The Cost Of Education
I've been talking to a lot of my clients about education savings lately that I thought I should write some information about the cost of education.
First let's look at education cost.
How much does it cost?
The average cost of University education in BC is around $4,300 a year. Here's a list of average cost of Universities around BC for 2010/2011 from the Province of British Columbia website.
I also found this calculator from the University of British Columbia to estimate the cost of going to UBC.
Including books and student fees, it currently cost around $7,200 a year for a science major. It's cheaper as a Fine Arts major at $6,500. Engineering major is around $8,500. But a law major would need $13,100 a year and to be a doctor will cost almost $20,000 a year.
Luckily for British Columbians, tuition fee increases has been limited to just 2% per year which is pretty manageable for most families. Whether this trend continues in the future, we'll have to wait and see.
On average, a four year education would cost a total of $17,200 including books but not including any other miscellaneous fees like travel, personal expenses, board and lodging (if living away from home).
So depending on what course your child will take and which University they're going to, we can assume that your child will need between $20,000 to $50,000 for a four year course.
So how will the child pay for his or her University? There's several options:
Student Loans
If the student qualifies for a student loan, according to the Canada Student Loan Act, they won't have to repay the loan while they are a full time student. Once they cease to be a full time student, either by graduating or just dropping out of college, they have to start repaying the loan before the last day of the 7th month after ceasing to be a full time student.
For the months between graduating and the 7th month, interest will be applied to the student loan but the student is not required to pay yet. They will be required to start paying off the loan on the last day of the 7th month of graduating. So there are accrued interest in the loan for the first six months from graduating or ceasing to be a full time student.
I know it's a little hard to understand, but let's just put it this way. If the child graduates on June 15, 2011. From July 2011 to December 2011, interest will be charged on the loan but the child is not required to pay for it. However, the child is required to start paying off the student loan before the end of January 31, 2012.
Canada Student Loans carries a maximum fixed interest rate of the prime rate + 5% or a maximum floating rate of the prime rate + 2.5%. Provincial student loans have different interest rates varying from province to province.
Here's a link explaining how to pay off a student loan.
RESP
The other option is to set up an RESP or a Registered Education Savings Plan for the child.
For example, the parents can setup an RESP and contribute money into the plan. They will then be eligible for the following:
Canada Education Savings Grant (CESG)
Canada Learning Bond (CLB)
Those living in Alberta and Quebec may qualify for additional benefits.
Basically, everyone qualifies for the Basic CESG of 20% on the first $2,500 of annual contributions. The other grants are based on when the child is born and income of the parents.
So if your child is going to University in the next 5 years, the aim is to save between $20,000 to $50,000 to cover a child's education.
There are special rules to follow when you want to start an RESP for a child that is between 15 to 17 years old.
In order to continue receiving the Canada Education Savings Grant after age 15, certain contributions must have been made to the RESP (and not withdrawn) by December 31 of the calendar year in which your child turns 15.
They are:
In Summary
The cost of education in BC at this time is manageable. The child can work part-time, get a student loan or the parents can contribute into an RESP.
Some parents who can't save for the full cost of education either because of their income or don't have enough time to save because they have older children may still want to contribute as much as they can into an RESP. The 20% grant and helping your child pay for their University education is the best return on investment you can get.
First let's look at education cost.
How much does it cost?
The average cost of University education in BC is around $4,300 a year. Here's a list of average cost of Universities around BC for 2010/2011 from the Province of British Columbia website.
I also found this calculator from the University of British Columbia to estimate the cost of going to UBC.
Including books and student fees, it currently cost around $7,200 a year for a science major. It's cheaper as a Fine Arts major at $6,500. Engineering major is around $8,500. But a law major would need $13,100 a year and to be a doctor will cost almost $20,000 a year.
Luckily for British Columbians, tuition fee increases has been limited to just 2% per year which is pretty manageable for most families. Whether this trend continues in the future, we'll have to wait and see.
On average, a four year education would cost a total of $17,200 including books but not including any other miscellaneous fees like travel, personal expenses, board and lodging (if living away from home).
So depending on what course your child will take and which University they're going to, we can assume that your child will need between $20,000 to $50,000 for a four year course.
So how will the child pay for his or her University? There's several options:
- The parents can pay for it.
- The child can work part time to help pay for part or all of the cost
- They can get a student loan, or
- The parents can save money in an RESP.
Student Loans
If the student qualifies for a student loan, according to the Canada Student Loan Act, they won't have to repay the loan while they are a full time student. Once they cease to be a full time student, either by graduating or just dropping out of college, they have to start repaying the loan before the last day of the 7th month after ceasing to be a full time student.
For the months between graduating and the 7th month, interest will be applied to the student loan but the student is not required to pay yet. They will be required to start paying off the loan on the last day of the 7th month of graduating. So there are accrued interest in the loan for the first six months from graduating or ceasing to be a full time student.
I know it's a little hard to understand, but let's just put it this way. If the child graduates on June 15, 2011. From July 2011 to December 2011, interest will be charged on the loan but the child is not required to pay for it. However, the child is required to start paying off the student loan before the end of January 31, 2012.
Canada Student Loans carries a maximum fixed interest rate of the prime rate + 5% or a maximum floating rate of the prime rate + 2.5%. Provincial student loans have different interest rates varying from province to province.
Here's a link explaining how to pay off a student loan.
RESP
The other option is to set up an RESP or a Registered Education Savings Plan for the child.
For example, the parents can setup an RESP and contribute money into the plan. They will then be eligible for the following:
Canada Education Savings Grant (CESG)
- A grant that equals 20% of the first $2,500 of their annual contribution up to a maximum of $500 a year.
- Grant is given until the end of the calendar year the child turns 17.
- Lifetime amount of $7,200.
Canada Learning Bond (CLB)
- For parents who's child is born after December 31, 2003 and the parents qualify for the National Child Benefit Supplement
- One time contribution of $500 to an eligible RESP.
- Additional $100 for each year of eligibility until the child turns 15.
- Up to $2,000 in total.
Those living in Alberta and Quebec may qualify for additional benefits.
Basically, everyone qualifies for the Basic CESG of 20% on the first $2,500 of annual contributions. The other grants are based on when the child is born and income of the parents.
So if your child is going to University in the next 5 years, the aim is to save between $20,000 to $50,000 to cover a child's education.
There are special rules to follow when you want to start an RESP for a child that is between 15 to 17 years old.
In order to continue receiving the Canada Education Savings Grant after age 15, certain contributions must have been made to the RESP (and not withdrawn) by December 31 of the calendar year in which your child turns 15.
They are:
- Total contributions of at least $2,000, or
- Contributions of at least $100 a year or more in any 4 previous years.
In Summary
The cost of education in BC at this time is manageable. The child can work part-time, get a student loan or the parents can contribute into an RESP.
Some parents who can't save for the full cost of education either because of their income or don't have enough time to save because they have older children may still want to contribute as much as they can into an RESP. The 20% grant and helping your child pay for their University education is the best return on investment you can get.
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