Financial Aid to Students | The Canadian Encyclopedia


Financial Aid to Students

Some form of financial support to needy post-secondary students has been available in Canada for many years. Until 1939 this primarily took the form of privately funded assistance from universities and colleges to students with high scholastic achievement.

Students, Financial Aid to

Some form of financial support to needy post-secondary students has been available in Canada for many years. Until 1939 this primarily took the form of privately funded assistance from universities and colleges to students with high scholastic achievement. The foundation of a national co-ordinated policy for student assistance began in a modest way with the federal government's passage of the Dominion-Provincial Student Aid Program in 1939. All provinces had joined the plan by 1944.

The CONSTITUTION ACT of 1867 granted the provincial legislatures the exclusive right to "make laws in and for each province" in relation to education, but the federal initiation of a national aid program was legitimized on the grounds that it related to activities in areas under federal jurisdiction; eg, economic growth, labour training and labour mobility. Thus, DSAP formed a part of the Youth Training Act, which was part of a national economic policy.

Federal and Provincial Contributions

Under DSAP the federal government contributed funds to each participating province and the province was expected to provide an equal amount of assistance. Some provinces provided only loans, others only grants. It has been estimated that overall the federal government contributed less than $5 million to DSAP, and that fewer than an average of 3000 students a year received support under the program.

The implementation of the DSAP affected financial aid to students in 3 major ways. First, provincial responsibility for administrating aid regardless of source of funding stimulated a diversity in provincial programs. Second, merit alone became less of a criterion than need for determining eligibility for aid; eg, aid shifted from scholarships to bursaries. Third, the role of the federal government in financing and co-ordinating aid increased in importance. Québec opted out of the joint arrangement in 1954, citing constitutional reasons of provincial primacy and autonomy in higher education.

The 1960s witnessed rapid growth in post-secondary education and a consequent need for reformed student aid plans. The Canada Student Loans Plan established in 1964 superseded the DSAP, which was discontinued in 1967. Under the current CSLP, the federal government guaranteed loans to all full-time students who demonstrated financial need to a provincial or territorial government on the understanding that the money will be repaid over a period not exceeding 9.5 years at a rate of interest set annually. Interest begins to accrue as soon as the student leaves full-time studies but the student does not have to actually make payments until 6 months after ceasing to be a full-time student.

Expanded Funding

In seeking assistance, students applied to a province or territory for aid, providing information about their financial resources and needs. The province or territory then determined the amount of aid for which the student is eligible. The CSLP provided 60% of the assessed need to a maximum of $105 a week. The provinces decided if, and how, to meet the remaining need.

Since 1970 tuition fees have risen dramatically, going from 17% of university revenue to 25%. The Canadian Federation of Students estimated that between 1985 and 1997 the Tuition Fee Annual Index, the yearly average increase in tuition fees, rose 155%.

The Canada Student Financial Assistance Act (1994) completely revised CSLP for the first time since it was established. The act increased the maximum loan from $105 to $165 a week for full-time students, and the maximum amount from $2500 to $4000 for loans to part-time students. A national program of grants was established for students with permanent disabilities, part-time students in high financial need, students with dependants and women in certain fields of doctoral study. At the time, interest relief was expanded to include not just unemployed borrowers but also those of low income, and a new proposal was made for the reduction or cancellation of debt for certain borrowers. However, the proposal did not take effect. Each province administers the program under jointly agreed upon administrative criteria. Under the CSLP, each province has discretion to cover unforeseeable situations in the need identification process.

In 1998, the government introduced measures to assist students in loan repayment, including a 17% tax credit on interest paid on student loans, and changes to the Interest Relief Plan in which the government will pay the interest portion of the loan, extend the loan repayment period, or reduce the loan principal.

In all provinces except Québec and the Northwest Territories, student assistance programs include a mix of aid provided from the CSLP and from supplementary provincial funds. Students cannot apply directly to the federal government for a CSLP loan. Québec and the Northwest Territories have opted out of the CSLP. They receive annual compensation from the federal government to operate in their jurisdiction. Provinces cannot set tighter assessment criteria, yet are able to grant more generous aid limits. Need assessment is based on a national database which provides regional tables of costs and allowances. The tables are updated on an annual basis according to a formula using the Consumer Price Index.

