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Tuition fee increase debate continues

“Nobody has any idea how student aid works,” says post-secondary expert


 

Alex Usher, who raised a stir this week by suggesting that tuition fee increases are an acceptable means of raising additional funds for institutions hard hit by the economic downturn, has responded to his detractors in the Educational Policy Institute’s Week in Review.

Those with an interest in tuition fee and student financial aid policy should read the whole piece, but the two following passages are particularly well done and are central to Usher’s argument:

“Apparently, no amount of empirical, scientific findings about the determinants of access will change the debate about tuition fees. Over the last ten years, a lot of time, money and effort has gone into trying to figure out the effects of finances on access to PSE, and they have been very hard to find. Basically, at current levels of tuition and current levels of student financial aid, the effects of tuition as a barrier to education appear to be tiny or non-existent. I won’t bore you with the econometric data, but consider the weight of experience: BC raised tuition by 55% in two years in 03-05 – more people went to PSE after the cuts than before. Same with the 50-60% increase in tuition in Ontario in the mid-90s. Same with the 130% increase in Quebec in 90-91. As for the question of *who* goes to school – some of the worst results in terms of access from low-income youth come from Newfoundland, where tuition is quite low. Ontario does pretty well in comparison, even though tuition is around double here what it is there. But absolutely none of this matters, apparently. In the public mind, (and that of politicians, apparently), access is always and everywhere about money.

Nobody has any idea how student aid works. Many people evinced genuine concern about the less fortunate in case if a tuition rise. And of course, they’d be right…if we were to ignore the effects of student aid entirely. But the fact is that the less well-off are to a substantial extent protected by student aid. If their need rises, they don’t automatically get more debt; in many cases, grant and remission programs kick in more aid to help them. I think student aid is going to be called on to help an awful lot of new clients in the next few years – and it will be important for everyone who cares about fairness to defend these programs vigorously in the next little while, because I guarantee that the resulting explosion in program costs is going to make politicians eager to start cutting away at them. And if that means sacrificing programs which are more likely to benefit the wealthy, such as tuition tax credit programs, then so be it.”


 

Tuition fee increase debate continues

  1. This kind of argument assumes only very wealthy and very poor people exist. What about all the people in the middle who are too wealthy to qualify for student aid but too poor to pay for tuition and living expenses out of pocket?

    Those are the people who automatically get more debt. Those are the people who accumulate tens of thousands of dollars in bank loans and credit card debt – debt which carries higher interest rates than government assistance and won’t be refunded as part of a goodwill program.

  2. I agree with Cassandra. Student Aid protects the poorest people while many middle class students are forced to take out bank loans. I find it frustrating that my supposedly less fortunate friends got large bursaries, received interest free loans and got a significant chunk of their student loans forgiven after they graduated. Royal Bank sure isn’t going to forgive my loans. My family was supposed to cover the monthly interest on my loans, even though I was barred from applying for work-study jobs at Guelph.

    If tuition needs to be raised, that’s fine, but let’s try and make things a little more fair to the middle class. I should not have to start life with twice as much debt as someone else, just because they come from a poorer family than me.

  3. See, this is an interesting dicussion right here, and it’s all about what you think “middle class” is.

    I don’t know what Josh’s actual situation is, but the characterization that “the middle class can’t get anything from CSL” is simply wrong. Even if you are a dependent student living at home (the category of student which has the most trouble getting money), getting $5,000 – $7,000 in subsidized loans is quite possible with for an Ontario family with total income of $100,000 (it varies a bit by province). Now, $100,000 is certainly not rich, but nor is it middle class by any sensible definition – only about 10% of Canadian families have incomes over this level. So we have a system which is designed to cover at least 90% of Canadian families (although – caveat here – it may not cover 90% of families with PSE-aged children…these tend to be parents’ prime earning years, so they should have higher-than-average incomes anyway).

    True, the amounts available start to head south pretty quickly if a student chooses to work, but this is true of poorer students as well.

  4. How the government subsidizes higher ed (tax credits, block grants, financial aid, etc.) matters, but what matters even more is that the overall level of public support has consistently declined since the 90s… tuition hikes have been many times higher than inflation, grants were converted to loans, etc. The net effect, no matter how we play with number, is a shift from a collective to an individual responsibility.

    It is not reasonable, nor is it efficient, to ask people who are starting their professional life to take on tens of thousands of dollars in debt. The only sustainable and fair way to fund education is a kind of social contract between generations, i.e. you get education to the extent of your abilities, and if you get a good job thanks to that, great, our tax system makes you pay more so that you contribute to the education of the next generation.

    Also, with the demographic trends that we know we have, do you seriously think a generation of indebted individuals will be able to pay for the previous generation’s healthcare? Do you think they will have the means to raise a family on top of that?

  5. See, almost none of this is true. The idea that students or institutions have been continually immiserated for the last decade is simply untenable.

    1) The overall level of public support has increased quite substantially in the last decade. We hit a nadir in about 1998 and have been going steadily up since then – quite strongly so in the last five years. If you look at provincial budgets since 2004, the average *annual* increase in funding has been on the order of 8-9% nationally. That’s ahead of inflation, ahead of economic growth, ahead of health spending, ahead of K-12 spending…the last few years have in many respects been the best for PSE since the mid-80s or possibly even earlier.

