The Regina-based First Nations University of Canada will not benefit from a proposed $3 million federal bail-out for students to be announced on Wednesday. The money will only be allowed to flow to Saskatchewan universities and colleges in good standing with the federal government. (CBC)

The federal government is preparing to bail out almost 1,000 current students of a troubled aboriginal university in Saskatchewan that recently had its funding pulled, CBC News has learned.

Indian Affairs Minister Chuck Strahl will announce on Wednesday that $3 million in funding will be made available to allow students currently enrolled at the First Nations University of Canada (FNUC) to get through the academic year ending Aug. 31 at other schools, sources said.

The funds, provided from the Indian Studies Support Program, won't flow directly to First Nations University.

'The students here are tired of the federal government telling them what is good for them.' — Diane Adams, president, FNUC students' association

The money will instead be available to another post-secondary institution, such as the University of Regina, which recently signed a partnership with First Nations University.

Sources said the money is for student programming and not intended to repay the aboriginal school's debt or to cover operational costs.

Because of FNUC's current status in the eyes of the federal government, the announcement is a likely sign that Ottawa is no longer willing to consider funding the school.

FNUC is still trying to wrangle a deal with the federal government that would see its $7 million a year in funding reinstated.

The university has about 800 students at its main campus in Regina and satellite campuses in Prince Albert and Saskatoon.

The president of FNUC's students' association said students would not react well to news of the bailout.

"Three million dollars is a slap in the face to the students," Diane Adams said on Tuesday. "It's purely a tactic to slow the death of the [school].

"It does not offer any kind of support to the students. It does not protect the students and the students here are tired of the federal government telling them what is good for them."

Funding suspended

Both the federal and provincial governments suspended FNUC's funding earlier this year as the university struggled with various issues.

In recent years, there have been numerous dismissals and departures of top administrators, allegations of misuse of funds, repeated deficits and declining enrolment.

Ottawa and the province both said they cut funding because FNUC wasn't fixing the problems fast enough.

However, a week ago, provincial officials signed a memorandum of understanding with the University of Regina and the Federation of Saskatchewan Indian Nations which would see provincial funding flow to FNUC again.

Under the first year of a proposed four-year agreement, the province would contribute $5.2 million as FNUC restructures. University of Regina officials would administrate FNUC's spending and manage the school.

The bailout money being announced tomorrow will come from the Indian Studies Support Program. Schools deemed eligible will have to submit proposals to the federal government to ensure the money is spent appropriately, sources said.

With file from The Canadian Press