The benefits of tax credits come, at the earliest, in the following spring – after the tuition bills are paid – when the tax return is filed and a refund issued
“In order to derive any benefit from the education tax credits, students and their families must first find the resources to pay for tuition fees, textbooks and living expenses and hope that a portion will be refunded sometime in the future,” says a policy statement from the Canadian Federation of Students. “As a result, education tax credits are most likely to benefit those who already have enough money to afford post-secondary education.”
Other analysts, including the main student groups, complain that tax credits do nothing to reduce the up-front costs of post-secondary education
- Making the tax credits refundable. Currently, the tuition and education/textbook tax credits are non-refundable, meaning that they can’t immediately benefit students (or their parents) who don’t owe any tax. “Making the credits refundable is an easy policy option,” says Neill. “A refundable tax credit can reduce your tax below zero and provide a refund. Lower-income students would get more up-front, and administratively, it’s relatively simple.” She notes that the GST/HST tax credit, for instance, is already refundable.
- Reducing or eliminating tuition and education/textbook tax credits in favour of non-repayable grants. The Canadian Federation of Students says if the money Ottawa spent on tax credits and saving programs like RESPs was instead used for up-front grants, “it would turn every dollar loaned by the Canada Student Loans Program into a non-repayable grant,” thus “greatly reducing” the amount of student debt owed to the federal government.
- Reducing or getting rid of student tax credits in favour of lower tuition fees. This suggestion, from the Ottawa-based Canadian Centre for Policy Alternatives, is aimed in part at getting help to needy students at the start of the school year. “Like other forms of after-the-fact assistance implemented by a number of the provinces, this [aid] would be much more effective and immediate applied to the up-front costs in the form of a significant fee reduction,” write Erika Shaker and David Macdonald in a 2013 position paper. This idea is also supported by the Canadian Federation of Students.
- Rolling back tuition hikes and boosting student-aid funding in return for a reduction or elimination of some tax credits (combines the previous two suggestions). Quebec did exactly this after the student payday loans no credit check Alaska protests of 2012. The province abolished proposed tuition hikes and increased student aid. It paid for this by reducing the tuition tax-credit rate from 20 per cent to eight per cent, effective as of the end of the winter 2013 session.
- Scrapping the education and textbook tax credits in favour of direct grants to RESPs. This was proposed in the 2011 federal Liberal Party election platform. The Liberals proposed replacing the education and textbook tax credits (but not the tuition tax credit) with a Canadian Learning Passport, which would deposit $1,000 every year for four years ($1,500 a year for low-income families) into every high school student’s Registered Education Savings Plan. It would be paid out in annual instalments “at the start of the school year, when students need it most,” according to the platform document.
- Allowing tax credits to be transferred to educational institutions. This idea comes from Alex Usher of Higher Education Strategy Associates. He points out in a blog posting that if students were able to transfer their unused tax credits to their college or university, instead of just to their parents, grandparents or spouses, “the institution could provide an instant rebate and then claim the money back from the government itself. Then we’d really be cooking with gas.”