Open this photo in gallery People walk on the University of Toronto's Scarborough campus on Nov. 3, 2017. Mark Blinch/Globe and Mail

Ontario is reversing unexpectedly costly student financing initiatives, cutting tuition and allowing students to opt out of campus fees as part of a package of changes to postsecondary education funding that drew criticism from students and universities.

The Progressive Conservative government announced that the grants promoted in 2016 by the former Liberal government as “free tuition” for low-income students will now be a mix of grants and repayable loans. Students in higher income brackets will no longer be eligible for grants, and the Ontario Student Assistance Program (OSAP) will more closely resemble its pre-2016 format.

Queen’s Park did not indicate how much it is expected to save as a result, but said the primary aim is to put OSAP on a more sustainable footing. The government now spends more than $2-billion a year on OSAP, an increase of 50 per cent over 2016-17, which exceeds a previous Liberal projection.

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Merrilee Fullerton, the Minister of Training Colleges and Universities, also announced a 10-per-cent reduction in tuition fees for domestic students at Ontario colleges and universities for 2019-20 and a freeze for 2020-2021.

The loss of tuition revenue for the schools will not be covered by the government, and universities and colleges will need to adjust their budgets. Ms Fullerton said the changes might mean a budget gap of 2 per cent to 4 per cent at most schools. She said there would be a contingency fund for Northern schools where the impact may be greater, in part because they attract fewer international students whose fees are not subject to the changes.

Ms. Fullerton said there would be no further cuts coming to institutional operating grants. Many institutions worried they could face operating-grant cuts as a consequence of Premier Doug Ford’s promise to tackling the province’s budget deficit.

The government also introduced changes to the rules around ancillary fees at universities, which can cover everything from student unions to clubs to health and dental plans. Students will now be able to opt out of any fees, which can range from hundreds of dollars to as high as $2,000 at some schools, so long as they are not related to campus-wide services (such as athletics) or health and safety (such as a walksafe program).

“We are putting money back in the pockets of students and families,” Ms. Fullerton said.

Ms. Fullerton said the government is focused on ensuring that students with the greatest need receive the bulk of government assistance. The government background document said the share of funds going to low-income families would increase from 69 per cent to 72 per cent and that 82 per cent of grants will go to those with family incomes below $50,000.

The opposition NDP said the changes would ultimately be bad for students and their finances. “I think it’s a sugar-coated poison pill,” said Chris Glover, the NDP higher-education critic. “Students need more grants, not fewer.”

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David Lindsay, president of the Council of Ontario Universities, said the tuition cut will put pressure on the province’s universities. Ontario has among the highest tuition fees and lowest per-student government funding in Canada.

“A 10-per-cent cut to tuition fees would be roughly $360-million for our sector," Mr. Lindsay said. "To put that in context, we have not had operating-grant increases from the government for a decade. We’re now getting about 35 per cent of our money from government grants and in other provinces it’s upward of 50 per cent. It will be challenging.”

Nour Alideeb, Ontario chair of the Canadian Federation of Students, said the news was worrisome. Students will receive less aid in the form of grants, which will lead to an increase in student debt, she said.

She described the move to make ancillary fees optional as an attempt to silence campus critics, because it would hinder student groups that do political advocacy.

"It's a very scary move. I can't say I'm surprised, but it's an indication that they're trying to take out the groups that hold them to account," Ms. Alideeb said.

Danny Chang, president of the Ontario Undergraduate Student Alliance (OUSA), said he’s concerned that if students opt out of ancillary fees in large numbers it could harm the campus experience and reduce the level of services students receive. As an example, he said 94,000 students at OUSA schools receive health coverage through a student plan that could be jeopardized by a mass opt out.

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Liberal critic Mitzie Hunter said the plan is of greatest benefit to those who are already well-off.

"Needy students will see next to no benefits because under the previous program they were already being provided for. Wealthy students, who never qualified for OSAP in the first place, are being given a 10 -per-cent tuition cut even though they can afford it the most,” Ms. Hunter said.

In the 2016 budget, the Liberals redesigned OSAP to make a greater portion of student aid available in the form of grants, with the aim of increasing access for students from low- and middle-income families.

A report from the Auditor-General in 2018 found that the use of OSAP, which grew by 25 per cent in a year, surpassed the government’s expectations.

The OSAP program previously did not take into account parental income for mature students who had had been out of high school for more than four years. Their aid applications were evaluated as though they had no parental support. That threshold will now rise to six years.

Under the pre-2016 system, about a third of student aid came in the form of non-repayable grants, and two-thirds in repayable loans. In 2017-18, 92 per cent of funds were spent on non-repayable grants and just 8 per cent on loans.

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In 2017-18, more than 440,000 students received OSAP funds, up from 360,000 in the previous year.