Provincial systems of aid under the CSLP differ. While all provinces use administrative criteria developed annually for CSLP by federal, provincial and territorial officials and approved by their respective governments, differences occur because national criteria set only maximum allowances. Individual provinces can set tighter criteria and offer less than the maximum loans and have established methods of calculating the total amount of assistance to each student. Loans and bursaries are issued by the province where the student resides and not where he or she studies. "Appropriate authority" in each province designates the post-secondary institutions, inside or outside the province, to which students may take their loans and grants. As part of general fiscal restraint, in the 1980s most provinces adopted much more stringent criteria for loan eligibility. In 1999, the federal government established agreements with the Ontario and New Brunswick governments to harmonize student loans for students in those provinces. The goal of harmonization is to create a single loan and to streamline administration for loans to simplify financial assistance for student borrowers.

CSLP has been criticized on a number of counts, including the following:

Loan-Bursary Balance

The Canadian Federation of Students, which represents 500 000 post-secondary students, contends that the debt load held by students after graduation represents a heavy burden. Although a few provinces are introducing a loan rebate program to ease this burden, the trend seems to be towards giving more loans than grants; ie, converting nonrepayable assistance in the main to loan programs.

Neglected Groups

Critics maintain that many of the disadvantaged - eg, native people, single parents, children of lower-income families - are not served well by the existing student aid programs. They argue that financial pressures, the reluctance of low-income families to assume loan commitments, and inadequate information combine to restrict aid accessibility for certain groups of Canadians. High debt loads for needy students remain a subject of controversy as debts of $30 000-$40 000 in 4-5 years become common.

Tight Criteria

Provinces complained that exceptional situations could not be recognized since the "appeal process" was not open to students/families any more. Finally Ottawa agreed to give discretionary power to provinces.


Dramatic changes in federal-provincial financial relationships has resulted in a sharp reduction in federal transfer payments through Established Programs Financing, and in turn lower provincial grants to higher education institutions. One consequence is sharp rises in tuition and overall student financial need. A federal suggestion in 1994 that would have made repayment of student loans contingent on annual income levels met with generally stiff resistance, including the Canadian Federation of Students. That suggestion was closely tied to a proposal to raise tuition fees by up to 100%.

The Canada Scholarships Program, 1988-94, was the first venture by the federal government to target special categories of undergraduates and specifically to encourage more women into degrees in science, engineering and agriculture. Industry Canada evaluated the Canada Scholarships program in 1994 and found that it was meeting its objectives. The introduction of the Canadian Millennium Scholarships in the year 2000 will award more than 100 000 scholarships to both full- and part-time students over a period of 10 years. The awards are administered through the Canada Millennium Scholarship Foundation and the initial endowment fund is $2.5 billion. This represents the single largest investment ever made by the federal government to support access to post-secondary education.

Since CSLP's inception in 1964 to 31 March 1996, the federal government has authorized $10.6 billion in bank loans to 2.4 million full-time students. In 1994-95 alone, 307 014 full- and part-time students received over $1 billion.

One of the difficulties behind financial assistance programs is that they seek to meet diverse goals; ie, to ensure access to post-secondary education to students in financial need and to provide indirect support to post-secondary institutions which are under the financial control of the provinces.

Supplementary Aid Schemes

These schemes are available in most provinces for groups such as the handicapped, native people and single parents on welfare. Some provinces offer different kinds of loan remissions to graduates. In Québec, interest-free loans are available for study at certain post-secondary institutions. A work-study program is available for exceptionally needy students in BC and Ontario. Loans are available in Saskatchewan for applicants studying in some courses where the entrance requirements do not meet CSLP criteria.

Native Peoples

Education of registered native people and Inuit is the constitutional responsibility of the federal government. Eligible native and Inuit may attend provincial universities and colleges; the Department of INDIAN AND NORTHERN AFFAIRS CANADA provides financial and other assistance. Certain provinces also provide special programs of assistance.

Various priorities deemed in the national interest have prompted the implementation of other significant federal programs. The Veterans Rehabilitation Act of 1945 provided financial aid to returning veterans. An extensive scholarship program in the arts, humanities and social sciences was supported by the Canada Council, 1957-67, and 10 years later the Social Sciences and Humanities Research Council and the Engineering Research Council became responsible for the grant and scholarship programs of the Canada Council.

The federal government also provides support through personal income tax benefits to individuals and/or their immediate families. Students receive a federal tax credit of 17% of their post-secondary tuition fees, and in addition, full-time students receive a tax credit of $13.60 per month for each month they are enrolled.

Student Youth-employment Programs

These programs encourage summer employment, as do co-operative programs that enable students to alternate university study with periods of employment. These programs overshadow early federal initiatives (1919) in providing loans to disabled veterans and grants and fellowships (established 1916) from the National Research Council.

Future directions include a proposal by Canada for a "voucher system" as a means to support learners that would replace government direct purchase of training seats. Supports to the training and retraining of the unemployed are changing with radical revisions to the utilization of unemployment insurance funds.

Further Reading