    2) Tuition hikes have *not* been very high, again since 1999. After inflation, nationally, tuition is only up about 20-25% this decade – and an awful lot of that increase is concentrated in BC. But subsidies have increased just as fast. The increase in tax credits have basically offset all the increase in tuition since that time. And there are substantially more grant dollars available now than there were a decade ago.

    3) The percentage of full-time college and university students using student aid is at a 15-year low. Total recipient numbers have declined since 2001 even though overall student numbers have shot up. Average annual student borrowing in 2006-7 was only about $500 higher than it was in 2001-02 and about $1,000 *lower* than it was in the mid-90s.

    Finally, I think your point about demographics is a fair one, but the problem is that it applies equally to governments and public finances: can governments who are heading deeply in to debt on the eve of a major demographic shift which will send the cost of health and elder soarinf care afford to spend billions on higher education when they know most students will pay for it anyway because the average private rate of return is so large? Will provinces be able to pay for this expensive, high-quality health and elder care if they keep spending nearly twice as much per student in higher education as the OECD average?

    (I’m not making a judgement here, you understand…I’m just saying not to get too sanctimonious when the other side could make an equally emotive case).

  6. The fact that it has been rising since 1998 does not mean that it has caught up with pre-1990 (in real dollars).

    Also tax credits do not equal tuition rebate. That is the basis of your previous study that was mentioned here. The problem with this logic is the following: if tax credits were equal to tuition reductions, dollar for dollar, then why not put the money in actual tuition reduction instead of tax credits? Because even if you believe (as I understand) that tuition reductions are not a progressive policy, certainly tax credits are no better on that regard, and possibly worse.

    I find it problematic to mention, in a discussion of funding higher education vs. healthcare, that “most students will pay for it anyway because the average private rate of return is so large”. If you thought about public funding in those terms, you would have to apply the same reasoning to healthcare (in terms of private return), and do we really want to go on that road?

  7. To follow along those lines, no matter the degree to which this debate is framed in terms of “efficiency” or supposedly neutral ideas of “equity”, there are political and, I would say, ideological issues at play as well. From a more utilitarian perspective, though, policies that will inevitably lead to increased student debt are no more desirable than those that lead to increased consumer or corporate debt. It is, frankly, grossly irresponsible not to consider this issue of *debt* seriously on its own as a cause for concern, especially in light of recent vivid illustrations of the effect of bad debt in aggregate.

  8. Yes, Philippe, it has reached and exceeded 1990 levels. Substantially so, if you include research and student aid funding, but even provincial operational dollars alone are up.

    Tax credits *are* equivalent to tuition reductions. You pay a dollar, the feds give you back 15 cents and the provinces give you back somewhere between 6 and 11 cents (depending on the province). Why is it not just applied to reduce tuition? I can’t say from the provincial side, but from the federal side it’s pretty simple – they want to help Canadian families but have no control over tuition policy – tax credits are the simplest way to get money to individuals without faffing around in things like transfer payments, which are opaque and don’t always ensure adequate accountability.

    I’m not sure health care is such a brilliant analogy for higher education. Medicare is basically an insurance system: we pay collectively for an insurance policy and the insurer (the government) provides health care providers (doctors, hospitals) withrules about how to ration care so that it fits the bill. It’s relatively egalitarian in that everyone, eventualy, gets sick and dies – but the actual manner in which this happens and the scale of medical costs incurred are quite random. Broadl, it’s insurance against certain illness with randomly distributed costs (or losses).

    Higher education quite clearly does not work like this. Not everyone consumes it, for a start. The amount and type consumed is an indiviudal choice. Different types of education provide differental returns – and these are very definitely not random! Education is also to some degree a positional good – your benefit from having some is to some degree related to other people *not* having the same level. High school – where everybody is consuming pretty muchthe same good and everyone is deriving more or less the same benefit from the credential – is analogous to health care (and is effectively funded the same way), but post-secondary education is quite a different story. That doesn’t mean there aren’t reason to provide public funding for post-secondary education – PSE provides lots of positive externalities which justify that. But private returns do justify a requirement for private payment.

    Josh, the credit crisis does illustrate the problem with bad debt. But student debt is pretty far from bad debt, don’t you think? For the most part, it’s pretty good debt – an investment in future skills and productivity.

    Obviously you can’t ignore total debt loads, but it’s hardly into unsustainable territory in most of the country (although I think in the Atlantic it’s getting awfully close). Once they are two years out of school, debt is consuming about 7-8% of the average graduate’s salary, which isn’t an enormous price to pay considering the bump in pay is much larger than that and lasts a lifetime. Yes, there are outliers paying much more than that and who should be receiving more help, but I think it’s very difficult to make a credible argument that debt as a whole is unsustainable. And, of course, a substantial number of students graduate with no debt at all.

    Anyways, let’s just say for a second that you guys are right and students should under no circumstances be asked to pay more. Given that institutions are underwater right now and they’re expecting substantial government cutbacks in the near future, effectively what you’re arguing is for institutions to start spending a lot less money so that the education they provide is more affordable. I’m curious to know where each of you think institutional budgets can be cut, to what degree these cuts can be made without affecting quality, and what degree of loss of service or quality you would be willing to accept to see in return for not having tuition rise.

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