While Ontario students apply for and receive financial assistance through the Ontario Student Assistance Program (OSAP), their loan is actually composed of two loans, one from the federal government (Canada Student Loan) and one from the provincial government (Ontario Student Loan). The federal government funds approximately 60 per cent of a student’s loan and the provincial government funds the remaining 40 per cent. Each government estimates a student’s financial need separately through a complex formula that assesses their allowable educational costs and reduces the expected financial resources available to them. These resources include employment income, assets, and family resources. For single students that have been out of high school for four years or less are expected to receive significant contributions from their parents’ income.

The amount that parents are expected to contribute to their children’s education costs is calculated based on family size, income, and the number of post-secondary students in the family. The parents’ discretionary income is calculated by taking the net parental income and subtracting the ‘moderate standard of living’, which is updated annually. The Canada and Ontario assessments use significantly different moderate standards of living. For example, the moderate standard of living for a family of three in 2010-11 is $53,782 according to the Canadian assessment and $43,133 in the Ontario assessment.

After subtracting the moderate standard of living to determine the parents’ ‘Annual Discretionary Income’, a percentage of this figure is set as the weekly parental contribution for the duration of the study period. Again, the formulas differ between the Canada and Ontario assessments. The Canadian government expects parents to contribute 15% of their first $7,000 in discretionary income, while Ontario expects 25% of this income. For the next $7,000, the difference becomes even more apparent, with Canada asking for a contribution of 20% and Ontario asking for a full 50%. Based on these contributions, Canada expects parents to contribute $2,450 of their first $14,000 in discretionary income while Ontario expects $5,250 – more than double that amount. The discrepancy grows even further after $14,000, where the contributions are 40% and 75% respectively.

If the family has two or more dependent children in post-secondary studies, the parental contribution is divided by the number of children in post-secondary studies. Finally, the parental contributions are incorporated into a student’s assessment of financial resources, regardless of whether parents contribute this amount or not.

The following table provides examples of the enormous discrepancies between Ontario and Canada in its expected parental contributions for an average family of three:

Examples of OSAP Parental Contributions for Family of Three, 2010-11

Net Parental Income Canada Ontario
$50,000 $0 $1,717
$55,000 $183 $4,184
$60,000 $933 $7,400
$65,000 $1,894 $11,150
$70,000 $3,337 $14,900
$75,000 $5,337 $18,650
$80,000 $7,337 $22,400

There are some measures in place for students facing family breakdown to be eligible for OSAP assistance without considering their parental income, however the list of acceptable reasons is highly restrictive, for example, physical or sexual abuse documented by a third party. Common reasons for parents not providing financial support to their children are not accepted as grounds to consider students’ OSAP applications without parental income. Examples of reasons not accepted by OSAP include:

  • Parents who feel that their children are independent once they reach age 18;
  • Parents who do not agree with their child’s choice of program or institution;
  • Parents who do not approve of their child’s living arrangement;
  • Parents who feel it is the responsibility of the government or child to fund post-secondary education.

Many students in Ontario fall into these examples outlined above, as well as numerous other legitimate reasons. In some cases, this may be due to parents overestimating the amount of financial assistance available to their children, and not accumulating enough savings to meet OSAP’s expected parental contributions. A Statistics Canada study found that 29 per cent of parents with 13 to 18 year-old children expected their child to receive need-based grants, but only 15 per cent of 18 to 24-year-olds actually received funds. For children with savings, the average amount saved for them by parents not expecting grants was $10,100, compared to $6,900 for parents who expected their children to receive grants. Considering that most students face annual costs of at least $13,000 per year of their undergraduate degree, clearly parental behaviour is not aligned with the expectations of the financial assistance system.

OUSA has heard this concern countless times from students across Ontario, indicating that this is more than a minor concern from a handful of students. Unfortunately, there is no data available on precisely how many students find themselves in this situation. It is interesting to note though that 51% of Ontario university students reported in 2009 receiving non-repayable funds from a family member to attend university, while 17% reported a loan from a family member. Considering that most students are assumed by the government to be receiving contributions from their parents for their education, there is a significant proportion of students are attending post-secondary education without parental support. Regardless of the number, it is fundamentally irresponsible for the government to allow these students to drop out of school or to take on a potentially crippling level of private debt.

This leaves many students, particularly those from middle-income families, with significant unmet need, and there are indications that these students are increasingly falling through the gaps in the system. Statistics Canada research through the 1990s shows that participation rates for post-secondary education increased for the lowest income category (with incomes below $25,000) and a narrowing of the gap in participation between this demographic and students with family incomes over $100,000. However, at the same time, participation rates for students in middle-income demographics stagnated and showed signs of decline. This finding suggests that financial assistance programs may have been directed to an overly narrow income band, neglecting students from middle-income backgrounds who still struggle with the costs of post-secondary education. Furthermore, some components of the financial assistance system, such as tax credits, provide more assistance to students from higher income backgrounds.

The government should be applauded for taking initial steps to decrease the parental contribution rates five years ago. Nevertheless, the current expectation placed on Ontario’s families is clearly unreasonable. OUSA calls on the government to harmonize its parental contribution formula with the federal government’s formula, which is significantly more generous.

-Sam Andrey
Director of Research & Policy Analysis