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Rising tuition? It’s a myth

New study says the real cost of university is falling. One province is even paying its students


 

On Nov. 5, the streets of downtown Ottawa were flooded with angry students frantically waving red-and-black “Drop Fees” signs. Nationwide, thousands rallied, demanding protection from what everyone knows are skyrocketing tuition fees. This is probably the image that springs to mind when you think about the price of a university education in Canada: students protesting, and tuition fees that just keep going higher and higher.

But according to a new report by Canada’s only higher education think tank, the cost of a university education for the average Canadian is actually going down: when inflation and a growing list of federal and provincial tax breaks are taken into account, a degree is now slightly cheaper than at the turn of the century. The real cost of an education has fallen in most provinces. In Manitoba, real tuition costs are down more than 100 per cent in the last eight years—which means that the average student in that province is effectively being paid $51 a month to go to school.

These surprising findings come from a recent report from the Educational Policy Institute (EPI). Alex Usher, director of the Canadian arm of the international think tank and the study’s co-author, says the commonly held view that university is becoming unaffordable is just plain wrong. “By any reasonable measure, education is a lot more affordable now here than it was 10 years ago,” says Usher.

More: Overview of federal/provincial tax credits and rebates

Tuition and related fees have been steadily rising in most provinces. But according to, “Beyond the Sticker Shock 2008–A Closer Look at Canadian Tuition Fees,” the tuition sticker price is not the real measure of the cost of university. Governments are offering a growing list of tax credits and rebates, targeted at students, which greatly reduce the real cost of university. It’s as if you walked into a car dealership and saw that the sticker price of a car was $20,000—but were also told all buyers would receive a $5,000 rebate. The real cost of the car would be $15,000, not $20,000.

That’s what’s been going with Canadian university costs: sticker prices are going up, but student tax credits and rebates are increasing, too. “Since 1999-2000, these credits have completely offset out the effects of any increases in tuitions,” says the report. “[Tuition] is no higher now than it was eight years ago.”

In order to accurately measure real tuition costs, Usher and EPI created a measure that takes into account inflation, as well as the growing amount of tax relief offered to students, calling the resulting number “Everybody’s Net Tuition”. Over the past few years, governments have introduced a number of large tax breaks targeted at higher education students. For example, for every month that they are enrolled, full-time students can claim a $400 tax credit from the federal government; part-time students can claim $120 per month. The textbook and technology tax credit, introduced in 2006, gives $65 off a month to full-time students and $20 a month to part-timers. Usher says taking such tax benefits into consideration and subtracting them from average tuition gives a more accurate picture of what university actually costs.

Value of Available Tax Credits per Full-Time University Student (click on charts to enlarge)

Table3TaxCredits

According to EPI’s report, the average Canadian full-time student’s university tuition and fees have risen by 58 percent since 1998, from $3,601 to $4,524. But when inflation and tax credits are taken into account, net tuition — the cost of tuition minus federal and provincial tax credits —is up only 8 per cent since 1999-2000.

In fact, since the turn of the century net tuition has declined in six provinces: Alberta, Manitoba, Newfoundland and Labrador, Prince Edward Island and Saskatchewan. Usher says that, however little the public may be aware of these tax credits, most students take advantage of them. According to him, about half of Canada’s students claim the credits immediately; one out of four students carry the credits forward to a later tax years; and around a third give the credits to their parents, who can use them to reduce their own income tax. “Practically all these credits are being used,” he says.

Absolute and Percentage Changes in Everybody’s Net Tuition

Table5ChangesENT

What’s more, four provinces have created tax rebate programs that further reduce the cost of higher education for students who remain in the province after graduation. For example, the Manitoba Tuition Fee Tax Rebate gives post-secondary students 60 per cent of their tuition fees back in income taxes over 6 to 20 years, while New Brunswick’s Tuition Tax Cash Back Credit gives students up to 50 per cent of their tuition back to a maximum of $2,000 per year and $10,000 total. Students have 20 years to use the New Brunswick credit, so they could conceivably leave the province for a decade, move back and still receive the full benefit. Nova Scotia and Saskatchewan have similar programs.

Everybody’s Net Tuition, Considering Tax Rebate Programs

Table7ENTRebates

When the effects of all of these tax rebates and credits are taken into account, EPI says average net tuition across Canada has decreased by 0.1% since 1999-2000. Students in seven provinces are paying less net tuition than they did at the beginning of the decade. The most extreme case is Manitoba: thanks to substantial new tax breaks, a full-time student in Manitoba who graduates and remains in the province is effectively being paid $51 per month to go to school.

