An Examination of Inequalities in Post-Secondary Education Savings Programs in Canada

Background/purpose:

Like in the U.S., the cost of post-secondary education (PSE) in Canada continues to rise. Escalating tuition and levels of student debt are barriers to participation for many low and middle-income Canadians.  

The Canadian government helps families finance post-secondary education through tax-based policies in the Canadian Education Savings Program (CESP).  A main feature of the CESP is the Registered Education Savings Plan (RESP), a dedicated savings account in which individual contributions are matched by the government. However, low- and middle-income families face significant financial and informational barriers to accessing and benefiting from the CESP.  It seems that higher-income families are better prepared to make use of and benefit from the CESP, thus impeding the progressive effects of these policies (Lewis & Elliot, 2014).

The purpose of this study to is to analyze the demographic and socio-economic characteristics of people saving for their children’s PSE. 

Methods:

Data is drawn from the nationally representative 2009 Canadian Financial Capability Survey (n= 15,519).  The sample was narrowed to include only those respondents who indicated that they were financially responsible for person/persons under the age of 18, which can be seen as a proxy for respondents with children (n=4637). 

The outcome variables consisted of dichotomous answers to questions regarding saving for children’s education and use of the RESP.  The demographic and socio-economic variables examined included marital status, family type, income, education, place of birth, age and province of residence. Bivariate and multivariate analysis (logistic regression) were used to estimate factors that influence savings.

Results:

Household income and education were significant predictors of saving for PSE and RESP participation.  Compared to those without a high school diploma, respondents with a university degree were most likely to save (OR=2.79, p<0.001) and to participate in the RESP (OR=4.58, p<0.001).  Compared to the lowest income group, those in the highest income group were most likely to save (OR=3.92, p<0.001) and to participate in the RESP (OR=2.96, p<0.001).  Other significant findings related to household type and province of residence. Compared to households with one child, those with four or more children were least likely to save (OR=.473, p<0.001), and to participate in the RESP (OR=.593, p<0.01), while those with two children were most likely to participate in the RESP (OR=1.36, p<0.001).  Using Ontario as the reference category, respondents from Quebec were least likely to save (OR=0.59, p<0.001) and to participate in the RESP (OR=0.57, p<0.001). Full regression results including predicted probabilities are discussed in the full paper.

Conclusions:

            Findings indicate that high income and high education people in Canada are more likely to participate in the CESP, signaling a lack of progressivity in the policy.  Looking at Child Development Account policies in the US, Beverly, Kim, Sherraden, Nam and Clancy (2014) found similar results. Increasing outreach in lower income communities, reducing initial set-up fees, simplifying the program structure and increasing matched contributions, amongst other program changes, may serve to increase uptake amongst underrepresented groups.   More research into the specific barriers for different groups is required.