenge by providing opportunities for young Canadians.

• To encourage employers to hire more young Canadians, the budget proposes to give employers an employment insurance (EI) premium holiday for additional young Canadians hired in 1999 and 2000.

Youth at Risk

Youth Service Canada is currently helping over 5,000 unemployed young Canadians get work experience in community projects. One year after completing their Youth Service Canada work experience, 85 per cent of participants had found work or returned to school.

• The government will more than double the resources devoted to youth at risk in order to assist those, particularly between the ages of 20 and 24, who have not completed high school. Wage subsidies of up to $10,000 will be provided to give young Canadians the kind of work experience that is key to long-term employment.

Connecting Canadians to Information and Knowledge

Canadians need to make the best use of the opportunities created by information technology and networks.

• The budget provides an additional $205 million over three years to expand and extend SchoolNet and the Community Access Program. Through these programs, the federal government will work with provinces and the private sector to put computers in more classrooms and to create 5,000 Internet access sites in urban neighbourhoods, in addition to the 5,000 sites already being put in place in rural Canada.
• In addition, the government will provide $55 million this year to the Canadian Network for the Advancement of Research, Industry and Education (CANARIE) to support the development of high speed communications networks.

The Canadian Opportunities Strategy: What It Means to Canadians

The Canadian Opportunities Strategy provides the tools that will help Canadians acquire the knowledge and skills that will prepare them for jobs that deliver a higher standard of living in the 21^st century.

• For children, it means bringing them in touch with the information age through SchoolNet.
• For post-secondary students, particularly those from low- and middle-income families, it means access and opportunity through scholarships, study grants and tax relief.
• For graduate students and researchers, it means increased support through the granting councils.
• For individuals coping with student loan debt, it means tax relief on interest payments and additional loan relief for those in financial difficulty.
• For youth facing difficulty in finding a job, it means work experience, supported by wage subsidies and services, as well as an EI premium holiday to employers to hire more young Canadians.
• For adults seeking to renew their labour market skills -- whether through university, community colleges or vocational and technical institutes -- it means the opportunity to draw on their RRSPs through tax-free withdrawals, and to benefit from tax relief for part-time study.
• For parents and grandparents, it means a Canada Education Savings Grant that will make RESPs the best way to save for a child's future education.
• For communities and schools across Canada, it means connecting them to the knowledge society by expanding access to the Internet.

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