Changes in Everybody’s Net Tuition, Considering Tax Rebate Programs

Table8ChangesENT

Three provinces have, however, seen an increase in the real cost of university. Since a tuition freeze was lifted in 2000, net tuition has risen 66 per cent in British Columbia. Quebec net tuition is up 8 per cent; in Ontario it has risen by 2 per cent.


Not everyone is in agreement with Usher’s findings. Donald Fisher, co-director of the Centre for Policy Studies in Higher Education and Training at the University of British Columbia, argues that EPI’s calculations mask the toll that tuition increases are taking on the poorest students. He says the best way to measure university affordability is to look at tuition fees as a proportion of after-tax income. In a yet-to-be published book, Fisher and a colleague find that increases in the annual cost of a university education hit poor families the hardest.

“We calculated that through the 1990s, for the lowest income quintile (20 per cent) the proportion of tuition cost to income rose from 14 per cent to 23 percent,” he says. In comparison, tuition fees take up less than five percent of after-tax income for the richest families. Although these figures are from British Columbia specifically, Fisher says the numbers are a good representation of the nationwide situation. He says university is becoming less affordable for the least wealthy.

Average Undergraduate Tuition Fees as a Proportion of After-Tax Income

BCData

Usher says this approach is flawed, because looking only at the tuition sticker price, without considering money students get back through tax credits and rebates, misses half the equation. Usher also points to new grants from the federal government, means-tested and targeted at low-income students, that he says are further helping to level the playing field.

Fisher also believes that Manitoba’s negative tuition is “theoretical” for many students. The big post-graduation tuition rebate is only available to graduates who live, work and pay taxes in the province. A Manitoba university student who moves to Ontario or Saskatchewan can’t claim the rebate.

Michael Bloom, education specialist at the Conference Board of Canada, says that even if higher tuition is being if offset by tax credits, governments need to be mindful of the fact that some students—particularly the poorest students—may be dissuaded from going to school by the high sticker price. They’ll be victims of the “sticker shock” in the title of the EPI report. “The bottom quintile is more inclined to see a post-secondary education as being an expense, not an investment,” says Bloom. “Where you do get a significant increase in the average cost of tuition, you need an active program to communicate to the groups at the lower end of the socio-economic spectrum so they don’t walk away from the system entirely,” he says.

Fisher similarly says that the federal government needs to get the message out there, so that students are aware of all the programs available to make university more affordable. “They can use these tax credit experiments in the four provinces as a model, advertise it broadly, and make it really attractive, so when someone is thinking about going to university they know about these rebates,” he says. “That would be a really major step forward.”


According to “Measuring Up 2008,” a recent report from the U.S. National Center for Public Policy and Higher Education, published university fees in the United States increased 439 per cent from 1982 to 2007, while median family income rose only 147 per cent. It also found student borrowing in the U.S. has more than doubled in the past decade, and students from lower income families get smaller grants than students from richer families.

Usher says the U.S. numbers are troubling, but that the situation in Canada is different. He says Canada’s federal government has over the past few years taken steps aimed at at ensuring that people from lower economic backgrounds are protected, mostly through increases in needs-based grants.

Before 2005, the Millennium Scholarship Foundation only gave grants based on a “need” formula that included number of children, age, price of the student’s program and family income. Usher says that meant that only about 40 per cent of the loans were going to low-income students. In 2005, to direct more money to low income students, the foundation established Millennium Access Bursaries, which are based solely on family income. The same year, the federal government established Canada Access Grants for Students from Low-Income Families, which provide first-time, first-year students up to $3,000, to cover one-half of their tuition.

“Grants, by and large, have not historically had an income-based component to them,” says Usher. “It’s only been in the last three or four years that we’ve seen the emergence of grants that are actually income-based.” Generally, he says those grants have gone to older students with children who are able to shoulder more debt.

The EPI report did not take these grants into account when measuring the real net cost of university tuition; the authors write that accurate national data simply doesn’t exist, and as a result, “the average size of grants received by grant recipients is actually unknown.” Their calculations also do not take into account student loan programs, which are designed to cover the immediate financial burden of attending college or university. According to the most recent numbers available, the Canada Student Loan Program loaned 350,000 students an average of $5,631 in 2006. Approximately 40 per cent of all full-time post-secondary students receive government loans.


 

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