We need better implementation of the Canada Learning Bond

From Wealthsimple Foundation’s CEO, Leen Li

Millions in education grants are being left on the table.

Education is one of the most significant — if not the most significant — levers for changing the trajectory of a child’s life. Yet the outcomes of students in this country remain vastly different depending on their family’s income. This is not for lack of effort. The federal government created the Canada Learning Bond (CLB), one of the world’s most generous education savings grants for children from modest-income families, to address this exact issue. But its implementation is flawed: parents need to opt-in to receive the grant, which has resulted in billions of dollars in unused grant money and a growing education gap.

The importance of getting this right cannot be overstated. On average, post-secondary education increases your lifetime earnings by about $1 million. An education gap intensifies every other aspect of inequality — political, economic or racial — and poses one of the greatest threats to Canada’s long-term competitiveness and prosperity. The way we utilize education as a driver for equality and the success of our future generations is the single most important investment our country can make.

The solution is simple: just as with the Canada Child Benefit, as soon as a child is born in a family that qualifies for the CLB, a Registered Education Savings Plan (RESP) should be automatically opened and funded by the government.

A little context: The government introduced the CLB in 2004 to tackle the education gap by providing up to $2,000 in free money per eligible child, earmarked for post-secondary education. But accessing the CLB is the responsibility of the parents. They need to figure out if they qualify, fill out complicated paperwork or visit a branch in-person and find an RESP provider to set up their education savings plan before they can even apply to receive the bond. After the application, they still need to wait an average of 30 days to see if they are eligible. As a result, nearly 60% of available CLB grants have gone unclaimed since the benefit was introduced. With roughly 4.1 million children eligible for the grant, that’s financial assistance for as many as 2.4 million children not getting the money they’re entitled to.

Modest-income Canadians are disproportionately feeling the impacts of today’s record breaking inflation: rising tuition rates, sky high rents, ballooning grocery bills. While the CLB does not solve Canada’s education gap, it does offer incremental financial support to these students and families. 97 per cent of families who open an RESP and claim their CLB end up contributing regularly.

The current system clearly doesn’t work. But a new and better model could exist. We already have the infrastructure established in Canada to provide children with a financial jumpstart at birth and, as others have noted before, we just aren’t using it properly. A simple change to an automatic opt-in model eliminates the barriers preventing most eligible families from utilizing the CLB. It would implicitly encourage families to contribute to their children’s education, reducing the burden of school debt for millions of future students.

An education savings account is more than just money. It’s an investment in the future. Access to financial freedom, the ability to make choices and pursue your dreams, is the greatest form of support you can offer someone. As a Canadian immigrant, and one of the few members of my family afforded the opportunity to attend post-secondary school, I know firsthand the impact education has on the trajectory of your life.

This is the basis for why Wealthsimple Foundation was created — because we know access to education expands opportunities and ambitions. But it’s also expensive and can be exclusive. For Canada, transitioning from a commodity-focused economy to a knowledge-based one will be key to unlocking prosperity for the next generation.

It’s clear what we’re doing now isn’t working. And I believe a simple change to the CLB program, from opt-in to opt-out, will fundamentally change the course of millions of childrens’ lives, and the long-term prosperity of our country. Not one dollar earmarked for education should ever be left on the table.

Leen Li is the CEO of Wealthsimple Foundation, a not-for-profit organization providing community-based financial education, helping people access government education grants like the Canada Learning Bond and providing bursary funding for the next generation of students. To date, Wealthsimple Foundation has helped over 7,700 students receive more than $4.6 million in Canada Learning Bond benefits.